Electronic Receipt and Transmission of Health Care Claim Information : Standard Enrollment and Claim Forms

Adopted New Rules: N.J.A.C. 11:22-3

Proposed: March 5, 2001 at 33 N.J.R. 750(a)

Adopted: September 6, 2001 by Karen L. Suter, Commissioner, Department of Banking and Insurance

Filed: September 10, 2001 as R. 2001 d. 364, with substantial and technical changes not requiring additional public notice and comment (see N.J.A.C. 1:30-6.3)

Authority: N.J.S.A. 17:1-8.1, 17:1-15e and P.L. 1999, c. 154 - The Health Information Electronic Data Interchange Technology Act ("HINT")

Effective Date: October 1, 2001

Expiration Date: November 6, 2005

Summary of Public Comments and Agency Responses:

The Department received 22 written comments regarding this proposal from: United Concordia Companies, Inc.; United Healthcare; Aetna US Healthcare; Golden Rule Insurance Company; AmeriHealth HMO, Inc.; Merck-Medco Managed Care, LLC; Thomas Edison State College; The New Jersey Association of Mental Health Agencies, Inc.; Highmark, Inc.; Delta Dental Plan of New Jersey, Inc.; American Family Life Assurance Company of Columbus (AFLAC); Health Insurance Association of America; State Farm Mutual Automobile Insurance Company; New Jersey Association of Health Plans; New Jersey Hospital Association; Physicians Health Services, Inc.; Kennedy Memorial Hospitals/University Medical Center; Saint Barnabas Health Care System; Oxford Health Plans; Medical Society of New Jersey; and Horizon Blue Cross and Blue Shield of New Jersey.

The Department also wishes to express its appreciation to the many individuals, professional associations, institutions and companies that have provided insight and guidance in the development of these rules. Of particular note is Dr. Kepa Zubeldia, MD, of Kaysville, Utah, who selflessly served as an invaluable resource regarding the complexities of the HIPAA Transaction and code sets and related issues. The efforts of Michael P. Boyle and Nancy P. Labbe of Middletown, Connecticut in creating the new standard paper enrollment form are also noted.

1. COMMENT: Many commenters expressed concern over the timetable for implementation of electronic processing of enrollment and claim forms in New Jersey. They stated that the Department should not mandate early use of electronic enrollment and claim forms because of the uncertainty currently associated with the implementation of the United States Health and Human Services ("HHS") rules that will implement the administrative simplification required by the Health Information Portability and Accountability Act of 1996 ("HIPAA") (P.L. 104-191).

The commenters pointed to the October 16, 2002 deadline for use of HIPAA's electronic transaction and code sets. They are concerned that they will be placed in the impossible position of spending time and money complying with the HINT ("Act") standards in the summer of 2002 and then ultimately be required to comply with the HIPAA standards a few months later. Also, they noted that the HIPAA requirements may not be settled by the time they must comply with HINT and argued that it would be wiser simply to wait until October 16, 2002 at which time compliance with HINT and HIPAA would converge.

Still other health care providers claimed that the Department should not implement the HINT requirements prior to the commencement date of the HIPAA Transaction Standards because New Jersey will only be implementing a few months prior to the HIPAA timeframe. These commenters claimed that this is not a sufficient amount of time to justify early implementation and therefore, the Department should order compliance contemporaneously with HIPAA.

The commenters also added that there are other issues not currently resolved, such as Privacy and Security rules and standards; National Employer Identifiers; Health Payer Identifiers; Provider Identifiers; and Claim Attachments. Thus, these commenters urged the Department to avoid early implementation.

RESPONSE: While the Department appreciates the concern of the commenters, the Department is acting pursuant to the obligations imposed by HINT and not HIPAA. HINT requires the Department to establish systems that will facilitate the electronic receipt and transmission of health care claim information in New Jersey. Among other things, the Act requires the Department to:

The Department also notes that it was obligated to commence the HINT electronic data interchange (EDI) related efforts only after HHS adopted its rules establishing the standards for the electronic transmission and receipt of health care claim information. HHS adopted the HIPAA Transaction and Code Set Rules on October 17, 2000. Thus, on March 5, 2001, the Department proposed these rules pursuant to the authority and requirements of HINT.

The Department's statutory obligations under HINT commenced with the HHS adoption of the standard health care transaction rules noted above. Shortly thereafter, on April 12, 2001, HHS adopted the HIPAA Privacy Rules as originally proposed, which became effective on April 14, 2001. This action ended some uncertainty regarding one aspect of the implementation of the HIPAA rules and demonstrates that there is no hesitancy by HHS to implement HIPAA. At this time, it appears that the HIPAA transaction and code set rules will become effective in October 2002 and the HIPAA privacy rule will be effective in early 2003.

The Department also notes that its obligations are grounded in HINT and became effective upon the HIPAA transaction and code set rule adoptions. Thus, the Department must remain committed to the timetable as proposed and as required by the Act. This does not mean, however, that the Department is not aware of and sensitive to the concerns of the commenters regarding coordination with HIPAA. The Department plans to monitor closely the responses filed by payers in their Operational Status Reports. In addition, the Department continually follows developments as they occur at HHS and will not hesitate to consider alternatives as may be necessary in the future. The Department also considers that the Act anticipated a degree of uncertainty by giving the Commissioner authority to issue extensions and waivers, on a case-by-case basis, from the implementation timetable. Thus, the Department cannot deviate from the timetable established in the proposal unless and until future events justify a corrective response.

2. COMMENT One commenter claimed that HINT does not require the early implementation of electronic data interchange (EDI), but only requires that payers undertake the accelerated use of the paper standard claim and enrollment formats, not electronic formats. The commenter argued that HINT simply requires the Department to develop a timetable but does not require the actual implementation of these electronic systems.

RESPONSE: The Department disagrees with the commenter. N.J.S.A. 17B:30-23a(1) requires that the Department establish by regulation a timetable for the implementation of the electronic receipt and transmission of health care claim information. Hence, the obligation is to create a timetable for the electronic receipt and transmission of this information and not a timetable for the development and use of standard paper formats. The Act goes on to state that this timetable shall be established after the adoption of HHS rules establishing standard electronic transaction and code sets for health care claims. This timetable will require that the identified health care payers will use the standard enrollment and claims forms 12 months after the adoption of these rules. Implementation is not limited to paper formats but clearly requires the Department to compel the use of the standard electronic forms for the receipt and transmission of health care claims. Furthermore, any other interpretation would not be consistent with the purpose of the Act, which 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).

