Special E-Mail Bulletin
September 2000
More on Prompt Payment Battles
Special E-Mail Bulletin
Hi, everyone.
This is a lengthy but information-rich article from the September 18 issue of American Medical News. I'm sure you'll find this an interesting summary of recent action on the prompt-payment battles.
Gil Weber
AMNews home
BUSINESS
Fine line between penalizing health plans that don't pay and forcing them out of business
State insurance departments are coming down harder on plans that fail to pay physicians. But efforts are made to ensure that penalties don't put companies out of business and cause physicians even more payment hassles.
By Cheryl Jackson, AMNews staff. Sept. 18, 2000.
The slap was worth half a million dollars, with HealthNow New York fined for various violations, including failure to pay physicians on time.
"The superintendent felt a need to send a clear message to the industry as a whole that the department will not tolerate an insurance company not paying its claims on time," said Salvatore Castiglione, chief of the consumer services bureau at New York's Dept. of Insurance.
In July HealthNow became one of the latest health plans to get sacked by insurance and health regulators with a mantra: If you're going to pay late, you're going to pay more. Much more.
Thanks in part to the preponderance of new and retooled prompt-pay laws across the nation, HMOs are being hit with record fines at a more frequent pace.
And with physicians calling for stiffer fines against health plans that break the laws, regulators expect to dole out record fines more often. That leaves them walking a fine line when deciding how big the penalty should be. Too small and it's ineffective -- and doesn't ease the wrath of physicians and other providers waiting to be paid. Too large and there's a risk of sinking companies, increasing the chances that plan members will be left without coverage and physicians will still be unpaid.
Last year, doctors in New York were pressured to accept a settlement from WellCare of New York Inc. for 30 cents on the dollar. The deal allowed WellCare to be acquired by another company.
Without the deal, physicians risked getting paid nothing. Still, doctors don't think insurance departments should let up on companies who violate prompt-pay laws, regardless of the plan's financial condition. They want them hit, and hit hard.
"The answer is not to excuse a financially ailing company from complying with the law," said Don Moy, general counsel with the Medical Society of the State of New York.
But the financial health of a company has to play a role in the decision to fine, insurance regulators say, along with how blatant firms are in their violations and how they cooperate in investigations.
"If I levied maximum fines against HMOs, most would be put into receivership," said John Oxendine, the Georgia insurance commissioner who is earning a reputation for being one of the harsher regulators on health plans that violate prompt-pay laws.
In its first wave of prompt-pay fines relating to quarterly claims data plans must now file, the state hit companies for about $1 million. The largest penalty was levied in March against Coventry Health Care of Georgia (formerly Principal Health Care of Georgia). The fine initially was $262,700, the largest ever against a health plan. The department later backed off slightly, but the plan still has to pay a record $201,570.
The insurance department fined United Healthcare HMO $123,500 in February and Prudential Health Care Plan of Georgia Inc. about $200,000 in May.
"I have two obligations. One is to protect the citizens and make sure they're getting good value for their dollar. The other is to ensure the solvency of a company," Oxendine said. "Any kind of insurance policy is totally worthless if the company is insolvent. It's kind of a balancing act. You put a company out of business, it's bad for providers, consumers, anybody."
Georgia alone could slap a plan with a $5 million to $6 million fine. If other states add on similar penalties, even a large company could be quickly forced under, he said.
And other states are joining in the prompt-pay march. North Carolina's prompt-pay law soon will take effect. Massachusetts's law was signed in July. Thirty-seven states in all have passed prompt-pay laws.
Prompt-pay penalties
Of course, states are seeing other violations, but it's the prompt-pay laws that get a large share of their attention, insurance regulators say.
In December 1999, New York fined Empire Blue Cross & Blue Shield $1.25 million for not making adjustments between guaranteed rates and approved rates.
In March, New Jersey's health and insurance departments fined HMOs more than $400,000 for a range of violations. Of that, Oxford Health Plans of New Jersey had to cough up $275,000 for failure to pay doctors and hospitals promptly and for unfair settlement of claims.
In June, New York regulators fined NYLCare Health Plans of New York $100,000 for failure to respond to requests for information about consumer complaints in a timely fashion. It was the largest fine levied for such a violation.
In July, the state fined HealthNow New York $500,000 for violating the prompt-pay law, underpaying claims, deleting claims from its computer system and being uncooperative with regulators.
Health plans say the money they are being fined could be put to better use.
"Those are sizable amounts of money that you're talking about. Plans prefer to devote their resources to the care of their members. That's where everybody thinks that the health care dollars should be going," said Susan Pisano, spokeswoman for the American Assn. of Health Plans. "When you've got costs that are attributable to this kind of activity, micromanagement in regulation or more lawsuits, you just don't see where it's helping patients."
Increases in the amounts and frequencies of fines could mean that plans raise premiums for members or lower fee schedules for doctors.
High in the news release announcing the HealthNow fine was an assurance that the company won't try to recoup the money in premiums. HealthNow operates as Blue Cross Blue Shield of New York in western New York and Blue Shield of Northeastern New York in Albany.
"I think indeed there was concern that it would become sort of the cost of doing business," said internist Nancy Nielsen, MD, PhD, of Buffalo, N.Y.
Lawfully, insurers generally can use only anticipated expenses for the coming year in setting rates, but New York regulators still made the company agree that the fine wouldn't be passed along in rate increases. "We just want to make sure the failures of the company aren't passed on to the consumer in the form of a rate increase. We don't want the consumer to share in the penalty," regulator Castiglione said.
