Do Texas insurers have to pay out-of-network emergency room claims on time, and can they be penalized if they pay late?

Plain-English summary

When a patient gets emergency care from a doctor or hospital that is not in their insurer's network, the provider still bills the insurer. Texas law sets a clock for how fast HMOs and PPOs must pay "clean claims," and it lays out penalties when they pay late. Two members of the Texas House asked the AG a question that had been causing real friction: do those prompt-pay rules, both the deadlines and the penalties, apply to claims from out-of-network emergency care providers? The requesters described out-of-network emergency providers being paid long after the law's deadline, if at all. The Texas Department of Insurance took the position that the deadlines apply but the penalties do not.

The AG split the question the same way the Department did. The Insurance Code makes "provisions ... relating to prompt payment" applicable to non-network emergency care providers through section 843.351 (for HMOs) and section 1301.069 (for PPOs). Reading "prompt" in its ordinary sense, the AG concluded the deadline provisions in sections 843.338 and 1301.103, which require payment of a clean claim within 45 days (or 30 days for electronic claims), plainly relate to prompt payment, so they reach out-of-network emergency providers. A federal court had read section 1301.103 the same way.

The penalties were a different matter. The penalty provisions in sections 843.342 and 1301.137 require a late-paying insurer to pay the claim "plus a penalty," and that penalty is calculated off the provider's "contracted rate." Out-of-network providers, by definition, have no contracted rate, so the AG reasoned there is no figure from which to compute the penalty. Because courts presume the Legislature intended a result that can actually be carried out, and because penalty statutes are strictly construed, the AG concluded a court would likely hold the penalty provisions do not apply to out-of-network emergency care claims. The AG added that the Department of Insurance cannot fill that gap by adopting its own alternative penalty by rule, since the Legislature already built the penalty regime. The Department can, however, enforce the statutory payment deadlines, and an enforcement action that simply compels the payment the statute requires is not necessarily a penalty.

Currency note

This opinion was issued in 2019. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

Out-of-network emergency care providers: At the time of the opinion, the AG read the deadline provisions of sections 843.338 and 1301.103 to apply to their clean claims, meaning insurers were on the statutory clock to pay. But the AG also concluded the dollar penalty for late payment, tied to a contracted rate the providers did not have, likely did not apply to them.

HMOs and PPOs: The opinion told insurers that the payment deadlines reached out-of-network emergency claims, while the late-payment penalty calculation in sections 843.342 and 1301.137 likely did not, because it depends on a contracted rate.

The Texas Department of Insurance: The AG agreed with the Department that it could not create a substitute penalty by rule, but confirmed the Department retained authority to enforce the statutory payment deadlines through actions not in the nature of a penalty.

Common questions

If my insurer is out-of-network, does it still have to pay my emergency care claim on time?
The AG concluded the deadline provisions, requiring payment of a clean claim within 45 days (30 for electronic claims), relate to prompt payment and so apply to out-of-network emergency care providers under sections 843.351 and 1301.069.

Can an insurer be fined for paying an out-of-network emergency claim late?
The AG concluded the specific late-payment penalty in sections 843.342 and 1301.137 likely cannot be applied, because it is calculated from a "contracted rate" and out-of-network providers have none.

Why does the deadline apply but not the penalty?
The AG explained that the deadline provisions describe a timeframe that plainly relates to prompt payment, while the penalty provisions depend on a calculation that has no input for a provider without a contracted rate, and penalty statutes are strictly construed.

Could the Department of Insurance just write a new penalty rule for these claims?
The AG concluded no. The Legislature already set the penalty regime, so the Department cannot impose an additional penalty by rule, though it may enforce the statutory payment deadlines.

Background and statutory framework

Chapter 843 of the Insurance Code governs health maintenance organizations and chapter 1301 governs preferred provider benefit plans. Both contain prompt-payment provisions setting a timeframe for insurers to pay clean claims and a penalty structure for violations (Tex. Ins. Code §§ 843.338, 843.342, 1301.103, 1301.137; a "clean claim" is defined in §§ 843.336, 1301.101, 1301.131). Sections 843.351 and 1301.069 extend the provisions "relating to prompt payment" to physicians and providers who are not in the network but who provide emergency-related care required by state or federal law.