3. COMMENT: Several commenters expressed concern with the Department's reference to N.J.S.A. 17B:27A-17 in the definition of "small employer health benefit plans." The commenters urged the Department to use the same definition that is used in the HIPAA rules. This would avoid confusion between those small employer health benefit plans that are identified under HIPAA and those identified under HINT. They observe that the Department's proposed definition of "small employer health benefits plan" at N.J.A.C. 11:22-3.2 is different from the HIPAA rules in several ways. The HIPAA definition includes those self-administered plans with fewer than 51 members, those small group health plans that have $5 million or less in annual receipts, and is not limited by the number of participants.

Additionally, the commenters also observed that the proposed HINT rules provided for an automatic 12 month extension upon application, whereas the HIPAA rules provided for an automatic twelve-month extension. The commenters recommended adoption of the Federal definition to avoid confusion with the Federal rule.

RESPONSE: Upon further consideration of this issue and in light of the arguments raised in the comment, the Department accepts these recommendations and will make the requested changes upon adoption. Exclusively for purposes of this subchapter, the Department will adopt a definition of "small employer health benefit plan" that includes both the Federal definition and the State definition. In this way, all small employer health groups will come under the definition. Also, the Department now concludes that the same 12 months of additional time granted by the HIPAA rules is appropriate for use in New Jersey. The Department is taking this action so that there is consistency for these plans between HINT and HIPAA.

5. COMMENT: In reference to N.J.A.C. 11:22-3.1(a), one commenter expressed concern that the proposed rules do not clearly state that New Jersey is adopting the same electronic transaction and code sets that were recently adopted by HHS.

RESPONSE: It is the specific intent of HINT and these rules that New Jersey recognize and implement the electronic transaction and code sets that were recently adopted by HHS. Thus, the Department specifically referenced the appropriate Federal citations to make clear that the Department is accepting the HHS electronic transaction and code sets as the standards for use in New Jersey. Also, these rules reference the Administrative Simplification Website and the HCFA Website. Thus, these rules adhere to the current transaction and code sets being used by HHS.

6. COMMENT: Several commenters expressed their objection to the paper enrollment form selected by the Department and proposed as Exhibit 1 in the Appendix. These commenters refer to N.J.S.A. 17B:30-23, which requires the Department to establish one set of standard health care enrollment and claim forms in paper and electronic formats. The commenters note that the paper enrollment form does not contain the same data elements that are contained in the electronic enrollment format. The commenters urge the Department to reconsider the use of the form proposed and ask the Department to permit use of any paper form that contains the same information and data elements that are used in the electronic format.

RESPONSE: The Act requires the Department to recognize and establish a standard form for enrollment and claims in both electronic and paper formats. There is no requirement that the electronic and paper formats be the same or even contain the same information. Regarding the electronic formats, there is specific reference in the Act (N.J.S.A. 17B:30-23a(1)) to HIPAA standard transaction and code sets. Thus, the Department had no difficulty in deciding to use the electronic standards required by the Act. The Act does not contain any similar guidance for selection of a paper format.

Regarding a paper claim form, the Department was able to identify two universally accepted forms that can easily be recognized as the proper document for use in the submission of paper claims. The UB-92 (HCFA 1450) for use by health care institutions and facilities and the HCFA 1500 for use by health care providers have long been used as the paper standards for submission of health care claims. After consultation with the New Jersey Department of Health and Senior Services (DHSS), the Department determined that recognition of these forms is appropriate. Therefore, N.J.A.C. 11:22-3.3(b) was proposed and will be adopted by the Department. The Department also observed that from time to time, changes in forms occur and the Department is therefore recognizing the website maintained by the Federal Center for Medicaid and Medicare Services (CMS) and incorporating that website by reference into these rules. Any updates or changes in the content of the federal electronic forms will also become part of these rules.

Regarding the enrollment form, the Department confronted a vastly different situation. First, there is no universally accepted Federal paper format used for enrollment in health plans. Thus, the Department was not able to refer to a HHS or CMS document or website as constituting the standard content of a paper enrollment form. The Department also observed that most group health insurers have their own forms for enrollment which contain the data they consider to be useful or needed. Early in the process of developing this proposal, the Department consulted a working group within the HINT Advisory Board (established in accordance with the Act), to assist in the formulation of a paper enrollment form. Many payers wanted the Department simply to print a list of all the information contained in the electronic form and call that document an enrollment form. It was noted, however, that the electronic format used in the HIPAA adoption contains certain information that is not subject to inquiry or consideration in this State. While the electronic format may be appropriate for use nationwide, New Jersey's paper format must be able to stand alone and be consistent with our State law. Thereafter, the Department and a working group formed by the HINT Advisory Board tried to identify certain data fields that could be recognized as being part of a New Jersey paper format for use by all payers. At the time these rules were proposed, there was no agreement within the industry to the degree necessary to formulate a comprehensive paper enrollment form consistent with the laws of this State. As a result, the Department turned to the form used by the Small Employer Health Benefits Program Board and amended it to list other necessary areas of inquiry. Thus, the Department proposed Exhibit 1 of the Appendix.

The Department has remained mindful of the need to work with group health insurers in the creation of a paper enrollment form that is consistent with state law, useable by all payers, and contains sufficient data adequate to complete the comparable HIPAA electronic enrollment form. Based on the comments received, the Department accepts those opinions that the proposed form is not conducive to industry-wide usage and is not adaptable to the electronic format. Consequently, the Department, with the assistance of several commenters, was able to identify a paper enrollment form which is currently in use by one large payer that appears to comply with the criteria listed above. This revised form does not contain any new data elements, nor is it as restrictive as the proposed enrollment form. On the contrary, the revised enrollment form contains less information, is consistent with State law and is sufficient to satisfy the data requirements of the electronic format. The Department was also able to obtain permission from the form’s designer to use this form. It should be noted that these forms can be customized to include plans names and logos as indicated.

It should also be noted that the list of factual data contained in the new Exhibit 1 is the maximum information that insurers can request in a paper enrollment form. If a group plan wishes to inquire beyond the information on the standard enrollment form, it will be required to submit these questions to the Department for approval prior to use.

7. COMMENT One commenter urged the Department to expand the scope of N.J.A.C. 11:22-3.1(d) to include all entities that are in any way associated with a health plan, including an employer that creates the plan and/or the administrators of ERISA plans. Another commenter asked the Department to further define the term "payer" to be consistent with N.J.S.A. 17B:30-23 and 17B:30-26. Specifically, the commenter stated that these rules should state that they also apply to agents and subsidiaries of the payers.

