Bills seek to penalize insurers Groups frustrated by late payments


Frustrated by years of lost claims and late payments, some of the most powerful medical associations in the state are backing several bills that would toughen the penalties for health insurance companies that fail to pay claims within 30 days.

The bills, primarily directed at Blue Cross and Blue Shield of Maryland and the state's HMO industry, come largely as hardball ploys by health-care providers to help settle years of disputed payments between these companies and insurers.

"We're very frustrated," said Robert J. O'Connor, vice president at Kirson Medical Equipment Co. in Baltimore and president of the Medical Equipment Dealers Association of Maryland. "For over three years we've been fighting over this issue."

In separate bills before the General Assembly, the proposed legislation would increase the interest rate that insurers must pay when claims reimbursements are late and would require insurers to notify the person or company as to why the payment was delayed.

Two additional bills would also bring health maintenance organizations under similar penalties and notification requirements.

"I think that it's important in today's fiscal climate that there is some fiscal responsibility by the [insurance] carriers," said Richard C. Edlow, president of the Maryland Optometric Association, which is also supporting the measures. "It just makes sense."

The impetus for the legislation goes beyond simply penalizing the companies for their history of laggardly payments, supporters of the bills said. Faced with suppliers demanding payment within 30 days, these groups said that they must battle continuing financial uncertainties while they wait for payments to come in from insurers.

Blue Cross has come under criticism recently from regulators, who found in an examination conducted from 1986 through 1988 that more than 16 percent of its claims took more than 30 days to be paid and that interest payments were not being made.

The company, citing more recent figures, said that between 96 and 98 percent of hospital claims were made within 30 days and that payments to more than 90 percent of doctors and other medical professionals were made within a month.

"To truly address these service issues, a longer term solution is needed," said Phil Grantham, senior vice president at Blue Cross, when the regulatory exam was issued. "We have established a special work group to develop better approaches to servicing customers including improved claims payments."

Mr. O'Connor said that his group, which includes more than 100 medium-sized companies, depends upon Blue Cross for about 30 percent of its insurance payments. He said that the insurer is taking an average of 155 days to pay claims to his members while a study in December found that Blue Cross was misplacing more than half the claims submitted by two of his companies.

Although meetings in recent months between the medical equipment providers and Blue Cross are close to resolving years of unpaid claims, "we feel we wouldn't be at this point if we didn't get the insurance commissioner involved and get this bill put in," Mr. O'Connor said.

Blue Cross, which successfully lobbied for a number of amendments to one the bill that would raise the interest rates on late payments, said it supports the legislation.

Under provisions of House Bill 618, health insurers -- currently required to pay 1.5 percent a month for payments over 30 days late -- would be forced to pay 2 percent a month after the 60th day and 2.5 percent after the 120th day.

Blue Cross would also be required to explain why the payment was late and to include the interest on the payment without first requiring written requests from the subscriber or health care provider if House Bill 803 passes.

Although far below the amount of time taken by other insurers to pay claims, Blue Cross owed 46 hospitals in the state $54.8 million as of September, according to Richard H. Wade, a spokesman for the Maryland Hospital Association. The average age of the claims was 54.5 days, Mr. Wade said. HMOs were taking nearly 100 days to make their payments, he said.

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