New Missouri Prompt Pay Law HFMA Show Me Chapter Annual Summer Conference July 29, 2010

1. New Missouri Prompt Pay LawHFMA Show Me ChapterAnnual Summer ConferenceJuly 29, 2010 Daniel J. Body, Esq. Suzanne B. Strothkamp, Esq. Greensfelder, Hemker & Gale, P.C.

2. Missouri Prompt Pay Law - Background • Signed into law by Governor Nixon on April 27, 2010 • Effective January 1, 2011 • Strengthens Missouri’s 2002 “Prompt Pay” Law • Passed in 2010 legislative session after previously failing at least twice in prior years

3. Background • Despite having a Prompt Pay Law (enacted in 2002), providers still experiencing slow payment, affecting significant cash flow issues • From 2006 through 2009, the number of complaints filed with Missouri Department of Insurance by providers increased six-fold. • Previous efforts to address issue legislatively failed (most recently in 2009) • In response to these issues, Governor Nixon, through Executive Order 09-24, established the “Prompt Pay for Healthy Missouri Project”

4. Prompt Pay for Healthy Missouri Project • Executive Order 09-24 required the Missouri Department of Insurance, Financial Institutions and Professional Registration (“DIFP”) to inquire into the timeliness of payment to Missouri medical providers by health insurers • Established deadline of December 31, 2009 to complete report on the scope of the problem • DIFP surveyed Missouri hospitals, focused inquires with hospitals, insurers and other interested stakeholders • DIFP worked closely with the Missouri Hospital Association (“MHA”); 69 Missouri hospitals participated, representing 70% of hospital revenue in Missouri

5. Prompt Pay for Healthy Missouri Project: Findings • A significant portion of pending claims submitted to health insurers remained unpaid in excess of 90 days • The 2002 Prompt Pay Law had little effect on timeliness of claims processing issues • Large variation exists between health insurers doing business in Missouri with respect to timeliness of payments • Large variation exists across the State with respect to timeliness of payments • Rural hospitals experienced greater delays in payment than their urban counterparts

6. Prompt Pay for Healthy Missouri Project: Findings • The following deficiencies of the 2002 Prompt Pay Statute were identified: • Lack of a clean claim definition • Ability of insurers to suspend a claim indefinitely • Lack of consistent processing days standard for claims processing times • Need for heightened level of regulatory scrutiny of health insurers’ claims processing practices

7. 2010 Legislative Response • In February 2010, several state legislators initiated negotiations between a provider coalition, health insurance companies active in Missouri, and various other stakeholders to develop an acceptable legislative proposal • Sponsored by Rep. Tim Jones (R), and handled by Sen. Jim Lembke (R) in the Senate, the 95th Missouri General Assembly completed its unanimous enactment of the 2010 Prompt Pay Act on April 7, 2010 (House Bill 1498). • House Bill 1498 signed into law April 27, 2010 by Governor Nixon

8. The New Missouri Prompt Pay Law (MPPL) Modifies Missouri’s Prompt Pay Law regarding the payment of health insurance claims in Missouri (Missouri Revised Statutes, Sections 376.383 and 384)

9. MPPL - Provisions • Requires insurers to either pay or deny claims and abolishes ability of health insurers to suspend a claim • Imposes requirement on health insurers to provide a specific reason for denial to be valid • Establishes a clear definition of “clean claim” • Claim that has no defect, impropriety, lack of any required substantiating documentation, or particular circumstance requiring special treatment that prevents timely payment

10. MPPL – Provisions (con’t) • Clarifies the 45 day claim processing requirement and tightens specific timeframes imposed on the health insurers pertaining to deadlines for various acknowledgments, follow-up requests, and actions • Including the following: • Within 48 hours of receiving an electronically-filed claim: Send an electronic acknowledgement of receipt • Within 30 processing days of receiving a filed claim: Send an electronic or facsimile notice of the status of the claim that notifies the provider whether the claim is a clean claim, or requires additional information from the provider. If the claim is clean, it must be paid or denied. If it requires additional information, a request for such information must be included in the notice

11. MPPL – Provisions (con’t) • Within 10 processing days of receiving additional information: Pay the claim or any undisputed part of the claim, or send an electronic facsimile notice of receipt and status of the claim that (1) denies all or part of the claim; or (2) makes a final request for additional information • Within 5 processing days of receiving a response to a final request for information: Pay the claim or any undisputed part of the claim, or deny the claim

12. MPPL – Provisions (con’t) • Clarifies definition of “processing days” • Sets forth penalties pertaining to claims unpaid after 45 “processing days” • Imposes penalty of 1% of claim per day vs. maximum $20 per day not to exceed 30 days • Imposes interest at a rate of 1% per month • Removes requirement that providers must formally notify health insurers that a penalty may be due • Expands definition of “health carriers” to include self insured plans and third-party contractors

