Prompt Payment Of Claims Law

Tarrant County insurance attorneys should be familiar with the Texas Prompt Payment of Claims Act. Here is a little information taken from a State Bar of Texas publication that attorneys and their clients should know. The article was discussing the legality of ordering an insurance company to pay restitution for it’s failure to promptly pay claims.
In 1999, the Texas State Legislature enacted House Bill 610, commonly known as the Prompt Pay Act. It’s general purpose was to require payors under the act, such as insurance companies including health insurance companies, to pay or deny the bills of medical providers within forty-five days after receipt of a bill, provided the claim was “clean,” as defined by the Act. If an insurance company violated this Act, they were subject to the various penalties provided for in the legislation itself. In addition, certain violations might subject an insurance company to administrative penalties under former article 1.10E of the Insurance Code, which is currently Texas Insurance Code, Section 843.342(k). However, these penalties are not the exclusive penalties for violating the Prompt Pay Act. The Act contains a “dragnet” provision clearly reading, “in addition to any other penalty or remedy authorized by this code or another insurance law of this state.”
The language in the dragnet provision indicates the Texas Insurance Commissioner can resort to the power of restitution for violations of the Prompt Pay Act, since restitution is an “other remedy” authorized by the Insurance Code in Section 82.053. Senate Bill 403 allowed the Insurance Commissioner to order restitution to “each entity operating in the state that is harmed by a violation of, or failure to comply with, this code or a rule of the commissioner. Since a medical provider would be an “entity operating in this state,” the Insurance Commissioner could order an HMO, for example, to pay “restitution” to any medical provider that was harmed by a violation of the Act.
That is exactly what the Texas Insurance Commissioner did. The Texas Department of Insurance (TDI) clearly adopted this construction of the interplay between the Prompt Pay Act and the power of restitution. On the TDI website, TDI listed the ability to “order restitution within a specified period to any person or entity harmed” as one of the sanctions that could be imposed for Prompt Pay violations.
This extension of the Insurance Commissioner’s power of restitution of Prompt Pay violations certainly was beyond the original intent of Senate Bill 403. At the time Senate Bill 403 was enacted in 1987, it would be another twelve years before the Prompt Pay Act was passed. So logically the Texas Legislature could not possibly have intended for restitution to apply to violations of an act that had not yet been enacted. By including the dragnet provision which permitted any other penalty or remedy authorized by the Insurance Code, that is exactly what the Prompt Pay Act authorized.
Many attorneys who do not handle a lot of first party insurance claims do not even know about the Prompt Payment of Claims Act and certainly do not understand the remedies available through this Act.