RESPONSE: The Department does not agree with the first commenter. The purpose and scope of the Act and these rules is established in N.J.S.A. 17B:30-23a(1). Under the Act, only certain health care benefit payers are subject to regulation by the Department, and this does not include employers or ERISA plans. Regarding the second comment, the Department agrees with the commenter and is amending the purpose and scope of these rules at N.J.A.C. 11:22-3.1(d) to include a payer’s subsidiaries and agents. The Department is also adding a definition for the word "agent" that is the same as that found in N.J.A.C. 11:22-1.2.

8. COMMENT: In regard to the definition of "health care transaction" or "transaction," one commenter expressed concern that this definition might unintentionally include other transactions not contemplated by HIPAA/HINT. The commenter asked that the Department amend the definition to make it clear that this definition applies only to the standard transactions.

RESPONSE: The Department agrees with the commenter and is making the change in N.J.A.C. 11:22-3.2 upon adoption by adding the words "for purposes of this subchapter only" to the definition of "health care transaction" or "transaction."

9. COMMENT: One commenter suggested that the Department amend the provisions of N.J.A.C. 11:22-3.4(c) and 3.5 to permit payers the opportunity to seek extensions of time and/or exemptions from compliance at any time. The rules, as drafted, only permit applications during the filing of the Interim Operational Status Report. The commenter observes that payers may not anticipate a problem and may find themselves in need of an extension of time just prior to the projected implementation date. The commenter requests that the rules be amended to permit payers to file for an extension at any time.

RESPONSE: The Department agrees and will amend N.J.A.C. 11:22-3.5 upon adoption. The Department recognizes that a situation may occur in which a payer unexpectedly requires an extension of time. In such circumstances, the Department would rather be consulted about the need for additional time than be left unaware of a problem.

10. COMMENT: Regarding requests for extension of time for compliance, one commenter offered the following suggestions to be considered when ruling on requests. The commenter recommended amending N.J.A.C. 11:22-3.5 to provide that the Department will grant extensions of time and exemption from compliance only for "well justified extenuating circumstances," which should include consideration of the following:

The commenter argues that waivers and extensions of time should not be granted by the Department unless good faith efforts have been demonstrated by the payer. Also, financial penalties should be imposed if the new deadlines are not achieved.

RESPONSE: The Department thanks the commenter for its suggestions regarding the implementation of the provisions dealing with extensions of time and exemption from compliance as found in N.J.A.C. 11:22-3.5. It should be noted that N.J.S.A. 17B:30-23(a)2 provides that applicants for extensions and waivers are required to demonstrate that compliance with the timetable will result in an undue hardship to the payer. Clearly, the Department will consider some, if not all, of the factors mentioned by the commenter. The Department also notes that other considerations, not subject to the control of the payer or the Department, may impact on a payer's timely ability to implement. These may include such matters as HHS-initiated changes that result in an inability to comply with the timetables.

At this juncture, the Department cannot anticipate whether these conditions will interfere with this process. Thus, the Department believes it is prudent to maintain flexibility in dealing with requests for an extension of time so as to achieve the required results. Therefore, the Department will not delineate any specific criteria in ruling on a request for additional time.

11. COMMENT: One payer expressed concern about the requirement that it report its operational status for compliance with HINT pursuant to N.J.A.C. 11:22-3.4. The commenter claims that it will be required to divulge valuable proprietary information regarding the procedures and systems being introduced. Additionally, the commenter is concerned that potential liability may result from filing this information if there is an erosion of investor and/or stockholder confidence in the event the payer is not in a position to comply with the timetables.

The commenter recommends that any and all information filed pursuant to these rules be considered proprietary and confidential and not be subject to review as public records.

RESPONSE: The Act requires that these reports be filed with the Department by all payers. It is the Act that requires the payers to report the information, not these rules. These reports are public records filed with the Department as part of a statutory obligation, and the Department cannot treat these reports as non-public records.

Although it is not clear whether these reports are private and/or proprietary, the Department is sensitive to the concerns of the commenter and will permit payers filing such reports to identify specific items of information that the payer claims are proprietary or confidential. When, and if, the Department receives a public records request to inspect and/or copy such reports, the Department will advise the filer prior to disclosure. In such circumstances, the filer will be afforded an opportunity to proceed with appropriate action to protect its claim of nondisclosure.

12. COMMENT: Regarding the application of N.J.A.C. 11:22-3.4(c) and 3.5(a), one commenter asked if the Operational Status Reports described in N.J.A.C. 11:22-3.4(c) and (d) can be used in cases where the payer has already requested an extension or exemption from compliance from these rules, or in situations where the payer is not requesting an exemption or extension for itself, but is requesting an extension or exemption for one of its vendors.

RESPONSE: Payers are encouraged by the Department to use the Operational Status Report, Exhibit 2 of the Appendix, in any appropriate way to advise the Department of the current status of the implementation of the payer's HINT/HIPAA systems. The Department is amending Exhibit 2 upon adoption to add an additional section: "8. Other Issues." This subsection will also contain space in which the payer may bring to the Department's attention any other matters of significance.

13. COMMENT: A commenter questioned how long it will take the Department to respond to requests for extensions/exemptions filed in accordance with N.J.A.C. 11:22-3.5. The commenter notes that this provision requires payers to request an exemption or extension but does not provide any timeframe within which the Department will respond to said request. The commenter is asking the Department to commit itself to a specific time frame in which it will respond.

RESPONSE: The Department intends to act on requests for extensions and exemptions in a timely fashion. At this point, the Department is preparing to handle the receipt of operational status reports and requests and has not determined what time will be needed to respond to requests.

14. COMMENT: One commenter expressed concern about the Department's use of the word "elect" to describe the choice that is made by a claimant who files a health care claim on his or her own behalf (see N.J.A.C. 11:22-3.6(a)). The commenter claims that the word "elects" implies some kind of a separate process wherein a patient makes a conscious choice to submit his or her own claim. Rather, the commenter would use the word "choose" whenever the word "elect" appears so as not to infer some separate selection process.

RESPONSE: The Act does not use the word "elect" or "chooses" when describing the process wherein a patient makes a selection on how a claim is to be filed. Rather, the Act states that the health care professional shall file the claim for payment, except that a patient is permitted to file the claim for payment at his or her "option." In light of the statutory language, the Department is amending this provision, upon adoption, to use the word "option". This should allay the concern of the commenter as to the use of the word "elects." Under normal circumstances, providers should file all claims.