13. Benefits of New MPPLAdds definition of Clean Claim • Currently no definition of Clean Claim • New definition: “a claim that has no defect, impropriety, lack of any required substantiating documentation, or particular circumstance requiring special treatment that prevents timely payment” • This is Medicare’s definition, and still somewhat ambiguous • Providers can still contract for a different (more specific) definition (standard form, required list of data elements); just make sure you know what “clean” means and that your claims processing system can produce)

14. Benefits of New MPPLRemoves Payor’s ability to “suspend” a claim • Current language states: “within 15 days after the date on which the health carrier…receives the additional information…it shall pay the claim or any undisputed part of the claim or deny or suspend the claim” • “suspend the claim” means that the payor gives notice to the provider specifying the reason for the suspension • Currently, after the payor notifies a provider that it has suspended a claim, the payor has no other obligation with regard to the suspended claim (other than to pay interest and penalties); the provider has to call, call and call to check status of a claim • New language states that after payor receives all additional information, it can only “pay” or “deny” and a denial must include the “specific reason” for the denial

15. Benefits of New MPPLProcessing days v. working days • Current language • Interest: 1% per month after 45 days • Penalty: 50% of claim amount up to $20 per day after 40 processing days; payors argued that it was not fair to include those days they were waiting for information from providers (fair enough…) • New language: all provisions use processing days (e.g., if a claim is not paid before the 45th day, interest and penalties are owed (i.e., clock stops while payor is waiting for information from provider) • This may make it difficult for providers to calculate interest

16. Benefits of new MPPLNew penalty provision • Current language • Notice requirements • 50% of claim up to $20/day • Payor could aggregate to $5.00 • New language • Notice requirements removed • Penalty is 1% of the claim amount per day (in addition to 1% per month interest) • Payor can aggregate to $100 • If claim has been “properly denied” before 45th day, interest and penalties do not apply • What if the payor thinks a denial is proper, but the provider disagrees?

17. Lagniappe(a little something extra) • “Fully Insured” on ID cards • 20 CSR 100-1.070.3 provides: An identification card or similar document issued to insureds or enrollees shall…indicate that the health benefit plan offered by the health carrier is regulated by the DIFP by placing “Fully Insured” on the front. • Effective 3/1/2010 for plans offered after 3/1/2010, or on the first anniversary date for plans already in effective as of 3/1/2010 (so most will be 1/1/2011) • Query if ERISA plans are considered a “health benefit plan” which is defined under Missouri law to be: • “a policy, contract, certificate or agreement entered into, offered or issued by a health carrier to provide, deliver, arrange for, pay for, or reimburse any of the costs of health care services; except that, health benefit plan shall not include any coverage pursuant to liability insurance policy, workers' compensation insurance policy, or medical payments insurance issued as a supplement to a liability policy;

18. Continued ChallengesERISA/Pre-emption • Currently, MPPA only applies to claims that are subject to the laws of the state of Missouri, based on definition of “health carrier” as “any entity subject to the laws of [Missouri].” Self-funded plans are not regulated by the state and are not subject to Missouri’s insurance laws. • Reasoning behind ERISA – companies that operate in multiple states have employees/beneficiaries in all different states and complying with the laws of 50 states seemed too onerous. If companies (or unions, etc.) self insure, ERISA allows them to have only one insurance scheme. • In reality, ERISA was probably meant to apply to coverage-related issues (true benefits such as coverage requirements), not to contract claims such as timely payment that do not affect beneficiaries.

19. Continued ChallengesERISA/Pre-emption, con.’t • The Eighth Circuit has yet to rule on whether a breach of contact claim based solely on a provider agreement (as opposed to the agreement between a company, union, etc. and a payor outlining the benefit plan) is completely preempted by ERISA. Many other Circuits have held that a contract claim for timely payment is not pre-empted. The only Missouri case on point is Schoedinger v. United Health Care, and it was not the perfect case. • New language attempts to subject ERISA plans to MPPL by modifying the definition of “health carrier” by adding “and any self-insured health plan, to the extent allowed by federal law…” and “For the purposes of this section…third-party contractors are health carriers…” • Georgia governor vetoed a bill that would have required TPAs of self-funded plans to comply with State’s prompt pay statutes, saying the bill likely violates ERISA • Georgia's law takes the same approach as Missouri did, that is, added “self-insured plan” to the definition of a “health benefit plan” as well as other definitional changes • What is next?

20. Continued Challenges Enforcement • Current law enacted in 2001/2002 with minimal impact (according to Governor’s report, providers still have 30% of A/R over 90 days) • Governor’s report was “blind” to public; does DIFP know identity of bad actors? • Is there anything DIFP can do as to payors not subject to the laws of Missouri (e.g., self funded ERISA plans)?