Skip to main content
U.S. flag

An official website of the United States government

Dot gov

The .gov means it’s official.
Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you’re on a federal government site.

Https

The site is secure.
The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

NRPM: Standards for Electronic Transactions

Publication Date
May 6, 1998

[Federal Register: May 7, 1998 (Volume 63, Number 88)]

[Proposed Rules]

[Page 25271-25320]

[DOCID:fr07my98-25]


DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

45 CFR Part 142

[HCFA-0149-P]

RIN 0938-AI58

Health Insurance Reform: Standards for Electronic Transactions

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Proposed rule.

"

Summary and Introduction

SUMMARY: This rule proposes standards for eight electronic transactions and for code sets to be used in those transactions. It also proposes requirements concerning the use of these standards by health plans, health care clearinghouses, and health care providers.

The use of these standard transactions and code sets would improve the Medicare and Medicaid programs and other Federal health programs and private health programs, and the effectiveness and efficiency of the health care industry in general, by simplifying the administration of the system and enabling the efficient electronic transmission of certain health information. It would implement some of the requirements of Administrative Simplification subtitle of the Health Insurance Portability and Accountability Act of 1996.

DATES: Comments will be considered if we receive them at the appropriate address, as provided below, no later than 5 p.m. on July 6,1998.

ADDRESSES: Mail written comments (1 original and 3 copies) to the following address:

Health Care Financing Administration,
U.S. Department of Health and Human Services,
Attention: HCFA-0149-P
P.O. Box 31850
Baltimore, MD 21207-8850.

If you prefer, you may deliver your written comments (1 original and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building,
200 Independence Avenue, SW.,
Washington, DC 20201, or

Room C5-09-26,
7500 Security Boulevard,
Baltimore, MD 21244-1850.

Comments may also be submitted electronically to the following e-mail address: transact@osaspe.dhhs.gov. E-mail comments should include the full name and address of the sender and must be submitted to the referenced address to be considered. All comments should be incorporated in the e-mail message because we may not be able to access attachments. Electronically submitted comments will be available for public inspection at the Independence Avenue address below.

Because of staffing and resource limitations, we cannot accept comments by facsimile (FAX) transmission. In commenting, please refer to file code HCFA-0149-P and the specific section of this proposed rule. Comments received timely will be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, in Room 309-G of the Department's offices at 200 Independence Avenue, SW., Washington, DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m. (phone: (202) 690-7890). Electronic and legible written comments will also be posted, along with this proposed rule, at the following web site: http://www.wpc-edi.com/hipaa/.

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.

Standard: First Report of Injury

[Please label any written comments or e-mailed comments about this section with the subject: Injury]

Background

“First report of injury” is not a general term or transaction in the health care insurance industry. Upon investigation, we found that the property and casualty insurance industry, among whose lines of business is workers compensation insurance, had developed a standard transaction entitled “Report of Injury, Illness or Incident” (ASC X12N 148). This transaction set was developed within ASC X12N to encompass more than 30 functions and exchanges that occur among the numerous parties to a workers compensation claim. The transaction can be used by an employer, first, to report an employee injury or illness to the State government agency that administers workers compensation and, second, to report to the employer’s workers compensation insurance carrier so that a claim can be established to cover the employee’s losses (income, health care, disability). When the employer is the Federal government, the transaction is used to report to the Department of Labor’s Office of Workers Compensation Programs. In a few States, the transaction can also be used by health care providers to report an employee’s work-related injury to employers and/or the employer’s workers compensation insurance carrier. The transaction can be used by State agencies responsible for monitoring the disposition of a workers compensation claim. Other uses include summary reporting of employee injuries and illness to State workers compensation boards, commissions, or agencies; the Federal Bureau of Labor Statistics; the Federal Occupational Safety and Health Administration; and the Federal Environmental Protection Agency.