15. COMMENT: N.J.A.C. 11:22-3.6(d) states that if a provider does not file a claim within 180 days of the last date of service, the health benefit payer shall within three days of the filing of the claim have an opportunity to "reserve" the right to deny payment. The commenter notes that this three-day period is not consistent with the provisions of the recently adopted prompt pay rules (N.J.A.C. 11:22-2) which permit payers the opportunity to deny payment within 30 days from the date of electronically filed claims and 40 days from the date of manually filed claims. The commenter argues that three days is insufficient time within which to investigate and respond, especially when a claim is filed so late. The commenter urges the Department to amend the rule to provide for the 30/40-day timeframe as used in Prompt Pay.

RESPONSE: The Department agrees with the commenter. In the interest of consistency with the prompt pay rules, the Department is amending N.J.A.C. 11:22-3.6(d), upon adoption, to provide that the payers have a right to dispute or deny payment in accordance with the timeframes in N.J.A.C. 11:22-1.6.

16. COMMENT: One payer objected to the provisions of N.J.A.C. 11:22-3.6(e), wherein health benefit payers shall not deny payment of any part of a claim based solely on its late filing without also considering other factors and giving notice of the reasons for denial to the claimant. These factors include the good faith of the parties; coordination of benefits problems; prior untimely claim practices by the provider; prejudice to the patient and/or provider; and adverse impact on the public. This payer claims that the Department lacks authority to impose a burden that shifts the obligation to a payer to prove why a late filed claim should not be paid.

RESPONSE: The Department disagrees with the commenter. N.J.S.A. 45:1-10.1b(1) provides that the Department shall establish standards for denial of payment of claims, which include several of the factors set forth in N.J.A.C. 11:22-3.6(e). Additionally, the Department is authorized to define specific instances where the sanctions shall not apply. Thus, the Department concludes that there is ample authority for the adoption of N.J.A.C. 11:22-3.6(e). Additionally, the Department notes that requiring a payer to explain its reasons for denying a claim is consistent with the provisions of the recently adopted Prompt Pay Rules. Specifically, N.J.A.C. 11:22-1.6(a) provides that a payer shall identify and explain all reasons why a claim is being denied or disputed.

17. COMMENT: Two commenters objected to the provisions of N.J.A.C 11:22-3.6(d) which state that in the event a provider files a claim beyond the required timeframe, the payer shall "within three days of the filing of the claim, reserve the right to deny payment." The commenters claimed that the three-day time limit is unreasonable, and impossible to comply with in most cases. The commenters also questioned the use of the words "reserve the right to deny" as used in the proposal. They claimed that they have no way to reserve the right to deny payment separate and apart from simply denying the claim.

RESPONSE: The Department agrees with the commenters’ concerns and is amending N.J.A.C. 11:22-3.6(d), upon adoption, to reference the Department's recently adopted prompt pay rules. This new subchapter contains rules that apply to denied and disputed claims. Thus, the Department is amending subsection (d) to provide that payers receiving late claim filings should handle the filings in accordance with N.J.A.C. 11:22-1.6. The commenters’ concerns regarding the three-day time limit will be eliminated. In addition, the commenters’ observations about the meaning of "reserve the right to deny" will be resolved by removal of these words and insertion of the reference to the prompt pay rules.

18. COMMENT: A professional association of providers submitted a comment pertaining to the application of N.J.A.C. 11:22-3.6. This section requires that health care providers submit claims within a certain period of time or run the risk of forfeiting payment. It states that providers acting without an assignment of benefits must file claims within 60 days of the last date of service, and those acting with an assignment of benefits must file claims within 180 days of the last date of service. The commenter is concerned that in many cases, a patient does not give the correct billing information and through no fault of the provider, a delay results. Of particular concern are hospital emergency care and geriatric care, where physicians are frequently not in a position to obtain the correct billing information.

The commenter is also concerned about the mandatory appeal provision to a Superior Court judge for permission to refile denied claims. The commenter asks the Department to establish a more simplified appeal and/or some process short of a petition to the Superior Court.

RESPONSE: The Department is sensitive to the concerns of the commenter and has taken care to address the issues raised. In the case of late claims caused by incorrect billing information given by the patient, N.J.A.C. 11:22-3.6(e)1 provides that good faith reliance upon information obtained from the patient should be considered before any denial of the payment of benefits is undertaken. Thus, the rule already addresses the issue raised by the commenter. The Department also notes that several other circumstances are listed that offer further protection to the rights of the provider. These include: delays encountered as a result of the coordination of benefits; prior history of timely and efficient claim practices; adverse impact to the rights of the patient and/or the provider; determinations of medical necessity; and any potential adverse impact to the public.

Regarding the commenter’s objection to mandatory appeals to the Superior Court, the Department notes that this requirement comes directly from the Act. The HINT law establishes that a provider will have the opportunity to re-file claim denials before the Superior Court Judge within 14 days of the notification of the denial of payment. See N.J.S.A. 26:2H-12.2b(2).

19. COMMENT: Several commenters questioned the provisions N.J.A.C. 11:22-3.7(a)7 which require the use of the 277 transaction, ANSI ASCX12.317, version 003070, release 7, sub-release O, October 1996, health care claims status notification electronic form. The commenters correctly note that the 277 transaction claim status notification is not one of the HIPAA transaction and code sets recently adopted by HHS. The commenters question the authority of the Department to impose this burden since it is not part of the HIPAA transaction and code sets. They also question the selection of the 277 transaction and observe that there are other transactions that fulfill the same electronic acknowledgement function.

RESPONSE: The Department’s authority to impose the obligation to acknowledge receipt of claims is clear. N.J.S.A. 17B:30-23 permits the Department to adopt rules necessary to implement the introduction of electronic filing of health care claim information. One of the essential elements of such a system is the ability of providers to be able to verify that an electronically filed claim is received by the payer. The use of an electronic acknowledgement is critical to the implementation of these electronic systems and will likely be a substantial incentive for providers to implement such systems. The Department also notes that N.J.A.C. 11:22-1.3(a)1 requires that payers provide receipt of an electronically filed claim within two working days of its filing. The Department is, in this rule, identifying the electronic transaction form that should be used for acknowledgement of an electronic claim.

