Michigan Law Requires Interest When an Insurer Fails to Timely Pay Claims

 A significant challenge to any chiropractic office is the prompt collection of payments from insurers. In 2002, the Michigan Legislature amended the Insurance Code (MCL §500.100-500.8302) to incorporate requirements for claims processing and payment that must be followed by commercial health insurers, commercial HMOs, and Blue Cross. Michigan’s prompt pay law (MCL §500.2006) applies with respect to “clean” claims and requires the payment of benefits on a timely basis (or, in the alternative, the payment of interest). Below are answers to some frequently asked questions regarding Michigan’s timely payment law.

 What is a “Clean Claim”?

A “clean claim” is one that does all the following:

1. Identifies the health professional that provided service sufficiently to verify, if necessary, affiliation status and includes any identifying numbers
2. Sufficiently identifies the patient and health plan subscriber
3. Lists the date and place of service
4. Is a claim for covered services for an eligible individual
5. If necessary, substantiates the medical necessity and appropriateness of the service provided
6. If prior authorization is required for certain patient services, contains information sufficient to establish that prior authorization was obtained
7. Identifies the service rendered using a generally accepted system of procedure or service coding
8. Includes additional documentation based upon services rendered as reasonably required by the health plan

How Many Days Does a Health Plan Have to Pay a Clean Claim?

A clean claim must be paid within 45 days after receipt of the claim by the health plan.

A health plan must notify the healthcare professional within 30 days after receipt of the claim of all known reasons that prevent the claim from being a clean claim. The provider then has 45 days, plus any additional time the plan permits, after receipt of the notice to correct those defects. The 45-day time period is tolled from the date of receipt of a notice to the health care provider to the date of the health plan’s receipt of a response from the provider.

If the healthcare provider’s response makes the claim a clean claim, the health plan shall pay within the 45-day time period, excluding any time period tolled. If the provider’s response does not make the claim a clean claim, the health plan shall notify the provider of an adverse claim determination and of the reasons for the adverse claim determination, within the 45-day time period, excluding any time period tolled.

A healthcare provider shall not resubmit the same claim to the health plan unless the 45-day time frame has passed.

What are the penalties for late payment?

A clean claim that is not paid within 45 days shall bear simple interest at a rate of 12 percent per annum. The Director of DIFS may also impose a civil fine of not more than $1,000.00 for each violation not to exceed $10,000.00 in the aggregate for multiple violations

What Happens When a Health Plan Fails to Timely Pay a Clean Claim?

A healthcare professional alleging that a timely processing or payment procedure has been violated may file a complaint with the Michigan Department of Insurance Services (DIFS) and has a right to a determination of the matter. The complaint must be filed on the required form, FIS 0284 (12/23).

Only a “health professional,” “health facility,” home health care provider, or a durable medical equipment provider can file a clean claim complaint. Other individuals or policyholders cannot file a clean claim complaint. Providers may also seek court action.

Is There a Time Period for Submitting a Claim to a Health Plan?

Yes. A healthcare provider shall bill a health plan within one year after the date of service in order for the claim to be a clean claim.

[Please note: While State law requires a health professional to bill within one year, individual insurance companies can have their own stricter claim submission guidelines. For example, Blue Cross requires claims to be filed within 180 days. Be sure to check your provider manual for each insurance company to be sure of each insurer’s claim submission guidelines.] 

Does the Clean Claim Language Require Electronic Submission of Claims or Notices to and from a Health Plan?

No. The initial claim submission and all other notices required may be made in writing or electronically.

Can a Health Plan Deny an Entire Claim if One or More Services are Payable, but One or More Services are defective or Non-Payable?

No. If a health plan determines that one or more services listed on a claim are payable, the plan shall pay for those services and not deny the entire claim because one or more other services listed on the claim are defective.

Can a Health Plan Discriminate Against a Health Professional for filing a Clean Claim Report?

No. A health plan shall not terminate the affiliation status or the participation of a health professional or otherwise discriminate against a health professional due to the filing of a clean claim complaint.

Where is the Clean Claim Language Found in Michigan Statute?

Subsection 4 of Section 2006 of the Insurance Code (MCL §500.2006). It can be found online here.  

What Type of Claims are Excluded?

The provisions of Section 2006 of the Insurance Code do not apply to claims arising from pharmacies, no-fault auto claims, workers compensation claims, or Medicaid claims, claims from Medicare or Medicare Advantage plans, or claims from self-funded health care plans.  

What About Delayed Payments in Workers Comp? Auto No-Fault?

Under Michigan’s Workers Compensation Rules:

• The provider should receive payment within 30 days.
• If the practitioner does not receive payment within 30 days of submitting a properly completed bill to the carrier, the Rules say that the carrier must pay the maximum allowable payment, plus a 3% late fee.
• The late fee due is paid one time and is not compounded.

Under Michigan auto no-fault law [MCL 500.3142(2) and (3)]:

• Personal protection insurance benefits are overdue if not paid within 30 days after an insurer receives reasonable proof of the fact and of the amount of loss sustained.
• If reasonable proof is not supplied as to the entire claim, the amount supported by reasonable proof is overdue if not paid within 30 days after the proof is received by the insurer.
• Any part of the remainder of the claim that is later supported by reasonable proof is overdue if not paid within 30 days after the proof is received by the insurer.
• For the purpose of calculating the extent to which benefits are overdue, payment shall be treated as made on the date a draft or other valid instrument was placed in the United States mail in a properly addressed, postpaid envelope, or, if not so posted, on the date of delivery.
• An overdue payment bears simple interest at the rate of 12% per annum.

Where can I find additional information?

The DIFS “Clean Claims and Other Information for Health Providers” has additional information that may be helpful.

Medicaid Clean Claims

Clean claims for Medicare are governed by MCL 500.2006(7) to (14) and MCL 400.111i. According to the State of Michigan, “Under MCL 400.111i, Medicaid providers may file clean claims with the Director against Medicaid HMOs for timely payment for the claims that have been submitted electronically. Ordinarily a clean claim must be paid within 45 days after receipt of the claim by the qualified health plan. A “clean claim” must meet certain criteria set forth in the legislation and must be submitted on form FIS 0278 (12/23).

Table 1. Allowable Interest Rates for Claims Not Timely Paid