02/05/2016

Tools You Can Use: Michigan's Prompt Pay Law

Michigan Law Requires Insurers to Pay Interest on Clean Claims Not Timely Paid

A significant challenge to any chiropractic office is the prompt collection of payments from insurance companies. Cash flow is more vital to the success of a health care provider than ever before, largely due to reductions in the amounts insurance companies will pay. As the amount of reimbursement is reduced, it becomes more and more important to providers that they collect the amounts they are due on a timely basis.

In 2002, the Michigan Legislature passed and Governor John Engler signed into law Public Act 316, which amended Michigan’s Insurance Code to incorporate detailed requirements for claims processing and payment that must be followed by commercial health insurers, commercial HMOs, and Blue Cross Blue Shield of Michigan. Because they give providers a direct right to prompt payment – a right that can be enforced against insurance companies – these requirements are very significant for health care providers. Prior to the passage of this law, health care providers did not have this right; it only applied to insureds and people “directly entitled to benefits under [the] insured’s contract of insurance.” 

Michigan’s prompt pay law applies with respect to “clean claims,” and requires the payment of benefits on a timely basis (or, in the alternative, payment of interest). This article presents a closer look at Michigan’s timely payment law. 

What Exactly is a “Clean Claim”?

Under Michigan law, a clean claim is one that satisfies ALL of the following criteria: 

• Identifies the health professional, health facility, home health care provider, or durable medical equipment provider that provided service sufficiently to verify, if necessary, affiliation status and includes any identifying numbers
• Sufficiently identifies the patient and health plan subscriber
• Lists the date and place of service
• Is a claim for covered services for an eligible individual
• If necessary, substantiates the medical necessity and appropriateness of the service provided
• If prior authorization is required for certain patient services, contains information sufficient to establish that prior authorization was obtained
• Identifies the service rendered using a generally accepted system of procedure or service coding
• Includes additional documentation based upon services rendered as reasonably required by the health plan 

Submitting a Claim to a Health Plan

A health professional shall bill a health plan within one (1) year after the date of service in order for a claim to be a clean claim. The initial submission of the claims and all other notices required may be made in writing or electronically. 

[Please note: While State law requires a health professional to bill within one year, individual insurance companies can have their own claim submission guidelines that are much stricter. Check your provider manual for each insurance company to be sure of each insurer’s claim submission guidelines and deadlines.]  

Clean Claim Payment

• A clean claim must be paid within 45 days after receipt of the claim by the “health plan.”
• The 45-day time period is tolled from the date of receipt of a notice to a health professional to the date of the health plan’s receipt of a response from the health professional, health facility, home health care provider, or durable medical equipment provider.
• If a health plan determines that one or more services listed on a claim are payable, the health plan shall pay for those services and shall not deny the entire claim because one or more other services listed on the claim are defective.
• A health plan must notify the health professional within 30 days after receipt of the claim by the health plan of all known reasons that prevent the claim from being a clean claim.
• A health professional has 45 days, and any additional time the health plan permits, after receipt of a notice to correct all known defects.
• If a health professional’s response makes the claim a clean claim, the health plan shall pay the health professional within the 45-day time period, excluding any time period tolled.
• If a health professional’s response does not make the claim a clean claim, the health plan shall notify the health professional of an adverse claim determination and of the reasons for the adverse claim determination within the 45-day time period.
• A health professional shall not resubmit the same claim to the health plan unless the 45 day time frame has passed. 

Penalties for Late Payment of a Clean Claim

A clean claim that is not paid within 45 days shall bear simple interest at a rate of 12% per annum. The Director of the Michigan department of Insurance and Financial Services (DIFS) may also impose a civil fine of not more than $1,000.00 for each violation not to exceed $10,000.00 in the aggregate for multiple violations. BCBSM is subject only to the civil penalties listed above and penalties listed in Section 402 of the Nonprofit Health Care Corporation Reform Act. 

Filing a Clean Claim Complaint with DIFS

A health professional alleging that a timely processing or payment procedure has been violated may file a complaint with DIFS on Form FIS 0284 and has a right to a determination of the matter by the Director or his or her designee. A health professional may also seek court action. 

Only a health facility, a health professional, a home health care provider, and a durable medical equipment provider can file a clean claim complaint. Individuals or policyholders cannot file a clean claim complaint. 

A health plan shall not terminate the affiliation status or the participation of a health professional with a health maintenance organization provider panel or otherwise discriminate against a health professional because the health professional claims that a health plan has violated Section 2006(7) to (10) of the Insurance Code. 

Form FIS 0284 can be found online HERE.

Excluded Claims

The provisions of Section 2006 of the Insurance Code do not apply to claims arising from pharmacies, claims arising out of Sections 3101 to 3177 of the Insurance Code (No Fault Auto claims), an entity regulated under the Worker's Disability Compensation Act of 1969, 1969 PA 317, MCL 418.101 to 418.941, the processing and paying of Medicaid claims that are covered under Section 111i of the Social Welfare Act, 1939 PA 280, MCL 400.111i, claims from Medicare or Medicare Advantage plans, and claims from self-funded health care plans. 

Medicaid HMO Clean Claims

Under MCL 400.111i, Medicaid providers may file clean claims with the Director against Medicaid HMOs for timely payment for the claims that have been submitted electronically. Ordinarily a clean claim must be paid within 45 days after receipt of the claim by the qualified health plan. A “clean claim” must meet certain criteria set forth in the legislation and must be submitted on form FIS 278 which can be accessed online at http://www.michigan.gov/documents/cis_ofis_fis_0278_24222_7.pdf.

What About Delayed Payments in Workers Comp? Auto No-Fault?

Under Michigan’s Workers Compensation Rules: 

• The provider should receive payment within 30 days.
• If the practitioner does not receive payment within 30 days of submitting a properly completed bill to the carrier, the Rules say that the carrier must pay the maximum allowable payment, plus a 3% late fee.
• The late fee due is paid one time and is not compounded. 

Under Michigan law [MCL 500.3142(2) and (3)]: 

• Personal protection insurance benefits are overdue if not paid within 30 days after an insurer receives reasonable proof of the fact and of the amount of loss sustained.
• If reasonable proof is not supplied as to the entire claim, the amount supported by reasonable proof is overdue if not paid within 30 days after the proof is received by the insurer.
• Any part of the remainder of the claim that is later supported by reasonable proof is overdue if not paid within 30 days after the proof is received by the insurer.
• For the purpose of calculating the extent to which benefits are overdue, payment shall be treated as made on the date a draft or other valid instrument was placed in the United States mail in a properly addressed, postpaid envelope, or, if not so posted, on the date of delivery.
• An overdue payment bears simple interest at the rate of 12% per annum.
   

Entity	Interest Rate	Notes
Workers Compensation	3%	After 30 days (one time)
Auto No-Fault	12% simple interest	After 30 days, then 1% monthly
Health Insurance	12% simple interest	After 45 days

 

Sources:

Michigan Department of Insurance and Financial Services

Michigan Workers Compensation Agency

MCL 500.3142