The Department is aware that there are other means by which electronic filings can be acknowledged by a payer, such as the 997 Functional Acknowledgement or by some other system mutually agreeable to the provider and the payer. However, the Department notes that HINT and Prompt Pay require an individual acknowledgment of an electronically filed claim by an individual electronic response. Furthermore, only the 277 provides an individual response to the filing of a claim. The 997 will acknowledge receipt of batch transfers, but provides no guarantee that an individual claim is in the hands of the payer. Thus, the Department remains committed to the use of the 277 in response to each electronically filed claim. This does not mean, however, that payers may not use another transmission such as the 997 to handle batch transfers or some other mutually acceptable means, so long as there is also a 277 issued for each individual claim in the batch.

The Department is also aware that some providers may not have systems capable of receiving a 277 acknowledgement. In such case, payers should establish a mutually agreeable means of acknowledgement of a claim with the provider.

The Department, upon adoption, is amending N.J.A.C. 11:22-3.7 to reflect these changes.

20. COMMENT: One provider questioned the reference to "vendor" as used in N.J.A.C. 11:22-3.10(b)5. The commenter stated that the reference does not make sense since vendors do not usually commit fraud by filing false health care claims.

RESPONSE: The commenter's observation is correct. The word "vendor" was inadvertently used in this paragraph of the rule when the word "provider" should have been used. The Department is amending this provision to insert the word "provider."

21. COMMENT: Several commenters objected to N.J.A.C. 11:22-3.10(b)1 that states that the payer’s anti-fraud electronic system should be able to screen all in-coming claims. The commenters noted that hundreds of thousands of claims are received each day by insurers, making it impossible to screen all in-coming claims for patterns associated with fraudulent activity, even with the aid of electronic search programs. The commenters stated that they recognize the obligation to conduct anti-fraud activities and the need to review claims for patterns associated with fraud. Nonetheless, they urge the Department to permit post-receipt and post-payment screening instead of, or in addition to, pre-payment screening. The commenters stated that this is consistent with most of the post-payment anti-fraud software currently being used by payers to identify fraudulent patterns in claims submissions, and has worked well in the past.

RESPONSE: The Department insists on the use of anti-fraud programs to search for patterns associated with fraudulent activity. While it would be preferable to intercept all fraud prior to payment, the Department recognizes that a degree of post-payment screening for fraudulent activities is a necessity. Thus, the Department is amending this provision upon adoption to permit insurers to implement anti-fraud programs that combine pre-payment and post-payment systems.

22. COMMENT: A comment was received that challenged the Department's authority to impose the obligation set forth in N.JA.C. 11:22-3.9 and 3.10(e). The commenter noted that N.J.A.C. 11:22-3.9 requires payers to comply with the provisions of the Insurance Information Practices Act N.J.S.A., 17:23A-1 et seq., in all HINT health care transactions. N.J.A.C. 11:22-3.10(e) requires payers to comply with the New Jersey Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 et seq., which, in part, obligates payers to screen for indications of fraud and to report suspected fraud to the Office of Insurance Fraud Prosecutor ("OIFP").

The commenter claimed that this Department does not have the statutory authority to impose these obligations on HMOs. The commenter pointed to N.J.S.A. 26:2J-25 which states, in part, that the insurance laws pertaining to hospitals or medical service corporations and insurers do apply to HMOs unless otherwise provided for in the law. Therefore, the commenter claimed that N.J.S.A. 26:2J-27, which applies to the confidentiality of medical information received by HMOs, preempts any further regulation.

RESPONSE: The Department disagrees with the commenter. N.J.S.A. 17:23A-2l clearly provides that the Insurance Information Practices Act applies to HMOs. In addition, HINT requires that the Department establish all rules necessary for implementation and use of the standard health care claim transactions and specifically references HMOs as part of the group of covered payers. The Department has determined that rules pertaining to security and privacy of health care information are necessary and should be universally applied to all payers. The Department also notes that the HIPAA Privacy Rules have recently been adopted by HHS and will become effective in 2003. At such time, HMOs will also be subject to the obligations imposed by the Federal HIPAA rules, regardless of any action taken by the Department pursuant to HINT.

Regarding the obligation to report incidences of insurance fraud to the OIFP, HINT prohibits HMOs from paying any claims where there is reason to believe that it has been submitted fraudulently (see N.J.S.A. 26:2J-8.1d(1)(d)). Thus, the Act obligates HMOs to screen all claims for indications of fraud. It is appropriate, therefore, that HMOs report their findings to the OIFP. Furthermore, the Department reminds the commenter that N.J.S.A. 17:33A-9a requires that any person who believes that a violation of the Insurance Fraud Act has occurred shall notify the OIFP immediately after discovery of the alleged violation.

23. COMMENT: One commenter questioned the meaning of N.J.A.C. 11:22-3.10(b)4, which states that the anti-fraud system must be capable of identifying inappropriate or inconsistent charges based on diagnosis codes. The commenter notes that the reference to "diagnosis codes" does not properly address the question of inappropriate or inconsistent charges. Rather the commenter suggests adoption of a reference to "specific procedures" as having more significance than the words "diagnostic codes."

RESPONSE: The Department agrees with the observation of the commenter that the reference to diagnosis codes is confusing. Thus, upon adoption, the Department is amending this paragraph to delete the words "based on diagnosis codes." This will permit greater latitude for payers to scan for any inappropriate or inconsistent charges.

24. COMMENT: A national pharmaceutical distributor submitted a comment requesting that the Department amend N.J.A.C. 11:22-3.7 upon adoption to include a recently recognized national standard for use by pharmacies in the telecommunication of prescription information. The standard is known as the "NCPDP Telecommunications Standards Format, Version 5.1."

RESPONSE: The Department appreciates the suggestion of this commenter and is interested in reviewing standards that have industry-wide recognition. The Department will study the standard to determine whether it should be included in these rules at a later date.

25. COMMENT: A comment was received from a national association of health insurers that expressed concern regarding the scope of these rules. The commenter stated that the rules should expressly state that they include all of the standards adopted pursuant to HIPAA, including the format specifications; the data elements required or permitted to structure the format; and, the data content of each of the data elements, including the designated code sets where applicable.

RESPONSE: The purpose and scope of proposed N.J.A.C. 11:22-3.1 indicates that the Department recognizes the HIPAA rules for use in New Jersey. In order further to clarify this intent, a specific reference to HIPAA is being added to N.J.A.C. 11:22-3.1.

