INSURANCE

DEPARTMENT OF BANKING AND INSURANCE

DIVISION OF INSURANCE

Health Benefit Plans

Prompt Payment of Claims

Denied and Disputed Claims

Adopted Amendment: N.J.A.C. 11:22-1.6

Proposed: September 17, 2001 at 33 N.J.R. 3239(a)

Adopted: June 17, 2002 by Holly C. Bakke, Commissioner, Department of Banking and Insurance.

Filed: June 17, 2002 as R. 2002 d. 222 without change as to the amendment to N.J.A.C.11:22-1.6, but with the amendment to N.J.A.C. 11:22-1.3 not adopted.

Authority: N.J.S.A. 17:1-8.1, 17:1-15e, 17B:30-13.1, 17B:30-23 et seq. and 26:2J-15b.

Effective Date: July 15, 2002

Expiration Date: November 6, 2005

Summary of Public Comments and Agency Responses:

 

The Department received 28 written comments on the proposed amendments during the comment period. Comments were received from five carriers (Amerigroup Corporation, Atlantic Care, Delta Dental Plan of New Jersey, Oxford Health Plan, Physician Health Services of New Jersey, Inc); 18 providers (Atlantic Health System, Barnett Hospital, Bayonne Hospital, Bergen Regional Medical Center, Burdette Tomlin Hospital, Carrier Clinic, Chilton Memorial Hospital, Community Medical Center, Holy Name Hospital, Irvington General Hospital, Monmouth Medical Center, Newark Beth Israel Medical Center, Saint Barnabas Health Care System, Saint Barnabas Medical Center, Saint Peters University Hospital, The Valley Hospital, Union Hospital and West Hudson Hospital); and four trade associations (Medical Society of New Jersey, New Jersey Association of Health Plans, New Jersey Hospital Association and New Jersey Podiatric Medical Society), and Physician Practice Service.

COMMENT: Several commenters expressed their support of N.J.A.C. 11:22-1.3(a), which requires a carrier or agent to acknowledge receipt of a claim if requested by a health care provider or covered person. Most of the commenters stated that it is their understanding that providers would have the opportunity to file a request for acknowledgement of receipt of claims for all claims, instead of filing a request for each individual claim. The commenters requested that the Department clarify this policy, because not all health plans are responsive in providing such acknowledgement, particularly for claims submitted in writing.

RESPONSE: The Department is reproposing amendments to N.J.A.C. 11:22-1.3(a) elsewhere in this issue of the New Jersey Register. The Department believes that the reproposal will address the commenterís concern. The Department is reproposing amendments to N.J.A.C. 11:22-1.3(a) to require a carrier or its agent to acknowledge receipt of all claims. Additionally, the Department is proposing amendments that provide a carrier with three options as a means of acknowledging written claims. Carriers shall provide either written acknowledgement; web-based access; or an automated telephone system that provides access to claim status and the date of receipt of the claim. The Department is not making these changes as part of this adoption, because these amendments are substantive changes that require additional public comment.

COMMENT: One commenter stated that there are numerous problems with the amendatory language proposed for N.J.A.C. 11:22-1.3.

The commenter stated that it does not believe that the language proposed in this section is contemplated by the authorizing statute. The commenter stated that the Legislature never intended for providers to be required to request acknowledgement for electronic claims. Additionally, the commenter stated that this section still requires carriers to acknowledge paper claims, which was specifically left out of the statute. The commenter stated that requiring the acknowledgement of paper claims is antithetical to the intent of the statute, which was to encourage electronic transactions. The commenter noted that the Department recognized the intent of HINT, in its latest adoption for Standard Enrollment and Claim Forms in the New Jersey Register (33 N.J.R. 3461(a)). There, the Department remarked that the purpose of the Health Information Electronic Data Interchange Technology Act (the "Act") is to eliminate or lessen reliance on paper and encourage the implementation of electronic health care claim transactions. See N.J.S.A. 17B:30-24. According to the commenter, requiring carriers to acknowledge receipt of electronic claims is an incentive to encourage providers to file electronically. The commenter further stated that providing the same incentive for filing paper claims does not encourage providers to change their submission practices, or to move toward an electronic claims environment.

