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Texas Legislature Examines the State’s Prompt Pay Penalties; Hospital Are Putting up a Fierce Fight

April 4, 2016

Last week, the Texas House Insurance Committee examined the state’s prompt pay system.  At issue is a strong move by the Texas Association of Health Plans (TAHP) to change the state’s current penalty payment methodology, which is currently based on billed changes, to a new system that would based on an interest rate system.

The hospitals and some attorney stakeholders killed 2015 legislation that would have made the switch from the billed charge system to an interest rate system in committee proceedings.

The hospitals expressed concern that a change to an interest rate system, which is found in other states, would lower their penalty payments.  The hospitals argued that the current system serves as a tool to regulate health plans and ensure that they make proper payments on time.

The courts have been examining the issue over the past few years.  At issue is whether the Texas prompt pay laws apply to ERISA plans, which make up well over 60 percent of the insureds in Texas.