26. COMMENT: A health care insurer claimed that the provisions of N.J.A.C. 11:22-3.6(a) will incorrectly place a burden on payers to force providers to submit claims for their patients. The commenter goes on to state that only HMOs and PPOs have a direct contractual relationship with providers and, thus, only those payers have a contract right to require providers to submit claims for patients. Conversely, health insurers have no direct relationship with providers and are not in a position to compel providers to submit claims for patients.

RESPONSE: The Department does not agree with the commenter. N.J.S.A. 17B:27-44.2c provides that health insurers shall require providers to file claims for payment twelve months after the adoption of these rules. This provision applies to all payers subject to the Act. Thus, it is the Act, not these rules, that directs all payers, not just HMOs, to accept claims only from providers.

27. COMMENT: One comment, received from an association of health plans, questioned the application of N.J.A.C. 11:22-3.6(b) and (c). The commenter stated the reference to the phrases "without an assignment of benefits" and "under an assignment of benefits" has little relevance to an HMO. In either case, an HMO's participating providers are not submitting claims to the payers and, therefore, it was requested that these provisions be clarified.

RESPONSE: The Department does not believe that any clarification is necessary. N.J.S.A. 17B:27-44.2 expressly uses the term "assignment of benefits." Furthermore, some HMOs sell plans with out-of-network benefits (that is, point of service plans) and are required to accept claims from out-of-network providers with or without an assignment of benefits. Also, closed panel HMOs do not receive claims for payment from network providers; therefore reference to an assignment of benefits is appropriate.

28. COMMENT: One commenter observed that the words "electronic exchanges" are used in N.J.A.C. 11:22-3.8(a) to describe those EDI transactions that are the subject of these rules. The commenter notes that the rules contain a definition of "health care transactions" and not "electronic transactions" and suggests that the rules be amended, upon adoption, to delete the words "electronic exchanges" and substitute in their place the defined term "health care transactions."

RESPONSE: The Department agrees with the commenter and is making the change upon adoption.

29. COMMENT: Several commenters questioned what health care benefit payers will be subject to these rules.

RESPONSE: The commenters’ attention is directed to N.J.A.C. 11:22-3.1(d) which lists the payer organizations that are subject to these rules. Simply stated, HINT applies to all listed health care benefit payers that are authorized to do business in this State.

30. COMMENT: Three commenters suggested that the Department establish a date by which all payers will be required to accept the paper format established in these rules.

RESPONSE: The Department notes that the commenters’ concern is already addressed by the Act, which requires use of the standard claim and enrollment forms in the paper and electronic format 12 months after the effective date of these rules.

31. COMMENT: Several commenters observed incorrect citations in the proposed rules that should be corrected. The first involves the reference to "N.J.S.A. 17B30-23" which should be N.J.S.A. 17B:30-23, as it is located at N.J.A.C. 11:22-3.4(e). The second correction is at N.J.A.C. 11:22-3.5(a). The reference to N.J.A.C. 11:32-3.4(a) should be amended to be N.J.A.C. 11:22-3.4(b).

RESPONSE: The statutory reference was published correctly in the New Jersey Register as N.J.S.A. 17B:30-23. The Department is changing the reference at N.J.A.C. 11:23-3.5(a) upon adoption.

32. COMMENT: In regard to N.J.A.C. 11:22-3.2, one commenter objects to the definition of "system" or "system for the electronic receipt and transmission of health care claim information," stating that the definition includes reference to the "first report of injury" transaction. The commenter claims that the HIPAA adoptions do not include a "first report of injury" transaction set and therefore the reference to that form should be deleted from the HINT definition.

RESPONSE: The Department disagrees with the conclusions expressed by the commenter. N.J.S.A. 17B:30-23a(1) specifically mentions the "first report of injury" transaction and obligates the Department to establish a timetable for use of this health care transaction. The Department further observes that HIPAA has not adopted a timetable for the use of this form because it does not yet exist. See N.J.A.C. 11:22-3.6 and 3.7.

33. COMMENT: One commenter asked if Organized Delivery Systems (ODS), which are either certified or licensed pursuant to N.J.S.A. 17:48H-1 et seq., are subject to these rules.

RESPONSE: Recently enacted P.L. 2001, c.67 establishes that ODSs are payers required to comply with HINT/HIPAA and these rules. See N.J.S.A. 17:48H-33.1.

34. COMMENT: The Department received a comment from the New Jersey Department of Human Services, Division of Medical Assistance and Health Services, Medicaid Office, stating that it is not an entity that is regulated by the Department nor is it required to adhere to the Act. However, it has committed voluntarily to implementing the HINT timeline. In addition to complying with this timeline, it will also use the HIPAA transaction and code sets that are recognized in the rules and will also implement the HIPAA standard electronic remittance advice during the early implementation phase. Thus, providers submitting electronic claims in the standard format recognized by HINT/HIPAA to Medicaid will receive in response an electronic remittance advice. The commenter notes that this remittance advice is not part of the early implementation undertaken by HINT, but is nonetheless being undertaken by Medicaid.

RESPONSE: The Department acknowledges that the New Jersey Medicaid Office will implement the HINT timeline and will comply with this timetable on a voluntary basis. The Department appreciates the support and continued input of that office.

35. COMMENT: One commenter asked the Department if these rules apply to limited benefits supplemental health insurance policies, such as specified disease coverage or accident only coverage, or to disability insurance payments.

RESPONSE: Rules for the administration of specified disease coverage were adopted by the Department and are published elsewhere in this issue of the New Jersey Register. Currently, the HINT rules, also adopted herein, do not apply to those types of insurance where claims are filed by the policyholder and the payment is made directly to the policyholder. Thus, the kinds of coverage mentioned by the commenter including specific disease coverage are not subject to these rules.

36. COMMENT: A comment was received from Thomas Edison State College, which notes that the historical references made in the proposal Summary regarding the HINT Advisory Council and the passage of the Act are not accurate. The commenter states that the HINT Advisory Council was created as a result of the HINT study process that was undertaken by Thomas Edison State College and the New Jersey Institute of Technology. The HINT Advisory Council was composed of public and private organizations that provided support, guidance and policy perspectives during the HINT study process. The HINT Advisory Council was not created by legislative action, although ultimately the HINT study recommended the creation of a public/private partnership that developed into the HINT Advisory Board (N.J.S.A. 26:1A-15.1). By early 1993, members of the State Legislature, the Governor's Office, Thomas Edison State College and the New Jersey Institute of Technology had embarked upon a collaborative study of methodologies necessary to reduce health care costs and achieve administrative simplification using then current technologies. By 1994, the Health Information Networks and Technology (HINT) study was unveiled, which provided recommendations for the use of national standards using EDI to reduce administrative costs and achieve administrative simplification for both the public and private sectors in New Jersey. This was nearly two years prior to the passage of HIPAA. The conclusions reached in the HINT study found that there was a potential $760 million overall cost savings, or a potential cost savings of $370 per year, for the average New Jersey family.