The requesters argued the phrase "provisions ... relating to prompt payment" takes in both deadlines and penalties. The Department of Insurance agreed the deadlines apply to out-of-network emergency claims but disagreed on penalties. Applying ordinary statutory construction (Hebner v. Reddy; In re Xerox Corp.; Centerpoint Builders GP, LLC v. Trussway, Ltd.; Randol Mill Pharmacy v. Miller), the AG looked to the common meaning of "prompt" and concluded the deadline provisions of sections 843.338 and 1301.103 relate to prompt payment and therefore apply, consistent with Emergency Health Centre at Willowbrook v. UnitedHealthcare of Texas.

On penalties, the AG noted the penalty in sections 843.342 and 1301.137 is the contracted rate owed "plus a penalty" calculated from that contracted rate, including for partial or late balance payments (§§ 843.342(a), (d)-(e), 1301.137(a), (d)-(e)). Because out-of-network providers have no contracted rate, the AG reasoned the penalty cannot be computed, invoking the presumption that the Legislature intends a result "feasible of execution" (Tex. Gov't Code § 311.021(4)) and the rule that penalty statutes are strictly construed (City of Houston v. Jackson; Brown v. De La Cruz; BankDirect Capital Fin., LLC v. Plasma Fab, LLC; Marchbanks v. Liberty Ins. Corp.). On rulemaking, the AG noted the Commissioner's authority to adopt rules to implement chapters 843 and 1301 and to impose administrative penalties (§§ 843.151(1), 1301.007(1), 84.021), but concluded a rule may not contravene the statute (Tex. State Bd. of Exam'rs of Marriage & Family Therapists v. Tex. Med. Ass'n). Because the Legislature already set the penalty regime, the Department cannot impose an additional one, though it may still enforce the statutory deadlines, which the Department's own rule already applies to non-network emergency providers (28 Tex. Admin. Code § 21.2823).

Citations

Statutory and regulatory provisions:

• Tex. Ins. Code § 843.151(1); § 843.336; § 843.338; § 843.342; § 843.342(a); § 843.342(d)-(e); § 843.351; § 843.351(1)-(2)(A)
• Tex. Ins. Code § 1301.007(1); § 1301.101; § 1301.131; § 1301.103; § 1301.137; § 1301.137(a); § 1301.137(d)-(e)
• Tex. Ins. Code § 84.021
• Tex. Gov't Code § 311.021(4)
• 28 Tex. Admin. Code § 21.2823

Cases:

• Emergency Health Centre at Willowbrook, L.L.C. v. UnitedHealthcare of Tex., Inc., 892 F. Supp. 2d 847, 851-53 (S.D. Tex. 2012)
• Billy Smith Enters. v. Hutchison Constr., Inc., 261 S.W.3d 370, 372-73 (Tex. App.-Austin 2008, pet. dism'd)
• Westcliffe, Inc. v. Bear Creek Constr., Ltd., 105 S.W.3d 286, 294 (Tex. App.-Dallas 2003, no pet.)
• Hebner v. Reddy, 498 S.W.3d 37, 41 (Tex. 2016)
• In re Xerox Corp., 555 S.W.3d 518, 527 (Tex. 2018); 556 S.W.3d at 530
• Centerpoint Builders GP, LLC v. Trussway, Ltd., 496 S.W.3d 33, 36 (Tex. 2016)
• Randol Mill Pharmacy v. Miller, 465 S.W.3d 612, 617 (Tex. 2015)
• City of Houston v. Jackson, 192 S.W.3d 764, 770 (Tex. 2006)
• Brown v. De La Cruz, 156 S.W.3d 560, 565 (Tex. 2004)
• BankDirect Capital Fin., LLC v. Plasma Fab, LLC, 519 S.W.3d 76, 86 (Tex. 2017)
• Marchbanks v. Liberty Ins. Corp., 558 S.W.3d 308, 315 (Tex. App.-Houston [14th Dist.] 2018, pet. filed)
• Tex. State Bd. of Exam'rs of Marriage & Family Therapists v. Tex. Med. Ass'n, 511 S.W.3d 28, 33 (Tex. 2017)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0250
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2019/kp0250.pdf

Original opinion text

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

May 22, 2019

The Honorable Joe Moody Opinion No. KP-0250
Speaker Pro Tempore
Texas House of Representatives Re: Whether certain prompt-pay provisions in
Post Office Box 2910 chapters 843 and 1301 of the Insurance Code
Austin, Texas 78768-2910 apply to claims filed by out-of-network
emergency care providers (RQ-0256-KP)
The Honorable Nicole Collier
Chair, Committee on Criminal Jurisprudence
Texas House of Representatives
Post Office Box 2910
Austin, Texas 78768-2910

