Prompt Payment Law

Summary (effective January 22, 1998)

• Sets standards for the prompt, fair and equitable settlements of both patient claims and provider services;
• Requires HMOs and insurers to pay claims and bills within 45 days of receipt, except in cases where the obligation to make payment is not reasonably clear or where there is evidence that the bill may be fraudulent;
• Requires in cases where the obligation to pay is not clear, that the HMO or insurer must pay the undisputed portion of the claim within 45 days;
• Specifies that each claim or bill processed after the 45 day period is a separate violation and must include the payment of interest. Interest must be paid at the greater of 12 percent per year or the corporate tax rate determined by the Commissioner of Taxation and Finance;
• Permits the Superintendent of Insurance to fine companies up to $500 per claim for each day a claim is processed beyond the 45 day limit. This fine is capped at $5,000 for each separate violation;
• Permits the Superintendent of Insurance to impose a penalty of up to $500 per day for any HMO or insurer that fails to respond to Insurance Department inquiries in a timely manner. The total penalty may not exceed $7,500 per inquiry; and
• Permits the Superintendent of Insurance to impose a penalty of up to $500 per day for any person that fails to cooperate with Insurance Department investigations. The fine can be levied against insurance companies as well as insurance agents or brokers. The total penalty can not exceed $10,000. However those who violate the law five times within a five year period can be fined an additional $50,000.