Act 6 Statute From Pennsylvania Automobile Insurance Law

Health Care Cost Containment

Understanding The Law And Regulations

I. Health Care Cost Containment – General Provisions

A. Statute

Customary Charges for Treatment.

(a) General Rule. – A person or institution provides treatment, accommodations, products or services to an injured person for an injury covered by liability or uninsured and underinsured benefits or first party medical benefits, including extraordinary medical benefits, for a motor vehicle described in Subchapter B (relating to motor vehicle liability insurance first party benefits) shall not require, request or accept payment for the treatment, accommodations, products or services in excess of 110% of the prevailing charge at the 75th percentile; 110% of the applicable fee schedule, the recommended fee or the inflation index charge; or 110% of the diagnostic-related (DRG) payment;  whichever pertains to the specialty service involved; determined to be applicable in the Commonwealth under the Medicare program for comparable services at the time the services were rendered, or the provider’s usual and customary charge, whichever is less.  The General Assembly finds that the reimbursement allowances applicable in the Commonwealth under the Medicare program are an appropriate basis to calculate payment for treatments, accommodations, products or services for injuries covered by liability or uninsured and underinsured benefits or first party medical allowances are applicable under this section.  If the commissioner determines that an allowance under the Medicare program is not reasonable, he may adopt a different allowance by regulation, which allowance shall be applied against the percentage limitation in this subsection.  If a prevailing charge, fee schedule, recommended fee, inflation index charge or DRG payment has not been calculated under Medicare program for a particular treatment, accommodation, product or service, the amount of the payment may not exceed 80% of the provider’s usual and customary charge.

B. Regulations

1. Important Definitions

Medicare prevailing charge – The lowest customary charge high enough to include 75% of the individual provider charges for services as adjusted by all limitation mandated by HCFA and the carrier.
Medicare recommended fee – The fee for which a Medicare payment schedule does not exist, and which is developed based upon a solicited recommendation from a consulting specialist or group of specialists.  This fee may vary depending upon the specifics of a particular case.
Pass-through costs – Medicare reimbursed costs to a hospital that “pass through” the prospective payment system and are not included in the DRG payments.  The term includes medical education, capital expenditure, insurance and interest expense on fixed assets.
Medicare Part A – Medicare hospital insurance benefits which reimburse providers for facility-based care, such as inpatient and outpatient hospital services and skilled nursing care.
Medicare Part B – Medicare supplementary medical insurance which reimburses providers for physician services, durable medical equipment, physical therapy and other services.
Medicare payment – Payment at 110% of the Medicare reimbursement allowance which includes the prevailing charge at the 75th percentile; the applicable fee schedule, the recommended fee or the inflation index charge; the DRG payment or any other Medicare reimbursement mechanism; as applied in this Commonwealth under the Medicare Program.
Provider – A person or institution which provides treatment accommodations, products or services.
Usual and customary charge – The charge most often made by providers or similar training, experience and licensure for a specific treatment, accommodation, product or service in the geographic area where the treatment, accommodation, product or service is provided.

2. Important Points

a) Look to regulations for interpretation.
b) Payment regulation apply to liability, uninsured, underinsured, first party, and extraordinary medical benefits.
c) Provider shall not “require, request or accept payments.”  Therefore, no provider may accept alternative payments, e.g., cash.
d) 110% of the Medicare charge at the 75th percentile.
e) 80% of usual and customary charge, whichever is less.

3. Changing Payment Schedules

If the Commissioner determines that an allowance under the Medicare program is not reasonable, the Insurance Commissioner may adopt a different payment allowance by regulation but the insurance company must follow agency law in making a request for change.

4. Applicability of Health Care Cost Containment

The Health Care Cost Containment chapter applies to medical payments made by insurers under automobile insurance policies issued under the MVFRL.  It also applies to insurer payments to providers for services rendered on and after November 30, 1991.

A. Limitations

1. Regulations

Payment limitation applicability.

(a) The payment limitations of Act 6 apply to a provider rendering services to an injured person whose medical costs are covered by automobile insurance issued under the MVFRL.  The payment limitations of Act 6 also apply to providers not currently participating in Medicare.
(b) The payment limitations of Act 6 apply in cases when care is rendered by a Pennsylvania licensed provider to a Pennsylvania resident covered by maintenance or use of a motor vehicle, irrespective of where the injuries occurred or where the care is rendered.