The current, approved version of this transaction is 3070, which is not millennium compliant. There is no approved implementation guide for version 4010, which would be millennium compliant. The ASC X12N workgroup is developing a version 4010 or higher implementation guide and data dictionary. The workgroup hopes to secure ASC X12N approval for its revised standard and implementation guide in the spring of 1998. Current workgroup planning is for a single implementation guide that covers all of the business uses to which we refer above.

Recommendation:

We do not recommend that the ASC X12N 148 - Report of Injury, Illness or Incident be adopted at this time, for the following reasons:

a. There is no millennium-compliant version of an implementation guide for this transaction.

b. There is no complete data dictionary for this transaction.

c. The implementation guide under development covers more business requirements and functions than the “first report of injury” specified in the statute.

d. Consultation with the transaction’s extensive user community is necessary to establish a consensus regarding the scope of the transaction set, and this is not possible in the time available to the Secretary for promulgating a final regulation.

e. An alternative to the ASC X12N 148 has been brought to our attention and must be evaluated.

The alternative EDI format is that developed and maintained by the International Association of Industrial Accident Boards and Commissions (IAIABC). The IAIABC EDI format was not identified in the ANSI HISB inventory of standards developed for HHS because the IAIABC is not an ANSI-accredited standards setting organization. Under the law, a standard adopted under the administrative simplification provisions of HIPAA is required to be “a standard that has been developed, adopted, or modified by a standard setting organization” (section 1172(c) of the Act)(if a standard exists). The Secretary may adopt a different standard if it would substantially reduce administrative costs to health care providers and health plans when compared to the alternatives (section 1172(c)(2)(A)).

Accordingly, the IAIABC EDI format must be evaluated before a national standard for first report of injury transactions is adopted because it is reported to be widely used. The IAIABC will be requested to submit documentation so that its first report of injury format can be evaluated according to the ten criteria applied to all other standards.

In assessing the utility of this alternative standard, we will follow the Guiding Principles for selecting a standard to evaluate the IAIABC EDI format against that developed and maintained by ANSI ASC X12N. The following questions about the IAIABC standard will be of particular importance:

a. To what extent is this format widely accepted and used by organizations performing these transactions?

b. Is this format millennium-compliant?

c. Does this standard meet the requirements set forth in the Administrative Simplification provisions of HIPAA for improving the efficiency and effectiveness of the health care system?

d. Is this a format developed, maintained, or modified by a standard setting organization as specified in Section 1171 (8) or does it meet the exceptions specified in Section 1172 (c)(2) of the Act?

We do not recommend that the IAIABC format be adopted at this time. We have asked that the IAIABC provide documentation for their format.

In view of these facts, HHS will take the following actions with regard to adopting a standard for “first report of injury”:

a. Continue to monitor the progress of the ASC X12N subcommittee toward development of a final, complete, millennium- compliant standard, implementation guide, and data dictionary for this transaction.

b. Request that ASC X12N review the ASC X12N 148 to determine whether all of its broad functionality should be included in a standard to be adopted under HIPAA authority or whether the scope of the transaction should be limited by dividing the functions into separate implementation guides.

c. Review and evaluate documentation from the IAIABC on its format so that it can be evaluated according to the ten criteria used to evaluate candidate standards and in relation to the ASC X12N 148 as described above.

d. After the ASC X12N subcommittee has completed its standard setting role and approved a 4010 version or higher implementation guide and data definitions for the ASC X12N 148 and after analysis of the IAIABC alternative standard, issue a subsequent proposed rule promulgating a standard for “first report of injury”.

Implementation of the Transaction Standards and Code Sets

[Please label any written comments or e-mailed comments about this section with the subject: Implementation]

 

A. Compliance Testing

We have identified three levels of testing that must be addressed in connection with the adoption and implementation of the standards we are proposing and their required code sets:

Level 1--Developmental Testing--This is the testing done by the standards setting organization during the development process. The conditions for, and results of, this testing are made public by the relevant standards bodies, and are available at the following Internet web site:

JBurke1@hcfa.gov (Attn:HCFA-0149) or mail copies directly to the following:

Health Care Financing Administration,
Office of Information Services,
Information Technology Investment Management Group,
Division of HCFA Enterprise Standards,
Room C2-26-17, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
Attn: John Burke HCFA-0149.