RESPONSE: The Department appreciates the historical perspective offered by the commenter, and acknowledges the commenter for its pivotal role in this process.

37. COMMENT: Two comments were received from dental plan organizations asking the Department to adopt as the standard paper format dental claims forms developed by the American Dental Association which are universally used in the dental profession.

RESPONSE: The Department agrees with the commenters that standardization and uniformity are essential. As a result, the Department is amending N.J.A.C. 11:22-3.3 to adopt the American Dental Association form as the standard dental paper claim form. This document also appears as Appendix Exhibit No. 3. The Department acknowledges the New Jersey Dental Association and the other commenters for their input and assistance in obtaining permission from the American Dental Association to use the standard form.

38. COMMENT: One commenter referring to N.J.A.C. 8:38-13.4 pointed out that the Department of Health and Senior Service rules require that certain disclosure statements be part of all applications for enrollment and member handbooks. The commenter noted that the DHSS rules require that these disclosure statements be made by HMOs. The commenter notes that the enrollment form proposed at Exhibit No. 1 of the Appendix does not contain the disclosure statements required by N.J.A.C. 8:38-13.4.

RESPONSE: The Department acknowledges the commenter's observations. DHSS's rules require that all applications for enrollment and member handbooks contain the necessary disclosure statements. HMOs are reminded that these warnings should be provided to enrollees by attaching the required document to the written application form. The warnings can appear as a separate attachment to the paper enrollment form.

Summary of Agency Initiated Changes:

During its pre-adoption review, the Department detected a problem with the definition of "health care provider" in N.J.A.C. 11:22-3.2 and the purpose and scope of the rules set forth N.J.A.C. 11:22-3.1. Simply stated, the definition of "health care provider" states that the term includes all those entities that are identified in N.J.A.C. 11:22-3.1(d). A quick review of N.J.A.C. 11:22-3.1(d) reveals that the section lists all the necessary health care payers listed in the Act but goes on to inadvertently list "all health care providers." This is clearly erroneous because providers are not considered payers for purposes of these rules. Thus, the Department, upon adoption, is amending N.J.A.C. 11:22-3.1 to remove the reference to providers from subsection (d). The Department is also amending the definition of "health care payer" to reference N.J.A.C. 11:22-3.1(c), which is the correct citation. In addition, as a courtesy to companies using the forms, N.J.A.C. 11:22-3.3(e) added upon adoption allows payers to add a company name and logo to the standard payers forms.

Federal Standards Statement

A Federal standards analysis is required when any State agency adopts, readopts, or amends State rules that exceed any Federal standards or requirements, and must include in the rulemaking document a comparison of Federal law.

The Department has determined that there rules, which are based upon requirements established in the Act, exceed the Federal standards insofar as payers will be required to implement systems for the electronic transmission of health care claims and enrollment information many months before compliance is required by Federal law.

October 16, 2002 of the Federal deadline by which all payers must be HIPAA, compliant, notwithstanding the early implementation mandated by New Jersey’s HINT requirements. HINT and these rules requires that payers implement systems for claims and enrollment transactions 12 months after these rules are adopted. The accelerated timetables are mandated by the Act and these rules reflect the requirements of the statute.

In Section 1178 of the HIPAA, Congress adopted the general rule that the Federal provisions will preempt State law that is contrary to the Federal rules. There are three exceptions to this general rule: (1) state laws and rules to prevent fraud or abuse; (2) state laws and rules enforcing a state’s controlled dangerous substances laws; and (3) state laws or rules that relate to the private of individually identifiable health information. While it may be that the HIPAA private rules will ultimately be more stringent than New Jersey’s Insurance Information Privacy Act, they will not become effective until after these rules are adopted. Thus, in the absence of operative HIPAA rules on this subject of privacy, the Department is compelled to follow State law until such time as the Federal rules may be effective. The Department will re-visit this issue as the effective date of the HIPAA privacy rules approaches.

The Department also wishes to note that it considered the application of the Gramm-Leach Bliley Act ("GLB"), Pub. L 106-192, §§ 501, et. seq. to these proposed rules. IT appears that GLB may limit the ability of financial institutions to disclose personal information about consumers to other parties and require that customers be advised about the institution’s privacy policies and practices. However, of significance is the fact that Congress did not specifically state that GLB was applicable to health insurers. As a result, it now appears to the Department that only the New Jersey Insurance Information Practices Act applies to the subject matter of the adopted rules. Thus, the Department has determined in the proposed rules to make clear that payers, their agents and vendors are processing information relative to insurance claims and, thus, the provisions of N.J.S.A. 17:23A-1et seq. (the Insurance Information Practices Act) apply. The Department will act as deemed appropriate with regard to future privacy and security issues when HHS’s position becomes clearer.

Full text of the adoption follows (additions to proposal indicated in boldface with asterisks *thus*; deletions from proposals indicated in brackets with asterisks *[thus]*):

SUBCHAPTER 3. Electronic Receipt and Transmission of Health Care Claims

11:22-3.1 Purpose and scope

    1. Pursuant to N.J.S.A. 17B:30-23 et. seq., P.L. 1999, c. 154 (the Health Information Electronic Data Interchange Technology Act ("HINT" or "the Act"), the purpose of this subchapter is to establish timetables for the introduction and implementation of systems for the electronic receipt and transmission of health care claim information, including, but not limited to, eligibility, premium payments, reports of injury, claim status, referral requests, authorization for referral, enrollment, disenrollment, and other health care claims transactions in accordance with the standards developed by the United States Department of Health and Human Services (hereinafter referred to as "DHHS") *pursuant to the Health Insurance Portability and Accountability Act of 1996, P.L. 104-191 ("HIPAA") for the electronic administration of health care benefits.

(b) – (c) (No change from proposal.)

(d) The subchapter applies to all hospital service corporations; medical service corporations; health services corporations; health insurers issuing individual policies of insurance; health insurers issuing group policies of insurance; health maintenance organizations; dental service corporations; dental plan organizations; *and* prepaid prescription service organizations; *[and all health care providers]* *as well as any subsidiary or agent of any such entity, company or organization that may process health benefit information on behalf of a payer* .