B. Exemptions

1. Statute

If acute care is provided in an acute care facility to a patient with an immediately life-threatening or urgent injury by a Level I or Level II trauma center accredited by the Pennsylvania Trauma Systems Foundation under the act of July 3, 1985, know as the Emergency Medical Services Act, or to a major burn injury patient by a burn facility which meets all the service standards of the American Burn Association, the amount of payment may not exceed the usual and customary charge.

2. Regulations

Life-threatening injury – The term shall be as defined by the American College of Surgeons’ triage guidelines regarding the use of trauma center for the region where the services are provided.
Urgent injury – The term shall be defined by the American College of Surgeons’ triage guidelines regarding use of trauma centers for the regions where the services are provided.
Trauma center – A facility accredited by the Pennsylvania Trauma Systems Foundation under the Emergency Medical Services Act.
Burn facility – A facility which meets the service standards of the American Burn Association.

Exemption from payment limitations.

(a) Acute care treatment and services for life-threatening or urgent injuries, and services for burn injury patients rendered by providers during transport to and while at a trauma center or a burn facility, shall be paid at the usual and customary charge when the insured’s condition meets the definition of urgent or life-threatening injury, based upon information available at the time of the insured’s assessment.  When the initial assessment at the trauma center determines that the insured’s injuries are not urgent or life-threatening, the exemption shall apply only to the initial assessment and the transportation to the facility.  A decision by ambulance personnel that an injury is urgent or life-threatening shall be presumptive of the reasonableness and necessity of the transport to a trauma center or burn facility unless there is clear evidence of a violation of the American College of Physicians’ Guidelines.
(b) A provider may seek a determination that a Medicare reimbursement allowance under the Medicare Program is unreasonable by applying to the Department for a deviation from the Medicare reimbursement allowance.  The application shall be provider specific and shall be for the specific Medicare reimbursement allowance that is believed to be unreasonable.  The application for a different Medicare reimbursement allowance shall be subject to a formal ad judicatory hearing in accordance with 2 Pa.C.S.

II. Provider Bills, Billing Procedure and Codes

1.  Statute

“. . . Provider subject to this section may not bill the insured directly but must bill the insurer for a determination of the amount payable.  The provider shall not bill or otherwise attempt to collect from the insured the difference between the provider’s full charge and the amount paid by the insurer.

2. Regulations

Allowable payment amounts

The provider may not require payment in excess of the Medicare payment pertaining to the applicable specialty under Medicare for comparable services at the time services were rendered, or the provider’s usual and customary charge, whichever is less.  An insurer shall use the Medicare payment applicable to this Commonwealth to determine the appropriate payment.  The applicable Medicare payment shall be utilized even when a service is not a reimbursed service under Medicare.  If no Medicare payment has been calculated, payment shall be 80% of the provider’s usual and customary charge.

Billing procedures

(a) An insurer shall apply the Medicare payment limitations of Act 6 to provider services covered by bodily injury, liability, uninsured and underinsured motorists, first party medical and extraordinary medical benefits coverages under an automobile insurance policy.

(b) In an action for damages against a tortfeasor arising out of the maintenance or use of a motor vehicle.

(c) If an insured’s first party limits have been exhausted, the insurer shall, within 30 days of the receipt of the provider’s bill, provide notice to the provider and the insured that the first party limits have been exhausted.

(d) Upon receipt of a provider’s bill, the insurer shall make a determination of the appropriate Medicare payment and pay up to the first party benefit limits of the policy.  If the determined amount exceeds the benefit limits of the policy, or the determined amount plus previously paid benefits exceed the benefit limits of the policy, the provider may directly bill the insured or a secondary insurance carrier.

(e) If only a portion of the provider’s services are paid by the automobile insurance policy, because benefit limits have been exhausted, the provider may bill the insured for the remaining services not paid under the automobile insurance policy.  The provider’s bill to the insured shall be limited to the remaining services not paid under the automobile insurance policy.