Dear Representative Moody and Representative Collier:

    You ask whether the deadlines and penalties associated with prompt-pay provisions in

chapters 843 and 1301 of the Insurance Code apply to claims filed by out-of-network emergency
care providers. [1] Chapter 843 (governing health maintenance organizations, or "HMOs") and
chapter 1301 (governing preferred provider benefit plans, or "PPOs") both contain prompt
payment provisions establishing a timeframe for insurers to pay clean claims [2] submitted by health
care providers and providing a penalty structure for violations of those provisions. [3] See TEX. INS.
CODE §§ 843.338 (deadline for action on clean claims submitted to HMOs), 843.342 (penalties for
violation of certain payment provisions by HMOs); see also id. §§ 1301.103 (deadline for actions
on clean claims submitted to PPOs), 1301.137 (penalties for violation of claims payment
requirements by PPOs). Each chapter addresses the applicability of its prompt-pay provisions to
non-network emergency care providers. In relevant part, section 843.351 provides that

             [t]he provisions of [subchapter J] relating to prompt payment by a
             health maintenance organization of a physician or provider and to
             verification of health care services apply to a physician or provider
             who:

                  (1) is not included in the health maintenance organization
                  delivery network; and

                  (2) provides to an enrollee:

                      (A) care related to an emergency or its attendant episode of
                      care as required by state or federal law;

Id. § 843.351(1)-(2)(A) (emphasis added). Similarly, section 1301.069 provides in relevant part
that

             [t]he provisions of [chapter 1301] relating to prompt payment by an
             insurer of a physician or health care provider and to verification of
             medical care or health care services apply to a physician or provider
             who:

                  (1) is not a preferred provider included in the preferred provider
                  network; and

                  (2) provides to an insured:

                      (A) care related to an emergency or its attendant episode of
                      care as required by state or federal law;

Id. § 1301.069(1)-(2)(A) (emphasis added). You tell us that "ambiguity in these laws has led to
out-of-network emergency care providers dealing with claims ... that are paid long after the TPPA
requires, if they are paid at all." Request Letter at 1. You argue that the phrase "provisions ...
relating to prompt payment" necessarily includes provisions setting out deadlines and provisions
providing for penalties and, as such, they apply to non-network emergency care providers pursuant
to sections 843.351 and 1301.069. Id. at 2-3. The Texas Department of Insurance (the
"Department") disagrees, stating that "the deadlines for PPOs and HMOs to pay clean claims ...
apply to out-of-network provider emergency care claims," but "penalties ... for failure to timely
pay clean claims do not apply to claims by out-of-network providers." [4] With this background, you
ask about the meaning of the phrase "provisions ... relating to prompt payment" as it relates to
the applicability of deadlines and penalties to non-network emergency care providers pursuant to
sections 843.351 and 1301.069. Request Letter at 3.

    Our primary goal when interpreting a statutory provision is to effectuate the Legislature's

intent as expressed by the plain and common meaning of the words in the statute. Hebner v. Reddy,
498 S.W.3d 37, 41 (Tex. 2016). Courts presume that "the Legislature selected statutory words,
phrases, and expressions deliberately and purposefully and was just as careful in selecting the
words, phrases, and expressions that were included or omitted." In re Xerox Corp., 555 S.W.3d
518, 527 (Tex. 2018). The language must be analyzed "in context, considering the specific
sections at issue as well as the statute as a whole." Centerpoint Builders GP, LLC v. Trussway,
Ltd., 496 S.W.3d 33, 36 (Tex. 2016). Courts also presume that "the entire statute is intended to be
effective" and that it may not be interpreted "in a way that renders any part of it meaningless."
Randol Mill Pharmacy v. Miller, 465 S.W.3d 612, 617 (Tex. 2015).