11:22-3.2 Definitions

The following words, phrases and terms, when used in this subchapter, shall have the following meanings unless the context clearly indicates otherwise.

*"Agent" means any entity, including a subsidiary of a carrier, or an organized delivery system as defined by N.J.S.A. 17:48H-1 with which a carrier has contracted to perform claims processing or claims payment services.*

. . .

"Health benefit payer" or "payer" means those entities identified in N.J.A.C. 11:22-3.1*[(d) above]* *(c)* that are subject to the provisions of this chapter.

"Health care transaction" or "transaction*,*" *for purposes of this subchapter only,* means the exchange of information between two or more parties to carry out the financial and administrative activities related to coverage under a health benefits or dental plan, including, but not limited to, health claims and equivalent encounter information, health care payment and admittance advice, health claims status, enrollment and disenrollment in a health plan, eligibility for a health plan, health or dental plan premium payments, first report of injury, deferral certification and authorization and health care attachments.

"Small Employer Health Benefits Plan" means *, for purposes of this subchapter only,* any plan identified as such by N.J.S.A. 17B:27A-17 *or a "small health plan" pursuant to 45 CFR § 160.103*.

. .

11:22-3.3 Standard enrollment and claim forms

(a) – (c) (No change from proposal.)

*(d) Subchapter Appendix Exhibit 3 incorporated herein by reference, is designated as the standard paper claim format to be used for all dental benefit claims.

(e) Payers may add a company name and logo to these standard paper forms.*

11:22-3.4 Timetable and operational status reports

    1. On or before *[(12 months after the effective date of these rules)]* *October 1, 2002*, health benefit payers shall use the standard electronic claim and enrollment forms adopted at N.J.A.C. 11:22-3.3(a).
    2. On or before *[(180 days after the effective date of these rules)]* *March 30, 2002*, health benefit payers shall file with the Department the First Operational Status Report, in the form set forth in subchapter Appendix Exhibit 2 incorporated herein by reference, demonstrating that they will be capable of implementing the timetable established in (a) above or will be requesting an extension of time pursuant to N.J.A.C. 11:22-3.5.
    3. On or before *[(300 days after the effective date of these rules)]* *July 28, 2002*, health benefit payers shall file an Interim Operational Status Report in the form set forth in Appendix Exhibit 2 in which the payer shall report that:
    4. i. – ii. (No change from proposal.)

    5. On or before *[(12 months after the effective date of these rules)]* *October 1, 2002*, all health benefit payers shall file the Final Operational Status Report in the form set forth in Appendix Exhibit 2, which certifies the then current status of the payer's system for electronic receipt and transmission of standard health care claims and enrollment forms pursuant to (a) above.

(e) – (g) (No change from proposal.)

11:22-3.5 Extensions of time and exemptions from compliance

(a) Health benefit payers may petition the Commissioner for an extension of the time limits set forth in N.J.A.C. 11:22-3.4 and/or to seek a waiver of the obligation to comply with the Act at any time after the filing of the First Operational Status Report filed in accordance with N.J.A.C. 11:32-3.4*[(a)]**(b)* *[, but in no case later than the Interim Operational Status Report required to be filed by N.J.A.C. 11:22-3.4(b)]*.

(b) – (c) (No change from proposal.)

11:22-3.6 Health care providers; claims

(a) On or after *[(12 months after the effective date of these rules)]* *October 1, 2002*, all payers shall require that all providers file all claims for payment unless*[, at the patient’s option, the patient elects to file the claim directly with the payer]* *the patient, at his or her option, files the claim directly* .

(b) – (c) (No change from proposal.)

(d) In the event a health care provider does not file the claim within 180 days of the last date of service of a course of treatment referred to in (c) above, the third party payer and/or health benefit payer shall*[, within three days of the filing of the claim,]* *in accordance with N.J.A.C. 11:22-1.6* reserve the right to deny *[payment of the claim in accordance with these rules]* *or dispute the claim* and the health care provider shall be prohibited from seeking payment in whole or in part directly from the patient.

(e) When a health benefit payer *[reserves the right to deny payment of a claim]* *takes action* in accordance with (d) above, the health benefit payer shall advise the health care provider that payment of the claim, in whole or in part, will be made based upon consideration of the following factors that shall be addressed by the provider:

1. – 5. (No change from proposal.)

(f) (No change from proposal.)

11:22-3.7 Additional timetables

    1. On or before *[(12 months after the effective date of these rules)]* *October 1, 2002*, all payers shall file with the Department a plan for the sequential implementation of usage of the following standard transactions, code sets and forms described below:

1. – 7. (No change from proposal.)

(b) (No change from proposal.)

*(c) In accordance with N.J.A.C. 11:22-1.3, payers receiving an electronically filed claim shall individually acknowledge receipt of each claim by responding with a 277 acknowledgement described in (a)7 above. Nothing in this section shall prevent payers from also using any other responses including, but not limited to, the 997 Functional Acknowledgement of batch transfers in addition to providing a 277 acknowledgment.

(d) In the event a provider's system is unable to receive a 277 acknowledgement, the payer shall establish a mutually agreeable alternative means of acknowledgement with the provider.*

11:22-3.8 Use of clearinghouses in electronic transactions

(a) When computing the number of days for purposes of acknowledging an electronic claim and/or any other *[electronic exchanges]* *health care transactions* required by this subchapter, the following shall apply:

1. –2. (No change from proposal.)

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

11:22-3.10 Fraud prevention and detection

(a) (No change from proposal.)

(b) The anti-fraud system described in (a) above shall be capable, at a minimum, of the following activities:

1. Screening all *[incoming]* claims *, pre-payment and/or post-payment, for* data patterns associated with fraudulent activity;

2. Responding to audit specific inquiries to facilitate fraud investigations;

3. Identifying phantom vendors, employees, patients and providers;

4. Identifying inappropriate or inconsistent charges *[based on diagnosis codes]*; and

5. Scanning *[vendor]* *provider* claims for unnecessary and repetitive charges.

(c) – (e) (No change from proposal.)

OFFICE OF ADMINISTRATIVE LAW NOTE: The Department is not adopting the proposed N.J.A.C. 11:22-3 Appendix Exhibit 1, the text of which is not reproduced below. Instead, the text of the adopted N.J.A.C. 11:22-3 Appendix Exhibit 1 appears below.

Exhibit 1

Exhibit 2

Exhibit 3