Potential problems with prompt pay laws in Texas

On Behalf of | Jun 27, 2023 | Health Care Law

The payment of claims by medical insurers to health care providers is complex as there are often instances of insurers refusing to pay valid claims on time or in full. Texas has prompt pay laws that attempt to address this problem, but the laws are not without problems themselves, according to some.

Texas prompt pay laws

Texas has enacted prompt pay laws to ensure medical insurers pay claims submitted by health care providers. Currently, these laws establish deadlines for when claims must be paid, denied or audited by insurers and impose penalties if these deadlines are not met. These laws apply to fully insured health plans. They do not apply to self-funded health plans, that is, benefit plans governed by the Employee Retirement Income Security Act of 1974 (ERISA). In addition, the penalties only apply to billed charges.

Problems with the prompt pay laws

There are some problems that can be found with Texas’ prompt pay laws. One issue some find problematic is that the claim submitted by the health care provider must be a clean claim. Problems can arise if the definition of a clean claim in a health care provider’s contract differs from the definition of clean claim as found in the rules promulgated by the Texas Department of Insurance.

Problems also can arise with billed charges. Billed charges are those representing the health care provider’s customary fees. Hospital billed charges can be significantly greater than what is actually paid. Moreover, what is included in hospital billed charges is generally self-determined.

This means that what constitutes billed charges at one hospital in Arlington could differ from those in other hospitals across the state. Thus, the associated penalties under Texas’ prompt pay laws are much in the control of the hospital who receives them, because they are based on billed charges.

Health care providers—both physician practices and hospitals—deserve prompt payment of claims. Still, some would say Texas prompt pay laws are not perfect, and more can be done to ensure the laws are fair both to insurers and health care providers.