NRPM: Standards for Electronic Transactions. Standard: Health Plan Premium Payment (Subpart Q)


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a. Background

Electronic payment methods have become commonplace for consumers who pay their monthly mortgage, power, or telephone bills electronically. Yet, electronic payment of health insurance premiums by employers is not common at all.

Adoption of a standard for electronic payment of health plan premiums would benefit employers and other sponsors, especially, by providing the opportunity to convert to a single electronic transmission format where paper forms and premium payment formats may vary from health plan to health plan. Many of these sponsors already use X12 standards in their core business activities (for example, purchasing) unrelated to the provision of health care benefits to employees. Federal and State governments when acting as employers and other government agencies that transmit premium payments to outside organizations (for example, State Medicaid agencies that pay premiums to outside organizations such as managed care organizations) would also benefit from these electronic transactions.

i. Candidates for Standard.

According to the inventory conducted for HHS by the HISB, only one standard developed and maintained by a standards developing organization for health plan premium payment transaction exists. It is the ASC X12 820 - Payment Order/Remittance Advice.

ii. Recommended Standard.

The standard we are proposing to adopt for health plan premium payment transactions is the ASC X12 820 - Payment Order/Remittance Advice. If we adopt the ASC X12 820, health plans would be able to transmit premium payments either as a summary payment or with individual payment detail, or as payment amount and adjustment amount, using a single, electronic format. Health plans would be required to accept the standard transaction as the electronic transmission; neither sponsors nor health plans would have to continue to maintain and use multiple proprietary premium payment formats or resort to paper.

Although the premium order/remittance advice (ASC X12 820), used for health plan premium payments, can be paired with the ASC X12N 811 - Consolidated Service Invoice/Statement, which is used for health plan premium billing, our proposal and the focus of the statute is on a standard only for health plan premium payments.

In addition to being the only relevant standard designed for use by sponsors, the ANSI ASC X12 820 met 9 of the 10 criteria deemed to be applicable in evaluating this potential standard. It would improve the efficiency of premium payment transactions by prescribing a single, standard format. It was designed to meet the needs of health care providers, health plans, and health care clearinghouses by virtue of its development within the ASC X12 consensus process, in which representatives of health care providers, health plans, and health care clearinghouses participate. It is consistent with the other ASC X12 standards detailed in this proposed rule. Its development costs are relatively low, given the X12 development process; its implementation costs would be relatively low as it can be implemented along with a suite of X12 transaction sets, often with a single translator. It was developed and will be maintained by the ANSI-accredited standards setting organization X12. It is ready for implementation, with the official implementation guide to which we refer in Addendum 7 to this proposed rule. It was designed to be technology neutral by X12. Precise and unambiguous definitions for each data element in the transaction set are documented in the implementation guides.

The ANSI ASC X12 820 - Payment Order/Remittance Advice is currently used in applications other than health care. However, it is currently not in widespread use in the health insurance industry because most health plan premium payments are not done electronically. However, some large organizations are using the ASC X12 820 to meet other business requirements, such as automated purchasing. The ASC X12 820 is used in the health care industry for premium payment information exchanged between the sponsor and the health plan; it should not be confused with the ASC X12 834, which includes additional nonpremium payment information. The ASC X12 820 is not intended to be used to carry enrollment or other eligibility information.

The data elements for this transaction, and other information, may be found in Addendum 7.

b. Requirements

In § 142.1702, we would specify the following as the standard for health plan premium payment: ASC X12 820 - Payment Order/Remittance Advice (004010X061). We would specify where to find the implementation guide and incorporate it by reference.

i. Health plans.

In § 142.1704, Requirements: Health plans, we would require health plans to accept only the standard specified in § 142.1702 for electronic health plan premium payments.

ii. Health care clearinghouses.

We would require in § 142.1706 that each health care clearinghouse use the standards specified in § 142.1702 for health plan premium payment transactions.

iii. Sponsors.

There would be no requirement for sponsors to use the standard: they are not one of the entities subject to the requirements of HIPAA. However, to the extent a sponsor uses an electronic standard, it would benefit that sponsor to use the standard we adopt for the reasons discussed earlier. In addition, HIPAA contains no provisions that would prohibit a health plan requiring sponsors with which its conducts transactions electronically to use the adopted standard.

c. Implementation Guide and Source

The implementation guide for this transaction is the ASC X12N 820 - Payroll Deducted and Other Group Premium Payment for Insurance Products (004010X061).

The implementation guide is available at no cost from the Washington Publishing Company site on the World Wide Web at the following address:

Users without access to the Internet may purchase implementation guides from Washington Publishing Company directly. Washington Publishing Company, 806 W. Diamond Ave., Suite 400, Gaithersburg, MD, 20878; telephone 301-590-9337; FAX: 301-869-9460.