And,

Office of Information and Regulatory Affairs,
Office of Management and Budget,
Room 10235, New Executive Office Building,
Washington, DC 20503,
Attn: Allison Herron Eydt, HCFA Desk Officer.

VI. Response to Comments

Because of the large number of items of correspondence we normally receive on Federal Register documents published for comment, we are not able to acknowledge or respond to them individually. We will consider all comments we receive by the date and time specified in the "DATES" section of this preamble, and, if we proceed with a subsequent document, we will respond to comments in the preamble to that document.

IMPACT ANALYSIS

[Please label any written comments or e-mailed comments about this section with the subject: Impact]

As the effect of any one standard is affected by the implementation of other standards, it can be misleading to discuss the impact of one standard by itself. Therefore, we did an impact analysis on the total effect of all the standards in the proposed rule concerning the national provider identifier (HCFA-0045-P), which can be found at [OFR: please insert cite for HCFA 0045 P].

We intend to publish in each proposed rule an impact analysis that is specific to the standard or standards proposed in that rule, but the impact analysis will assess only the relative cost impact of implementing a given standard. Thus, the following discussion contains the impact analysis for each of the transactions proposed in this rule. As stated in the general impact analysis in HCFA-0045-P, we do not intend to associate costs and savings to specific standards.

Although we cannot determine the specific economic impact of the standards being proposed in this rule (and individually each standard may not have a significant impact), the overall impact analysis makes clear that, collectively, all the standards will have a significant impact of over $100 million on the economy. Also, while each standard may not have a significant impact on a substantial number of small entities, the combined effects of all the proposed standards may have a significant effect on a substantial number of small entities. Therefore, the following impact analysis should be read in conjunction with the overall impact analysis.

In accordance with the provisions of Executive Order 12866, this proposed rule was reviewed by the Office of Management and Budget.

Guiding Principles for Standard Selection

The implementation teams charged with designating standards under the statute have defined, with significant input from the health care industry, a set of common criteria for evaluating potential standards. These criteria are based on direct specifications in the HIPAA, the purpose of the law, and principles that support the regulatory philosophy set forth in Executive Order 12866 of September 30, 1993, and the Paperwork Reduction Act of 1995. In order to be designated as a standard, a proposed standard should:

  • Improve the efficiency and effectiveness of the health care system by leading to cost reductions for or improvements in benefits from electronic HIPAA health care transactions. This principle supports the regulatory goals of cost-effectiveness and avoidance of burden.
  • Meet the needs of the health data standards user community, particularly health care providers, health plans, and health care clearinghouses. This principle supports the regulatory goal of cost-effectiveness.
  • Be consistent and uniform with the other HIPAA standards (that is, their data element definitions and codes and their privacy and security requirements) and, secondarily, with other private and public sector health data standards. This principle supports the regulatory goals of consistency and avoidance of incompatibility, and it establishes a performance objective for the standard.
  • Have low additional development and implementation costs relative to the benefits of using the standard. This principle supports the regulatory goals of cost-effectiveness and avoidance of burden.
  • Be supported by an ANSI-accredited standards developing organization or other private or public organization that would ensure continuity and efficient updating of the standard over time. This principle supports the regulatory goal of predictability.
  • Have timely development, testing, implementation, and updating procedures to achieve administrative simplification benefits faster. This principle establishes a performance objective for the standard.
  • Be technologically independent of the computer platforms and transmission protocols used in HIPAA health transactions, except when they are explicitly part of the standard. This principle establishes a performance objective for the standard and supports the regulatory goal of flexibility.
  • Be precise and unambiguous but as simple as possible. This principle supports the regulatory goals of predictability and simplicity.
  • Keep data collection and paperwork burdens on users as low as is feasible. This principle supports the regulatory goals of cost-effectiveness and avoidance of duplication and burden.
  • Incorporate flexibility to adapt more easily to changes in the health care infrastructure (such as new services, organizations, and provider types) and information technology. This principle supports the regulatory goals of flexibility and encouragement of innovation.

