California Health Insurance Prompt Pay Act

States across the country have implemented laws demanding payers, such as health plans, to provide prompt payments to cash-strapped hospitals and physicians or face penalties. California is one of those states. A 2000 study found that on average, California hospitals waited up to 62 for payments from payers and longer for payments from health plans after services were delivered. To obtain payment quicker, hospitals turned to litigation, which can be a costly and lengthy process in its own right. To provide hospitals and physicians with the legal means to challenges long payment delays by payers, the state passed the California Health Insurance Prompt Pay Act in 2000.

California Health Insurance Prompt Pay Act

• California lawmakers enacted one of the most stringent laws of all states. Under the law, the state can force health plans with a habit of taking a long time to pay hospital claims to pay claims faster.

Time Frame

• California's Health Insurance Prompt Pay Act provides 45 working days for health maintenance organizations (HMOs) and 30 working days for non-HMOs to remit payments to hospitals and physicians.

Penalty

• For health plans that fail to pay within the allotted time period, hospitals and physicians are entitled to collect 15 percent annually and $10 additional non-inclusion of interest with payment from delinquent health plans.

Monitor And Review

• The law also provides the California Department of Managed Care authority to monitor health plan payment histories and enforce time frames. Providers, such as hospitals and physicians, are also able to bring a claim against a health plan for delinquent payment for the state Department of Managed Care to investigate.

Enforcement

• The law permits the state Department of Managed Care to put the health plans on an accelerated payment schedule for up to three years for health plans with a history of slow payments, absence of interest for late claim payments and/or denial of payments, in addition to other payment related issues. Furthermore, it's up to the health plan, not the hospital or physician to prove an error in payment.

Providers

• The 2000 passage of the law also included a study of provider billing practices. The insurance industry insisted that part of the delay of payment was due to providers submitting the bill more than one time, which required the health plan to review the same claim two or more times before they handed over payment. California's Health Insurance Prompt Payment Act is intended to curb this practice as well.