Health Insurance Reform: Standards for Electronic Transactions. a. Affected Entities

10/16/2000

Health care providers that conduct EDI with health plans and that do not wish to change their internal systems will have to convert the ASC X12N 835 transactions received from health plans into a format compatible with their internal systems either by using a translator or a health care clearinghouse. Health plans that want to transmit remittance advice directly to health care providers and that do not use the ASC X12N 835 will also incur costs to convert to the standard. Many health care providers and health plans do not use this standard at this time. We do not have information to quantify the standard’s use outside the Medicare program. However, according to Medicare statistics, in 1996, 15.9 percent of part B health care providers and 99.4 percent of part A health care providers were able to receive this standard. All Medicare contractors must be able to send the standard.

Some of the possible effects of adopting the ASC X12N 835 include the potential for an initial delay in payment or the issuance of electronic remittance during a plan’s transition to the standard format and the possibility that health care providers could react adversely to implementation costs and thus, revert to hard copy remittance notices in lieu of an electronic transmission.

Despite the initial problems health care providers may encounter with administrative simplification, health care providers will, in the long run, enjoy the advantage associated with not having to keep track of or accept different electronic payment/ remittance advice formats issued by different health plans. This will simplify automatic posting of all electronic payment/remittance advice data, thus reducing administrative expenses. This will also reduce or eliminate the practice of posting payment/remittance advice data manually from hard copy notices, again reducing administrative expenses. Most manual posting occurs currently in response to the problem of multiple formats; using standard transactions will eliminate this burden.

Additionally, once the ASC X12N 835 has been implemented, health plans’ coordination of benefits activities, which will use the ASC X12N 837 format supplemented with limited data from the ASC X12N 835, will be greatly simplified because all health plans will use the same standard format.

As long as they meet the deadlines specified in the statute, health plans will be able to schedule their implementation of the ASC X12N 835 in a manner that best fits their needs, thus allaying some costs through coordination of conversion to other standards.

The selection of the ASC X12N 835 does not impose a greater burden on the industry than the nonselected options because the nonselected formats are not used in a standard manner by the industry and they do not incorporate the flexibility necessary to adapt easily to change. The ASC X12N 835 presents significant advantages in terms of universality and flexibility.