General

The effect of implementing standards on health care clearinghouses is basically the same for all the standards. Currently, health care clearinghouses receive and transmit various transactions using a variety of formats. The implementation of standard transactions may reduce the variability in the data received from some groups, such as health care providers. The implementation of any standard will require some one-time changes to health care clearinghouse systems. Health care clearinghouses should be able to make modifications that meet the deadlines specified in the legislation, but some temporary disruption of processing could result. Once the transition is made, health care clearinghouses may have less ongoing system maintenance. Costs may vary according to the complexity of the standard, but costs may be recouped from customers.

Health care clearinghouses would face impacts (both positive and negative) similar to those experienced by health plans (which we discuss in more detail in the discussions for specific transactions. However, implementation would likely be more complex, because health care clearinghouses deal with many health care providers and health plans and may have to accommodate additional nonstandard formats (in addition to those formats they currently support), as well as standards we adopt. (The additional nonstandard formats would be from those health care providers that choose to stop submitting directly to an insurer and submit through a health care clearinghouse.) This would also mean increased business for the health care clearinghouse.

Converting to any standard will result in one-time conversion costs for health care providers, health care clearinghouses, and health plans as well. Some health care providers and health plans would incur those costs directly and others may incur them in the form of a fee from health care clearinghouses or, for health care providers, other agents.

Each standard compares favorably with typical ASC X12 standards in terms of complexity and ease of use. No one in the ASC X12 subcommittee assumes that every entity that sends or receives an ASC X12 transaction has reprogrammed its information systems in order to do so. Every transaction is designed, and the technical review process assures, that it will be compatible with the commercial, off-the-shelf translator programs that are widely available in the United States. These translators significantly reduce the cost and complexity of achieving and maintaining compliance with all ASC X12 standards. Universal communication with all parties in the health care industry is thus assured.

Specific technology limitations of existing systems could affect the complexity of conversion. Also, some existing health care provider systems may not have the resources to house a translator to convert from one format to another.

Following is the portion of the impact analysis that relates specifically to the standards that are the subject of this regulation.

A. Code Sets--Specific Impact of Adoption of Code Sets for Medical Data

Affected entities

Standard codes and classifications are required in some segments of administrative and financial transactions. Those that create and process administrative transactions must implement the standard codes according to the official implementation guides designated for each coding system and each transaction. Those that receive standard electronic administrative transactions must be able to receive and process all standard codes (and modifiers, in the cases of HCPCS and CPT), irrespective of local policies regarding reimbursement for certain conditions or procedures, coverage policies, or need for certain types of information that are part of a standard transaction.

The adoption of standard code sets and coding guidelines for medical data supports the regulatory goals of cost-effectiveness and the avoidance of duplication and burden. The code sets that are being proposed as initial HIPAA standards are all de facto standards already in use by most health plans, health care clearinghouses, and health care providers.

Health care providers currently use the recommended code set for reporting diagnoses and one or more of the recommended procedure coding systems for reporting procedures/services. Since health plans can differ on the codes they accept, many health care providers use different coding guidelines for dealing with different health plans, sometimes for the same patient. (Anecdotal information leads us to believe that use of other codes is widespread, but we cannot quantity the number.) Some of these differences reflect variations in covered services that will continue to exist irrespective of data standardization. Others reflect differences in a health plan's ability to accept as valid a claim that may include more information than is needed or used by that health plan. The requirement to use standard coding guidelines will eliminate this latter category of differences and should simplify claims submission for health care providers that deal with multiple health plans.