The commenter contends that, when the Department decided to include paper claims in this section, it created numerous complications. The commenter stated that the Department has changed language in this proposal in order to attempt to fix some of the problems caused by the inclusion of paper claims. However, the language that the Department has added only serves to make the situation worse. The commenter stated that the new language provides that the acknowledgement of a claim is to be provided by the same method utilized in the transmission of the claim. However, the language also states that a provider or covered person may request an acknowledgement. The commenter argued that this could present a myriad of problems. For example, if a provider submitted a claim electronically, and the covered person who received treatment submits a request for acknowledgement by paper, and does not have the ability to receive an electronic acknowledgement, the carrier cannot comply with the regulation.

Finally, the commenter stated that the Department has decided that the postmark date on a paper claim or request for acknowledgement will be considered the date of receipt. The commenter recognizes that the Department has struggled over this issue to find a solution that is fair to both providers and plans. Nevertheless, the postmark issue remains tremendously problematic for many of the plans.

RESPONSE: When the Department originally proposed N.J.A.C. 11:22-1.3, see 32 N.J.R. 1985(a), this provision required acknowledgement of the receipt of a claim. The Department on adoption clarified this provision by amendment to require that the acknowledgement be provided in the same medium that the claim was received. See 33 N.J.R. 105(a). The Department is reproposing amendments to N.J.A.C. 11:22-1.3. The Department believes that the reproposal addresses the postmark issue and operates appropriately to encourage the implementation of electronic transmission of claims.

COMMENT: Two commenters stated that in addition to the problems created by the requirement that paper claims be acknowledged, the Department has changed the language concerning electronic acknowledgement. The original adoption provides that: "The acknowledgment of receipt of an electronic claim shall go to the entity from which the carrier received the claim." A proposed revision to this language provides that the acknowledgment be sent to the entity "that made the request" for acknowledgement. See 33 N.J.R. 3239(a). The commenter stated that the proposed language presents tremendous problems, because electronic acknowledgement can be done automatically. If, for example, the claim comes in from a clearinghouse, rather than a provider, the acknowledgement of receipt would go from the carrier to the clearinghouse, because the clearinghouse is the entity that submitted the claim. The commenter recommends that the Department return the language to its original form, and require electronic acknowledgment to "go to the entity from which the carrier received the claim."

RESPONSE: The Department disagrees with the commenter. Requiring that the acknowledgement of electronic claims go to the entity that made the request ensures that proper notice reaches the party who requested the acknowledgement. Different rules apply if the claim is, instead, transmitted by a clearinghouse. N.J.A.C. 11:22-3.8 governs the use of clearinghouses in electronic transactions by the provider or payer, and those situations in which both use the same clearinghouse. These rules provide that:

1. When the provider chooses to use a clearinghouse for the transmission of claims to a payer, notice delivered by the payer to the clearinghouse shall constitute notice to the provider.

2. When a payer uses a clearinghouse for the receipt of any electronic transaction required by this subchapter, notice sent by the payer through the clearinghouse shall not constitute notice to a provider until it is delivered to the provider by the clearinghouse, or is available for pickup from the providerís mailbox at the clearinghouse.

3. When a payer and provider use the same clearinghouse for the transmission and receipt of health care transactions, notice that is sent by one party to the clearinghouse shall also constitute notice to the other party.

COMMENT: Several commenters expressed concern that the Department has proposed changing the language in N.J.A.C. 11:22-1.3(a), such that a provider or covered person may request acknowledgement "of all claims to be submitted in the future." See 33 N.J.R. 3239(a). The commenter stated that this is particularly troublesome, considering some of the additional changes in that proposal, such as the requirement that the acknowledgement go to the entity making the request, and the inclusion of paper claims in this section. According to the commenter, this new proposal requirement would be an incredible administrative burden, and would require a major systems overhaul. The commenter believes that this would be costly to health plans and add little value to the process.

One commenter's position is that the Act is intended to encourage, standardize and facilitate electronic submissions. Therefore, the acknowledgement of such claims within two business days is clearly achievable due to automation, which is not the case with paper claims.