    Sections 843.351 and 1301.069 make provisions relating to prompt payment applicable to

non-network emergency care providers. See TEX. INS. CODE §§ 843.351, 1301.069. The
Legislature did not define the phrase "related to prompt payment" but the word "prompt" is
commonly understood to describe something "performed readily or immediately" or "given
without delay or hesitation." WEBSTER'S THIRD NEW INT'L DICTIONARY 1816 (2002). The
deadline provisions in sections 843.338 and 1301.103 establish the time by which an HMO or a
PPO must pay on an eligible clean claim submitted by a provider. See TEX. INS. CODE §§ 843.338,
1301.103 (providing that non-electronic claims be paid "not later than the 45th day" after the HMO
or PPO receives the claim or, in the case of electronically-submitted claims, "not later than ... the
30th day" after receipt). Thus, the deadline provisions of sections 843.338 and 1301.103 relate to
prompt payment and, therefore, apply to claims filed by out-of-network emergency care providers
pursuant to section 843.351 or 1301.069. See Emergency Health Centre at Willowbrook v.
UnitedHealthcare of Tex., Inc., 892 F. Supp. 2d 847, 851-53 (S.D. Tex. 2012) (noting that the
PPO deadline provisions of section 1301.103 would apply to an emergency care provider who was
not a preferred provider if the care in question was required by state or federal law).

    The penalty provisions require an HMO or PPO failing to pay an eligible clean claim by

the deadline to pay "the contracted rate owed on the claim plus a penalty," which is the lesser of a
specified amount or an amount calculated using the contracted rate. TEX. INS. CODE §§ 843.342(a),
1301.137(a). When an HMO or PPO makes only a partial timely payment on an eligible clean
claim but pays "the balance of the contracted rate" after the deadline, the penalty is the lesser of a
specified amount or a percentage of the underpaid amount, which varies depending on how late
the balance is paid. Id. §§ 843.342(d)-(e), 1301.137(d)-(e). The consequences of not paying in a
timely manner may "relate to prompt payment." However, the penalty structure depends, for its
calculation, on the "contracted rate" of reimbursement owed to the provider on the claim. The
Department advises that "[o]ut-of-network providers do not have a contracted rate, so penalties
cannot be calculated for them." Department Brief at 2. "In enacting a statute, it is presumed that
... a result feasible of execution is intended[.]" TEX. GOV'T CODE § 311.021(4). In addition, a
penalty statute "should be strictly construed." City of Houston v. Jackson, 192 S.W.3d 764, 770
(Tex. 2006); see also Brown v. De La Cruz, 156 S.W.3d 560, 565 (Tex. 2004). Here, the
Legislature could have specified the manner for calculating a penalty for non-network providers
referenced in sections 843.351 and 1301.069, who do not have a "contracted rate," but it did not.
Courts endeavor to "read [the law] as written-in a manner faithful to what the law actually says-
despite its imperfections." BankDirect Capital Fin., LLC v. Plasma Fab, LLC, 519 S.W.3d 76, 86
(Tex. 2017) (quotation marks omitted); see also Marchbanks v. Liberty Ins. Corp., 558 S.W.3d
308, 315 (Tex. App.-Houston [14th Dist.] 2018, pet. filed) (applying this principle to other
prompt-pay provisions in the Insurance Code). Under these presumptions, a court would likely
conclude that the penalty provisions in sections 843.342 and 1301.137 cannot apply to claims filed
by out-of-network emergency care providers pursuant to sections 843.351 or 1301.069.

    You also ask about the authority of the Department "to promulgate rules setting

alternatives" to any deadlines or penalties not applicable to non-network emergency care providers
under sections 843.351 or 1301.069 and "what standards govern the timely payment and resolution
of those emergency care claims." Request Letter at 3. A state agency has only those powers
"expressly conferred upon it and those implied powers" reasonably necessary "to carry out its
statutory duties." See Tex. State Bd. of Exam'rs of Marriage & Family Therapists v. Tex. Med.
Ass'n, 511 S.W.3d 28, 33 (Tex. 2017). Accordingly, it can adopt only such rules as authorized by
and consistent with its statutory authority. See also id. (explaining that a rule may not
"(1) contravene[] specific statutory language; (2) run[] counter to the general objectives of the
statute; or (3) impose[] additional burdens, conditions, or restrictions in excess of or inconsistent
with the relevant statutory provisions"). With respect to HMOs, the Legislature authorized the
Commissioner of Insurance to "adopt reasonable rules as necessary and proper to ... implement
[chapter 843.]" TEX. INS. CODE § 843.151(1). Regarding PPOs, the Legislature directed the
Commissioner of Insurance to "adopt rules as necessary to ... implement [chapter 1301.]" Id.
§ 1301.007(1). The Commissioner also has broad authority to "impose an administrative penalty
on a person licensed or regulated under [the Insurance Code] or another insurance law of this state
who violates [the Insurance Code.]" Id. § 84.021. The Department takes the position that the
"plain language of the statute precludes [Department] rulemaking that would apply the penalties
of Sections 1301.137 and 843.342 to out-of-network providers." Department Brief at 3. We agree.
A penalty is a punishment imposed on a wrongdoer that goes beyond compensation and is intended
to punish and label defendants as wrongdoers. In re Xerox Corp., 556 S.W.3d at 530 ("the
hallmark of a penalty is that it goes beyond compensating for a loss"). The Legislature already
provided a penalty regime through sections 843.342 and 1301.137 for insurers who do not make
timely payments on eligible clean claims submitted to them. Thus, the Department cannot impose
an additional penalty. However, the Department may enforce provisions of the Insurance Code,
and the deadlines for payment on clean claims, which apply to non-network emergency care
providers, are imposed by statute in sections 843.338 and 1301.103. Depending on the
circumstances, a court could conclude that a particular enforcement action to compel the claim
payment required by statute is not in the nature of a penalty and is within the Department's
authority to implement.