Currently, there are health plans that do not adhere to official coding guidelines and have developed their own plan- specific guidelines for use with the standard code sets, which do not permit the use of all valid codes. (Again, we cannot quantify how many health plans do this, but we are aware of some instances.) When the HIPAA code set standards become effective, these health plans would have to receive and process all standard codes, irrespective of local policies regarding reimbursement for certain conditions or procedures, coverage policies, or need for certain types of information that are part of a standard transaction.

We believe that there is significant variation in the reporting of anesthesia services, with some health plans using the anesthesia section of CPT and others requiring the anesthesiologist or nurse anesthetist to report the code for the surgical procedure itself. When the HIPAA code sets become effective, health plans following the latter convention will have to begin accepting codes from the anesthesia section.

We note that by adopting standards for code sets we are requiring that all parties accept these codes within their electronic transactions. We are not requiring payment for all these services. Those health plans that do not adhere to official coding guidelines must therefore undertake a one-time effort to modify their systems to accept all valid codes in the standard code sets or engage a health care clearinghouse to preprocess the standard claims data for them. Health plans should be able to make modifications to meet the deadlines specified in the legislation, but some temporary disruption of claims processing could result.

There may be some temporary disruption of claims processing as health plans and health care clearinghouses modify their systems to accept all valid codes in the standard code sets.

B. Transaction Standards

1. Specific Impact of Adoption of the National Council of Prescription Drug Programs (NCPDP) Telecommunication Claim
a. Affected Entities

Health care providers that submit retail pharmacy claims, and health care plans that process retail pharmacy claims, currently use the NCPDP format. The NCPDP claim and equivalent encounter is used either in on-line interactive or batch mode. Since all pharmacy health care providers and health plans use the NCPDP claim format, there are no specific impacts to health care providers.

b. Effects of Various Options

The NCPDP format met all the principles and there are no known options for a standard retail pharmacy claim transaction.

2. Specific Impact of Adoption of the ASC X12N 837 for Submission of Institutional Health Care Claims, Professional Health Care Claims, Dental Claims, and Coordination of Benefits
a. Affected Entities

All health care providers and health plans that conduct EDI directly and use other electronic format(s), and all health care providers that decide to change from a paper format to an electronic one, would have to begin to use the ASC X12N 837 for submitting electronic health care claims (hospital, physician/supplier and dental). (Currently, about 3 percent of Medicare providers use this standard for claims; it is used less for non-Medicare claims.)

There would be a potential for disruption of claims processes and timely payments during a particular health plan’s transition to the ASC X12N 837. Some health care providers could react adversely to the increased cost and revert to submitting hard copy claims.

After implementation, health care providers would no longer have to keep track of and use different electronic formats for different insurers. This would simplify provider billing systems and processes and reduce administrative expenses.

Health plans would be able to schedule their implementation of the ASC X12N 837 in a manner that best fits their needs, thus allaying some costs (through coordination of conversion to other standards) as long as they meet the deadlines specified in the legislation. Although the costs of implementing the ASC X12N 837 are generally one-time costs related to conversion, the systems upgrades for some smaller health care providers, health plans, and health care clearinghouses may be cost prohibitive. Health care providers and health plans have the option of using a clearinghouse.

The cost may also cause some smaller health plans that have trading partner agreements today to discontinue that partnership. That same audience of health care providers, health care clearinghouses, and health plans could conceivably be forced out of the partnerships of transmitting and accepting claims data. In these instances patients may be affected, in that, without trading partner agreements for electronic crossover of claims data for the processing of the supplemental benefit, the patient may be responsible for filing his or her own supplemental claims that are filed electronically today.

Coordination of benefits

Once the ASC X12N 837 has been implemented, health plans that perform coordination of benefits would be able to eliminate support of multiple proprietary electronic claim formats, thus simplifying claims receipt and processing as well as reducing administrative costs. Coordination of benefits activities would also be greatly simplified because all health plans would use the same standard format.

There is no doubt that standardization in coordination of benefits will greatly enhance and improve efficiency in the overall claims process and the coordination of benefits.