The commenter stated that paper claims can be acknowledged within 15 working days, but the burden incurred in doing so is substantially greater. This commenter believes that the Department should not encourage providers to continue to send paper claims. Where a provider opts to send paper claims, thereby requiring the carrier physically to handle and input each claim into its computer system, it is entirely reasonable to require the provider to decide, on a paper-claim by paper-claim basis, whether to request an acknowledgment. If the provider truly desires acknowledgement of a paper claim, he need only place an appropriate sticker on the paper claim. The inclusion of the request for acknowledgement on the paper claim will also facilitate the carrier's ability to honor the request upon receipt and input of the claim.

Further, the commenter stated that a generic or "blanket" request to acknowledge paper claims is not in the greater public interest, because it will indiscriminately result in higher costs and slower processing as every claim, no matter how simple or small, would result in an "acknowledgement" being mailed. The commenter stated that the postage alone is $.34, not counting the cost of materials and labor involved. This would result in an unnecessary and undesirable drain of resources and funds otherwise available to pay for health care on a timely basis.

RESPONSE: The Department is reproposing amendments to N.J.A.C. 11:22-1.3. The Department believes that the amendments address the commenterís concerns by providing an equitable solution for providers and carriers. The proposed amendments require a carrier or its agent to acknowledge receipt of all claims. The Department is also proposing amendments that offer a carrier three options to acknowledge written claims. Carriers shall provide either written acknowledgement; web-based access; or an automated telephone system that provides access to claim status and the date of receipt of the claim.

COMMENT: One commenter stated that N.J.A.C. 11:22-1.3(a) should be amended to state that acknowledgement of receipt of claims should be required "whether the provider is participating or non-participating with the carrier."

RESPONSE: These rules apply whether the provider is participating or non-participating with the carrier.

COMMENT: One commenter stated that the proposed amendment to N.J.A.C. 11:22-1.3(a), which requires that the acknowledgement be provided by the same method utilized in the transmission of the claim, is problematic. The commenter stated that as to this section, although not part of the proposal, the Department has reiterated the provision it inserted upon adoption of the initial rules that written claims or requests for acknowledgement are considered "received" based on the US mail postmark date. The commenter objected to using the postmark date as the date for receipt of either a request for acknowledgement or a claim. The commenter contends that carrier claims processing systems do not capture postmark dates and, more importantly, experience has shown that the postmark date is not a proper indication of when something is received by the carrier. Carriers often use internal postmark meters that do not represent when something actually left the providerís office. The commenter stated that the legislation uses "date of receipt" as a benchmark for payment timeframes. The commenter recommends that the Department give this phrase its ordinary meaning and use the actual date of receipt, not the date of postmark, from which to measure a carrierís compliance with claim payment and acknowledgement requirements.

RESPONSE: The Department is reproposing amendments to N.J.A.C. 11:22-1.3 that address the postmark issue.

COMMENT: Several commenters expressed concern with proposed N.J.A.C. 11:22-1.3(b), which requires that carriers provide written notice to the provider and the covered person when the covered person will have an increased responsibility for payment if a claim is disputed or denied in full or in part.

Several commenters stated that this policy is inconsistent with that adopted by the Department of Health and Senior Service ("DHSS"). The commenter stated that DHSSís position is that the patient/covered person should be involved with the delivery of care and transactions that occur between their health plans and providers regarding that care. Therefore, the commenter believes that there is the need to obtain consent from patients to appeal on their behalf following the issuance of a denial of coverage. According to the commenter, DHSSí policy is that the patients must be fully informed of all determinations made by their health plan to deny or dispute a claim.

The commenter stated that it is through this process that patients will be informed of denial. Such communication, however, should be provided by the health plan and not rest solely with the provider. The commenter is unclear why the Department would adopt a position that would only allow covered persons to be informed of the actions of their health plan if they owe money for the care they received, which is highly unlikely given hold harmless provisions that currently exist in regulations.

The commenter stated that the Department has expressed concern that a policy of notifying the covered person in all cases, even for administrative denials or downcoding of care, simply raises the anxiety of individuals at a time when they are physically and emotionally vulnerable. Further, disputes about coverage occur, which may result in patients believing that they have financial obligations when, in fact, they do not.

