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by Richard D. Weber, J.D.
MDA Legal Counsel
Published in the August 2002 issue of the Journal

Question: I read that the Michigan Legislature passed legislation requiring insurance companies and HMOs to timely pay health care professionals. Would you please explain this legislation?

Answer: After battling for more than two years, the health care professions finally achieved legislation mandating timely payment. Public Act 316 of 2002 (Senate Bill 451), effective Oct. 1, 2002, requires health plans to follow timely claims processing and payment procedures for the payment of health care claims. Health plans subject to Public Act 316 are health insurers, HMOs, and Blue Cross Blue Shield of Michigan. Public Act 316 does not apply to Delta, workers' compensation, auto no-fault insurers, and ERISA self-funded plans. Medicaid health plans are subject to timely payment legislation enacted in 2000.

Timely Payment of Clean Claims. A health plan must pay a "clean claim" within 45 days after receipt. A clean claim that is not paid timely bears simple interest at 12 percent per annum.

A "clean claim" is a claim, which satisfies all of the following:

  • identifies the health professional that provided the service sufficiently to verify, if necessary, affiliation status and includes any identifying numbers;
  • sufficiently identifies the patient and health plan subscriber;
  • lists the date and place of service;
  • is a claim for covered services for an eligible individual;
  • if necessary, substantiates the medical necessity and appropriateness of the service provided;
  • if prior authorization is required for certain patient services, contains information sufficient to establish that prior authorization was obtained;
  • identifies the service rendered using a generally accepted system of procedure or service coding;

  • includes additional documentation based upon services rendered as reasonably required by the health plan.

Correction of Defective Claims. Within 30 days after receipt of the claim, the health plan must notify the health professional of all known reasons that prevent the claim from being a "clean claim." The health professional has 45 days, plus any additional time the health plan permits after receipt of the notice, to correct all known defects. The health plan's 45-day payment period is tolled from the date the health professional receives the notice until the health plan receives a response. If the health professional's response makes the claim "clean," the health plan is required to pay the claim within the remainder of the 45-day period. If the health professional's response does not make the claim "clean," the health plan must notify the health professional of an adverse claim determination, including the reasons, within the remainder of the 45-day period.

Review by Commissioner. Health professionals alleging that a timely processing or payment procedure has been violated may file a complaint with the commissioner of the Office of Financial and Insurance Services. Although health professionals have a right to a determination of the matter by the commissioner, the legislation does not bar health professionals from seeking court action. In addition to any other penalty provided by law, the commissioner may impose a civil fine of not more than $1,000 for each violation of the timely payment and processing procedures, not to exceed $10,000 in the aggregate for multiple violations.

Provider Protection from Discrimination. A health plan is barred from terminating affiliation status or the participation of a health professional or otherwise discriminating against a health professional for making a claim that a health plan has violated the legislation's timely processing and payment procedures.

Other Provisions. Health professionals are required to bill health plans within one year after the date of service, or the date of discharge from a facility, in order for a claim to be "clean." Health professionals are prohibited from resubmitting the same claim to a health plan, unless the 45-day payment period has passed, or if the health professional is submitting information in response to a notification from a plan. If a health plan determines that one or more services listed on a claim are payable, the plan must pay for those services and cannot deny the entire claim because one or more other services are defective. However, this provision does not apply if a health plan and health professional have an overriding contractual reimbursement arrangement.

Posted in: Billing Issues

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