New York is among the states most visible in its stepped-up intensity in regulation of prompt-pay laws. It's a new zeal in dishing out fines that led 10 insurers and the New York Health Plan Assn. in June to file suit in its state Supreme Court to stop the insurance department from penalizing its members when the independent practice associations they contract with make late payments to doctors.
The insurance department began with fines of $100 per violation, which since have escalated to $1,000 per violation. The higher fines in New York typically are reserved for repeat offenders. The state can levy up to $5,000 per violation but has yet to hit a company that hard.
New York physicians are calling for even stiffer penalties.
"The problem is that our members are continuing to experience late payment. Yes, fines are imposed. But it remains a serious problem. And it may be that a more substantial fine is what it takes to get the insurance companies to understand that they have a responsibility," MSSNY's Moy said. "We hear from physicians that their cash flow is so disrupted that their ability to provide care for patients can be threatened."
And it shouldn't matter if a large fine will push a company past the brink of insolvency, he said. "State law requires that insurers show financial stability. It's not an answer to say, 'They're not financially stable, so let's give them a pass on legal requirements.' The answer is to ensure that insurers have sufficient reserves to be in the business. Hold them to the reserve requirements."
Receivership might even help some companies improve their payment records, some say. Harvard Pilgrim Health Care, based in Brookline, Mass., went into receivership for a few months in January after many physicians complained they hadn't gotten paid in 120 days, said Frank Fortin, spokesman for the Massachusetts Medical Society.
"As a result of receivership, Harvard Pilgrim caught up in some measure or at least closed that gap," he said. "A lot of physicians said they got paid better when the plan was in receivership."
Catching insurers' attention Insurance departments across the country say they think the harsher penalties are leading the industry to more compliance.
Whether or not a penalty is announced in a news release, "there is some negative connotation to it. It quite frankly diverts the attention of the company from doing its business," said Jim Bracher, chief of the bureau of managed care at the Florida Dept. of Insurance.
His department initially might propose a large fine, but reduce it if the amount would drive a plan out of business.
"As a regulator, you need to be very conscious about treating people the same who have similar circumstances. If you're going to fine HMO A $100,000 for paying 100 claims late, I need to at least propose a similar fine if HMO B does that," Bracher said. "But after I say I'm going to fine HMO B, and then I look and see they're close to insolvent, that could be the basis for mitigating the fine.
"It would be proposed, reviewed by various levels of management within the department of insurance. And that's where these various extenuating circumstances would be considered," he said.
Physician leaders said they don't worry about plans taking their fines out on doctors by reducing fees.
Of course, plans can lower fees without giving reasons, said Mark Fox, MD, an otolaryngologist-head and neck surgeon in Scarsdale, N.Y. But "I'm not sure they can take it out of physicians any more than they already have. I don't think physicians are worried about what else the HMOs are going to do."
Dr. Fox is all for the larger fines.
"It's hard to say whether it's going to make a difference in the long run, but I think it's getting the HMOs' attention. Unless you're going to give them a significant fine, they really don't care."
The media attention that comes along with large fines also helps keep plans in check, he said.
"When it starts to get the public's attention, we can call attention to it. That's not the PR the HMOs want to bring forward," Dr. Fox said. "Certainly at this juncture when we have very little else in our armor, it's a help."
Georgia, which requires uncontested claims be paid within 15 days, can fine up to $1,000 per violation. "It's unfortunate sometimes the only way you can get people's attention is to hit them in the pocketbook," Oxendine said. "Fining somebody doesn't help me or anybody. I don't know of any other way to enforce responsible conduct. What I want is compliance."
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Putting the hammer down
Recent fines issued by state regulators against health plans:
July 31: New York Dept. of Insurance fines HealthNow New York Inc. $500,000 for violation of prompt-pay law, underpaying claims, deleting thousands of unprocessed claims from its computer system and not cooperating with state investigators.
June 30 : New York insurance department fines NYLCare Health Plans of New York Inc. $100,000 for failure to respond to requests for information about consumer complaints in a timely fashion. It's the largest single fine levied against an HMO in the state for the offense.
May 1 : Georgia insurance regulators fine Prudential Health Care Plan of Georgia Inc. $199,894.90 for failure to pay claims in a timely manner.
March 31 : New Jersey Dept. of Banking and Insurance and the state's Dept. of Health and Senior Services fine Oxford Health Plans of New Jersey $275,500 for failure to pay claims for doctors and hospitals promptly and for unfair settlement of claims.
March 31: Health and Senior Services fines United Healthcare of New Jersey $127,400 for failing to remove from its panel a physician whose license to practice medicine in the state had been suspended by the State Board of Medical Examiners.
March 14: Georgia insurance regulators direct Kaiser Foundation Health Plan of Georgia Inc. to pay $1.5 million in refunds to policyholders and fine the plan $100,000 for raising health coverage rates without state approval.
March 2: Georgia insurance regulators fine Principal Health Care of Georgia Inc., now Coventry Health Care of Georgia Inc., $262,700.20, a record for an HMO in the state, for not paying claims in a timely manner. Regulators later reduced the amount to $201,570.50, which is still the stiffest HMO fine levied in Georgia.
Feb. 9: Georgia insurance regulators fine United Healthcare HMO $123,500, mostly for slow claims payments and failure to respond in a timely manner to consumer complaints being investigated by the insurance department.
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