The commenter believes that there are ways to address these concerns. The commenter notes that patients are going to be informed of a denial if a provider elects to appeal that denial, so the patient is not going to be "shielded" from communication taking place between the provider and health plan. The commenter stated that the issue becomes who is responsible for notifying the patient that a denial or dispute has been issued by the health plan. The commenterís position is that HMOs must take responsibility for communicating with their covered persons regarding the decisions they are making to allow or deny medical care, instead of the provider who has no control over the actions of the health plan other than through an appeal process.

The commenter stated that to address the Departmentís concern, perhaps patients can be notified of a denial or dispute (regardless of their financial obligation) if the denial is related to medical necessity, including the downcoding of diagnosis of care. If they have no obligation, then the health plan can simply indicate same in their notification letter.

These commenters requested that the Department not adopt a policy that absolves health plans of responsibility for the decisions they make and communicating with those they insure.

RESPONSE: The Department is amending this provision in its reproposal of amendments to N.J.A.C. 11:22-1.3(b) to be consistent with N.J.A.C. 11:22-1.6(a). The Department is maintaining its requirement in N.J.A.C. 11:22-1.6(a) that a carrier or an agent additionally provide written notice to the covered person when he or she will have increased responsibility for payment.

COMMENT: One commenter expressed concern with N.J.A.C. 11:22-1.3(b). The commenter stated that the hospital provider has provided clinical service in good faith under terms of the contract with the carrier, yet the hospital is subsequently not paid. The commenter stated that it is important to note that payers receive premiums for the insuredsí full range of health services. The commenter believes that there is a serious "disconnect" when the carrier is not paying for services rendered, but receiving the full premium.

The commenter stated that the practice of denials has resulted in diminished revenues for hospitals. Hospitals cannot, however, reduce costs because the clinical service has already been rendered to the patient before the payment is denied.

The commenter stated that it is not always clear or contractually evident when a patient has responsibility for payment of hospital services. Often such decisions are purposely delayed long after the patient has been discharged from the hospital. The commenter stated that, when a decision is made to deny reimbursement because the stay is considered by the carrier to be medically unnecessary or the level of care is less than acute, the patient in most cases, is obligated to pay because the stay is deemed by the carrier to be a non-covered service. The commenter stated that this is very confusing to the patient, and clearly unfair to the hospital provider when the carrier is not willing to state the reasons for non-payment. The commenter believes that it must be required that carriers make a physician available to explain why the case is denied and to speak with the hospital staff/physician before rendering the denial. The commenter stated that there is a growing trend where the carrierís physician is not available. The commenter believes that language should be included that a denial cannot occur unless the carrierís physician speaks directly to the patient.

The commenter stated that this proposed amendment places an unnecessary financial burden on the hospital provider of services to notify the patient for non-payment or partial payment for benefit coverage, while insulating the carrier. It is the commenter's position that HMOs take responsibility for communication with the patient for all non-payment decisions that are related to medical services provided by a hospital, and that such decisions must be communicated to the insured during the hospital stay. By doing so, the hospital, patient, and carrier can work toward the patientís disposition in the appropriate care setting.

In addition, the commenter believes that it is imperative that the patient be informed of the denial. Patients must know that the clinical services are not being reimbursed, even though their employer has paid for health insurance coverage. Currently the hospital cannot appeal a denial without the patientís consent.

RESPONSE: N.J.A.C. 11:22-1.6(a)1 requires the covered person to be notified of a denied or disputed claim when he or she has increased responsibility. These rules require that the notification include an identification and explanation of all reasons for the denial or dispute. Denials that are believed to be inappropriate may be appealed in accordance with N.J.A.C. 11:22-1.8. The Department does not believe that it is necessary to require the physician to speak directly with the hospital staff or physician before rendering a decision.

COMMENT: Several commenters expressed their support of N.J.A.C. 11:22-1.6, the denied and disputed claims provisions. The commenters stated that these amendments clarify the reasons why a claim cannot be entered into the claims system. The commenter stated that the clarification would be helpful as claims continue to be rejected for reasons that are simply unknown to providers. The commenters requested the Department to add language that would prohibit a claim received by a health plan to be classified as "pended." The commenters believe that the options available to health plans are to pay, deny or dispute a claim, yet health plans continue to pend claims in significant numbers. The commenters stated that "pended" status effectively prohibits providers from moving forward with an appeal in a timely fashion. Pending claims can occur when providers call health plans and seek authorization to provide care. Claims are also pending when they are submitted and simply not processed or paid, thereby allowing the health plan to bypass all payment timeframes.

