Thursday, February 01, 1996
by Richard D. Weber, J.D.
MDA Legal Counsel
Published in the February 1996 issue of the Journal
Question: Are there any laws that require insurance companies/administrators to pay claims for dental services on a timely basis?
Answer: The Michigan Insurance Code requires insurance companies to pay all claims on a timely basis. Failure to do so is deemed to be an unfair trade practice under the insurance code. In addition, benefits not paid on a timely basis shall bear interest at a rate of 12 percent per annum from a date 60 days after a satisfactory claim form was received by the insurer (MCLA section 500.2006). The insurance code applies to all insurers doing business in Michigan, but the code does not apply to Blue Cross Blue Shield of Michigan or Delta Dental.
Timely payment of claims is also mandated by statute. Under the Non-Profit Health Care Corporation Reform Act, which is the Blue Cross Blue Shield of Michigan enabling act, benefits payable to an insured shall bear interest at the rate of 12 percent per annum from a date 60 days after a satisfactory claim form was received by BCBSM (MCLA section 550.1403). BCBSM must specify in writing the materials which constitute a satisfactory claim form not later than 30 days after receipt of a claim.
Under the Nonprofit Dental Care Corporation Act, which is the corresponding statute for Delta, there is no mandatory interest requirement for the failure to timely pay a claim.
Other than these statutory requirements, any claim for interest against an insurer for failure to timely pay a claim must be based upon a contract. The insurance policy or a participating provider agreement could require interest, in the event claims are not timely paid. In addition, it could be argued that a common law contract claim was created with the implied requirement for timely payment, failing which the statutory legal rate of 5 percent interest would be assessed.
Question: What recourse do the patient-insured and/or dentist have if an insurance company does not timely pay a claim for dental services?
Answer: A dentist has no statutory right to require insurance companies to timely pay claims. Since the insurance contract is with the patient, not the dentist, the dentist has no legal rights under that document. If the dentist has a participating agreement with the insurance company, however, the dentist may have a direct claim against the insurance company. Some participating agreements require payment of claims within a certain time period, with the provision that interest will be assessed if the payment is not made within the time period. Absent any agreement between the insurance company and the dentist, however, the dentist has no rights against the insurance company. The dentist's rights are solely against the patient, who would then have rights against the insurance company under the contract of insurance between the insurer and the patient.
A patient has a right to enforce payment of interest under the statute under either the insurance code or the BCBSM enabling act. Moreover, the patient has a right to file a claim with the insurance commissioner based upon the unfair trade practices section of the insurance code. Although a dentist could assist the patient filing such claims, absent a participating agreement with the insurance company, the dentist would have no direct rights against the insurance company. In this instance, the patient is directly responsible for payment to the dentist, which would obviously give the patient some incentive to pursue the insurance company.
Insurance Bureau complaint forms are readily available. Upon receipt of a complaint, the Insurance Bureau contacts the insurance company or administrator and the insurer has 30 days to respond to the allegations. The Insurance Bureau then makes a determination as to whether the insurer's activities comply with the applicable laws. The Insurance Bureau forwards this determination along with a copy of the insurer's response to the patient/complainant. The patient has the right to pursue litigation if the Insurance Bureau resolution is unsatisfactory.
The complaint and litigation process is obviously time-consuming and expensive. It is not a satisfactory solution to the typical late payment claim. The best solution is to insist that insurance companies provide a mechanism for timely payment and interest.