                                 SUMMARY

                  A court would likely conclude that the deadline provisions
          of sections 843.338 and 1301.103 of the Insurance Code relate to
          prompt payment and, therefore, apply to claims filed by out-of-
          network emergency care providers pursuant to section 843.351 or
          1301.069 of that Code. However, a court would likely conclude that
          the penalty provisions in sections 843.342 and 1301.137 do not
          apply to claims filed by out-of-network emergency care providers
          pursuant to sections 843.351 or 1301.069.

                  The Legislature provided a penalty regime through sections
          843.342 and 1301.137 of the Code for insurers who do not make
          timely payments on eligible clean claims submitted to them. Thus,
          the Department cannot impose an additional penalty. But depending
          on the circumstances, a court could conclude that a particular
          enforcement action to compel the claim payment required by statute
          to a non-network emergency care provider is not in the nature of a
          penalty and is within the Department's authority to implement.

                                        Very truly yours,

                                        KEN PAXTON
                                        Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

RYAN L. BANGERT
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

BECKY P. CASARES
Assistant Attorney General, Opinion Committee

[1] See Letter from Honorable Joe Moody, Chair, Comm. on Crim. Jurisprudence, Tex. House of Representatives, to Honorable Ken Paxton, Tex. Att'y Gen. at 3 (Nov. 26, 2018), https://www2.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter"). Although the request was originally submitted by Representative Moody as Chair of the House Committee on Criminal Jurisprudence, he was thereafter named Speaker Pro Tempore. Representative Collier, as the new Chair of the House Committee on Criminal Jurisprudence, thereafter confirmed her desire for this office to proceed with this request.

[2] A "clean claim" is one that complies with certain administrative requirements, such as use of the proper submission form and inclusion of specified information. See TEX. INS. CODE § 843.336 (governing claims submitted to health maintenance organizations); see also id. §§ 1301.101, .131 (governing claims submitted to preferred provider benefit plans).

[3] You refer to these provisions collectively as the Texas Prompt Pay Act or "TPPA." Request Letter at 1. While no Texas statute contains the short title designation "Prompt Pay Act" or "Prompt Payment Act," courts use such designations to refer to a variety of prompt payment provisions. See, e.g., Emergency Health Centre at Willowbrook, L.L.C. v. UnitedHealthcare of Tex., Inc., 892 F. Supp. 2d 847, 851-52 (S.D. Tex. 2012) (referring to prompt pay provisions governing PPOs in chapter 1301 of the Insurance Code); Billy Smith Enters. v. Hutchison Constr., Inc., 261 S.W.3d 370, 372-73 (Tex. App.-Austin 2008, pet. dism'd) (referring to provisions governing payment for goods and services by state and local governments in chapter 2251 of the Government Code); Westcliffe, Inc. v. Bear Creek Constr., Ltd., 105 S.W.3d 286, 294 (Tex. App.-Dallas 2003, no pet.) (referring to provisions governing payment of contractors by certain real property owners in chapter 28 of the Property Code).

[4] Brief from Ms. Norma Garcia, Gen. Counsel, Tex. Dep't of Ins. at 2 (Jan. 4, 2019) ("Department Brief") (on file with the Op. Comm.). See also 28 TEX. ADMIN. CODE § 21.2823 (Tex. Dep't of Ins., Applicability to Certain Noncontracting Physicians and Providers) (applying claim processing deadlines to non-network emergency care providers).