The commenters stated that the position of DHSS is that health plans only have the option of paying, denying or disputing a claim. Therefore, the commenters suggested that explicit language be added to N.J.A.C. 11:22-1.6, to make it clear that claims cannot be pended.

RESPONSE: The Department agrees with the commenter and will reflect this change in its reproposal.

COMMENT: One commenter stated that N.J.A.C. 11:22-1.6 should be amended to make it explicitly clear that these rules apply to secondary and tertiary carriers as well as primary carriers.

RESPONSE: These rules apply to all carriers who are responsible for payment.

COMMENT: One commenter stated that it welcomes the proposed amendments to N.J.A.C. 11:22-1.6, and requested two changes. The commenter stated that the phrase in N.J.A.C. 11:22- 1.6(a)1i, ii, and iii "cannot be entered into the claims system," is inaccurate: claims of the sort listed can be "entered" but cannot be processed. The commenter stated that changing the phrase to "because it cannot be processed by the claims system" would cure the problem. Additionally, the commenter stated that the danger of trying to draw up an exclusive list of reasons why a claim cannot be processed, as the Department attempts to do in N.J.A.C. 11:22-1.6(a)1ii, is that all valid reasons might be missed. For example, "incorrect data" (for example, wrong member or provider number) is not listed as a reason, yet is probably the most questioned or disagreed upon aspect of a claim or payment. Additionally, undisputed payments could have been received by the provider the next day or may have already been received.

RESPONSE: N.J.A.C. 11:22-1.6(a)1i specifically states that if a claim is denied because it cannot be entered into the claims system, then all reasons why the claim cannot be entered shall be included. The purpose of this provision is to try and avoid multiple submissions when problems with a claim can be identified on the first review so that the claim can be cured and promptly processed.

The Department is proposing amendments to N.J.A.C. 11:22-1.6(a)1ii which address the issue of missing or incorrect data as a reason why a claim may not be entered.

COMMENT: Several commenters noted the Departmentís willingness to amend N.J.A.C. 11:22-1.6(a)1, which requires the carrier to identify all the reasons for denial. The commenters stated that the Departmentís recognition that there is a floor of essential administrative information required before a claim can be adjudicated is positive. The commenters stated that the language the Department has added to categorize denials does not achieve the desired result, however.

One commenter stated that the Departmentís language reads, in part, "If a claim is denied because it cannot be entered into the claims system, then all reasons why the claim cannot be entered into the claims systems shall be included." The commenter expressed concern with this language because claims can be entered into the claims systems even if they are incomplete, contain invalid information, or the eligibility of the subscriber or member cannot be determined. The commenter stated that the problem for health plans is that these claims cannot be fully adjudicated. The commenters recommended that this language be changed to use the phrase "fully adjudicated" in place of "entered into the claims system," wherever the latter phrase occurs in the section.

RESPONSE: The Department disagrees with the commenter. The Department does not believe that the use of the phrase "fully adjudicated" is necessary and may lead to confusion in the application of this provision.

COMMENT: The commenter stated that when the Department added language to N.J.A.C. 11:22-1.6(a)1i, the existing language was removed. The commenter stated that as proposed, this provision creates a potential problem. The commenter stated that if, after denying for all of the reasons in N.J.A.C. 11:22-1.6(a)1ii and then, if necessary, denying for other reasons once the claim is entered, a plan obtains information or documentation from a provider after the first review and after the claim has been entered, the plan may not use that information to deny the claim. The commenter requested that the Department insert language at N.J.A.C. 11:22-1.6(a)1iii that reads, "A carrier or its agent shall not deny or dispute a claim for reasons other than those identified after the first review after the claim is entered unless information or documentation relevant to the claim is received after the initial review and such documentation leads to additional reasons to deny or dispute which were not present at the time of that review."

RESPONSE: The Department agrees with the commenter and has included this substantive change in its reproposed amendments of N.J.A.C. 11:22-1.6.

