Health Insurance Reform: Standards for Electronic Transactions. g. Transaction Standard for Health Plan Premium Payments


In subpart Q, we proposed the ASC X12N 820 - Payment Order/Remittance Advice, Version 4010, Washington Publishing Company, (004010X061) as the standard for health plan premium payments.

Comments and Responses on the Transaction Standard for Health Plan Premium Payments

The majority of commenters expressed support for the selected standard.

i. Of those comments we referred to ASC X12N, the work groups determined that 53 comments identified areas where the implementation specification could be improved, and the appropriate changes were made.

ii. One comment identified a business need that ASC X12N judged could already be met within the current standard implementation specification. Detailed information on how the current implementation specifications can be used to meet these business needs has been provided by ASC X12N at the Internet site in §162.920.

iii. Six comments alleged technical or editorial errors in the standard implementation specification. A technical review of these issues was conducted by work groups within ASC X12N. The work groups determined that the 6 comments identified areas where the implementation specifications were in fact correct and that no changes were needed. Changes to the implementation specification were not required.

iv. Comment: Several commenters said that health plans must be free to accept premium payment data in non-standard formats if that option is chosen by a sponsor. In the preamble to the proposed rule, we stated that health plans must “accept only the standard specified in §142.1704.” (63 FR 25295). Commenters suggested that we not include the word “only” in the final rule under the health plan requirements. One commenter suggested that we add language in the rule to state: “However, health plans may require trading partners to use the standard transaction to conduct business.”

Response: We recognize that entities such as sponsors perform EDI with health plans. The proposed rule stated that health plans are required to use only the standard specified in §142.1702 for electronic health plan premium payments. Sponsors, one of the primary trading partners with whom the health plans exchange health plan premium payment transactions, were proposed to be excluded. Our reference to the requirements for health plans to accept “only” the standard specified was intended to preclude health plans from using data in formats other than standard when conducting transactions that are standard transactions. It was not intended to impose requirements on sponsors. Thus, sponsors remain free to send health plan premium payments in nonstandard format if they choose, and health plans are free to accept the data.

We expect that sponsors may voluntarily accommodate a health plan’s request to use the ASC X12N 820 by directly submitting the transaction in standard format, or by using a health care clearinghouse to translate non-standard data into the standard format.

v. Comment: One commenter said that Version 3040 is the most widely accepted version of the ASC X12N 820 in the financial community and, therefore, recommended its adoption. The commenter reasoned that by setting the minimum version at 3040, The Secretary would greatly increase the likelihood of successful implementation since it is currently in use for transmitting premium payments.

Response: We did not recommend version 3040 because it was not millennium ready.

vi. Comment: Several commenters, including the Department of the Treasury, said that the ASC X12N 820 should not be named as a payment order format for use by Treasury- disbursed Federal agencies since they use Federal implementation conventions and Treasury payment formats that may not be compatible with this standard. All Federal payment formats disbursed by these agencies must go through a commercial financial institution prior to delivery of the payment to the recipient. It was stated a distinction needs to be made in regard to the function of the X12N 820. It is used as a “payment order” and a “remittance advice” delivery.

Response: The ASC X12N 820 is an appropriate format for use by all covered entities and is designed to provide the information needed to process a payment of health insurance premiums from an employer or other sponsor of health insurance to a health plan. If a Federal agency is a covered entity and conducts a transaction adopted under this part with another covered entity electronically, the transaction must be conducted as a standard transaction. If the other entity is not a covered entity, of course, the standard transaction need not be used unless the Federal agency is a health plan and the other entity requests the standard transaction.

This standard is quite flexible with respect to transfers of funds. The implementation specification for the ASC X12N 820 contains two parts, a mechanism for the transfer of dollars and one for the transfer of information about the payment. It allows these two parts to be transmitted separately. Consistent with the implementation guide, actual payment may be sent in a number of different, equally acceptable ways, including check and several varieties of electronic funds transfer, as long as the detailed information describing the payment is transmitted to the health plan using the ASC X12N 820 directly or indirectly (through a health care clearinghouse or financial institution). When the transfer of funds is part of paying a health care premium the ACH transaction may continue to be used as a valid part of an ASC X12N 820 transaction where the other part of the transaction is sent to the health plan. Although these standard transactions allow transmission of one or both parts through a financial institution, they do not require both parts to be sent to the financial institution, and the financial institution is not required by this regulation to accept or forward such transactions. The Department of the Treasury has confirmed that this standard does not conflict with their requirements for disbursements.

vii. Comment: One commenter asked whether a sponsor must use the 4010 version of the ASC X12N 820.

Response: Section 1172 of the Act identifies the entities required to comply with the HIPAA standards. Sponsors are not included in this provision. If sponsors choose to use the ASC X12N 820, we strongly encourage that they use the version of the standard named in this rule.