Example:  Assume the uninsured has $5,000 of first party benefits from the insured’s automobile insurance policy and no health insurance.  Further assume the provider’s bill totals $10,000 and the Medicare payment for the $10,000 total bill would be $6,000.  The actual worth of the $5,000 first party benefits applied at the appropriate Medicare payment is $8,333 worth of services of the $10,000 bill ($5,000 is to $6,000 as x is to $10,000; x is $8,333).  The provider may bill the insured $1,677, or $10,000 less $8,333, for the remaining services not paid under the automobile insurance policy.

(f) If another insurance policy exists and a provider bills that insurer for the actual worth of remaining services not paid (such as $1,667 in the Example in subsection (e) that insurer shall determine the appropriate amount of payment to the provider under the terms of the insured’s health or other insurance policy, without regard to the medical cost containment provisions of the act.

(g) When multiple provider seek reimbursement and when their bills for services collectively exceed the policy limits, providers shall be paid by the insurer in the order the insurer receives a provider’s bill.  If bills are received simultaneously, the bill with the lowest payment amount in accordance with 69.43 (relating to insurer payment requirement) shall be paid first.

(h) If no portion of the provider’s bill is payable under automobile insurance coverage, the Medicare payment limitations no longer apply.  A provider may directly bill the insured or other insurance carrier as it has prior to passage of Act 6.

Applicable Medicare payment and codes.

(a) The applicable Medicare fee schedule shall include fees associated with all permissible procedure codes.  If the Medicare feel schedule also includes a larger grouping of procedure codes and corresponding charges than are specifically reimbursed by Medicare, a provider may use these codes, and corresponding charges shall be paid by insurers.  If a Medicare codes exists for application to a specific provider specialty, that code shall be used.

(b) Medicare procedure codes are updated periodically by HCFA and the carrier and intermediaries.  Insurers and provider shall utilize the latest Medicare payments as updated and provided by HCFA.  Medicare payments shall be utilized by insurers and provider within 30 days of their effective date or date of official publication by HCFA, whichever occurs later.

(c) Medicare procedure codes are updated periodically by HCFA and the carrier and intermediaries.  The updated Medicare procedure codes shall be utilized by insurers and provider within 30 days of their effective date or date of official publication by HCFA, whichever occurs later.

Unbundling

A provider may not fragment or unbundled charges imposed for a specific care except as consistent with the Medicare Program.  Changes to a provider’s codes by an insurer shall be made only as consistent with the Medicare Program and when the insurer has sufficient information to make the changes and following consultation with the provider.  An insurer shall substantiate the reasons for coding changes to the provider in writing.

Required billing information

(a) In submitting a request for payment to an insurer, a provider may state the full charge for services rendered.  To the extent possible, a Part A provider shall submit DRG payment information including estimated pass-throughs and outliers as calculated by the intermediary and shall utilize Form UB82 or the form currently in use by Medicare.  If Form UB82 is used, the intermediary assigned provider number shall be shown on the form.  To the extent possible, a Part B provider shall utilize Medicare procedure codes for the service rendered and shall utilize Form HCFA-1500 or the currently in use by Medicare.  Provider specialty codes shall be provided, if know.  Failure to sue Forms UB82 and HCFA-1500 or Medicare procedure codes does not preclude payment by an insurer if the provider submits a complete narrative describing the services rendered for which payment is requested, including complete information on the insured and provider.  When applicable, complete information on the primary and secondary diagnosis shall also be submitted.

(b) Insurer processing of provider bills under this section is subject to the Unfair Insurance Practices Act.

Peer Review Time Periods

  1. Bill must be paid if not referred to a PRO within the first thirty (30) days after insurer receives sufficient documentation regarding the bill;
  2. Insurance company still has ninety (90) days to submit bills to PRO;
  3. Initial determination must be complete within thirty (30) days of receipt of requested information unless additional 20 period applicable because information not received;
  4. The Peer Review Organization must mail written determination to the insurer within three (3) working days of conclusion of PRO’s review;
  5. The insurer must mail report to provider within five (5) days of receipt from PRO;
  6. Provider, insurer or insured has thirty (30) days to request reconsideration;
  7. Reconsideration completed in thirty (30) days;
  8. Reconsideration send to insurer within three (3) days; and
  9. Reconsideration mailed to insured within five (5) days.

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