COMMENT: Several commenters expressed concern with the amendatory language in N.J.A.C. 11:22-1.6(a)1ii which attempts to list all of the reasons why a claim cannot be entered into a claims system. The commenter stated that, in creating this list, the Department has omitted a number of reasons that should be included. The commenter contends that a provider may enter incorrect data, which would not be covered under "missing data fields." For instance, it is possible that an invalid member or provider number, invalid CPT code or other invalid data was entered on the claim, none of which would be reflected by the list provided in the regulations, and all of which would prevent a claim from being fully adjudicated. The commenter stated that it would like to see N.J.A.C. 11:22-1.6(a)1ii amended to include "invalid data entered in a data field" as a reason. Additionally, the commenter is concerned that by giving examples of "missing data fields" the Department may inadvertently be limiting this particular reason for denial, and requests that the language "(for example CPT code, date of service, provider name)" be removed when this language is adopted. The commenter also stated that the list also fails to note that a suspension due to coordination of benefits, workersí compensation claim or service that was not a covered benefit would make it impossible to adjudicate fully the claim.

A second commenter suggested adding the following reasons why a claim cannot be entered: coordination of benefits (COB); workers compensation; lack of precertification; preexisting condition; not a covered benefit; the benefit cap has already been reached; the payment was included in a global or hospital fee; incorrect CPT code or CPT code is not substantiated by medical information; and the entry of other incorrect data on the claim.

RESPONSE: The Departmentís examples are intended to be illustrative, not exhaustive, as reflected in the proposed amendments to N.J.A.C. 11:22-1.6(a)1ii.

COMMENT: One commenter stated that N.J.A.C. 11:22-1.6(c), which permits the carrier to aggregate interest amounts under a dollar with the consent of the provider, should be amended so that plans have the ability to work with providers to aggregate interest amounts up to $25.00 due to the administrative time and effort involved.

RESPONSE: The Department agrees with the commenter. The proposed amendment is a substantive change that requires additional public comment. Therefore, the Department is making this amendment as part of the reproposed amendments to N.J.A.C. 11:22-1.6.

COMMENT: One commenter stated that clarification is needed regarding when interest payments must be made. The commenter stated that the amendment is unclear as to whether interest must be paid when the aggregate amount is reached, or within 14 days of the date the claim is paid. The commenter recommended that when the aggregate amount reaches the agreed-upon amount, interest should be paid.

Another commenter urged the Department to broaden the consent provision for providers, so it is clear that providers can elect not to receive interest checks unless and until the accrued interest totals an agreed-upon amount (for example, $5.00 or $10.00). The commenter believes that, in these cases, the provider retains full control and can elect to defer its receipt and processing of payments of smaller sums.

The commenter suggested that N.J.A.C. 11:22-1.6(c) be revised to read:

"The carrier need not issue any interest payment which totals less than $1.00 for a claim so long as the carrier maintains auditable records to substantiate that such payments were less than $1.00. The carrier may aggregate interest payments to providers rather than pay them on an ongoing basis so long as the provider consents to the particular aggregation level and the carrier maintains auditable records to substantiate the providerís consent."

RESPONSE: The aggregate is to be paid when the aggregate is reached. The Department is reproposing N.J.A.C. 11:22-1.6 to establish $25.00 as the maximum aggregate amount, with the consent of the provider.

COMMENT: One commenter stated that these rules need to specifically address the issue of where and how providers report non-compliance with these rules.

RESPONSE: The Department monitors compliance through its analysis of prompt pay reports, performance of targeted market conduct examinations and handling of consumer complaints. (Providers are encouraged to utilize the internal and external appeals provisions of N.J.A.C. 11:22-1.8.).

COMMENT: One commenter stated that all reports submitted to the Commissioner should be available to the providers/public upon request and this should be stated in these rules.

RESPONSE: Disclosure of these reports will be governed by the provisions of the Right to Know Law. See N.J.S.A. 47:1A-1 et seq.

Federal Standards Statement

A Federal standards analysis is not required because the adopted amendments are not subject to any Federal standards requirements.

Full text of the adoption follows:

11:22-1.6 (No change from proposal.)

dht02-06/inoregs