From a nonsystems perspective, we do not foresee an impact to the coordination of benefits process. The COB transaction will continue to consist of the incoming electronic claim and the data elements provided on a remittance advice. Standardization in the coordination of benefits process will clearly increase efficiency in the electronic processes utilized by the health care providers, health care clearinghouses, and health plans as they work with standardized codes and processes.

b. Effects of Various Options

We assessed the various options for a standard claim transaction against the principles, listed at the beginning of this impact analysis above, with the overall goal of achieving the maximum benefit for the least cost. We found that the ASC X12N 837 for institutional claims, professional claims, dental claims, and coordination of benefits met all the principles, but no other candidate standard transaction met all the principles.

Since the majority of dental claims are submitted on paper and those submitted electronically are being transmitted using a variety of proprietary formats, the only viable choice of a standard is the ASC X12N 837. The American Dental Association (ADA) also recommended the ASC X12N 837 for the dental claim standard.

The ASC X12N 837 was selected as the standard for the professional (physician/supplier) claim because it met the principles above. The only other candidate standard, the National Standard Format, was developed primarily by HCFA for Medicare claims. While it is widely used, it is not always used in a standard manner. Many variations of the National Standard Format are in use. The NUCC, the AMA, and WEDI recommended the ASC X12N 837 for the professional claim standard.

The ASC X12N 837 was selected as the standard for the institutional (hospital) claim because it met the principles above. The only other candidate standard is the UB-92 Format. While it is widely used, it is not always used in a standard manner.

The selection of the ASC X12N 837 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 flexibility in order to adapt easily to change. The ASC X12N 837 presents significant advantages in terms of universality and flexibility.

3. Specific Impact of Adoption of the ASC X12N 835 for Receipt of Health Care Remittance
a. Affected Entities

Health care providers that conduct EDI with health plans and do not wish to change their internal systems would have to convert the ASC X12N 835 transactions received from health plans into a format compatible with their internal systems. Health plans that want to transmit remittance advice directly to health care providers and that do not use the ASC X12N 835 would also incur costs to convert. 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, 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.)

There would be a potential for the delay in payment or the issuance of electronic remittance advice transactions during a particular health plan’s transition to the ASC X12N 835. Some health care providers could react adversely to the increased cost and revert to use of hard copy remittance advice notices in lieu of an electronic transmission.

After implementation, health care providers would no longer have to keep track of or accept different electronic payment/ remittance advice formats issued by different health care payers. This would simplify automatic posting of all electronic payment/remittance advice data, reducing administrative expenses. This would 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, which the standard would eliminate.

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

Health plans would 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), as long as they meet the deadlines specified in the legislation.

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

b. Effects of Various Options

We assessed the various options for a standard payment/remittance advice transaction against the principles listed above, with the overall goal of achieving the maximum benefit for the least cost. We found that the ASC X12N 835 met all the principles, but no other candidate standard transaction met all the principles, or even those principles supporting the regulatory goal of cost-effectiveness.

The ASC X12N 835 was selected as it met the principles above. The only other candidate standard, the ASC X12N 820, was not selected because, although it was developed for payment transactions, it was not developed for health care payment purposes. The ASC X12N subcommittee itself recognized this in its decision to develop the ASC X12N 835.

4. Specific Impact of Adoption of the ASC X12N 276/277 for Health Care Claim Status/Response
a. Affected Entities

Most health care providers that are currently using an electronic format (of which there are currently very few) and that wish to request claim status electronically using the ASC X12N 276/277 will incur conversion costs. We cannot quantify the number of health care providers that would have to convert to the proposed standard, but we do know that no Medicare contractors use it; thus, we assume that few health care providers are able to use it at this time.

After implementation, health care providers would be able to request and receive the status of claims in one standard format, from all health care plans. This would eliminate their need to maintain redundant software and would make electronic claim status requests and receipt of responses feasible for small providers, eliminating their need to manually send and review claim status requests and responses.

Health care plans that do not currently directly accept electronic claim status requests and do not directly send electronic claims status responses would have to modify their systems to accept the ASC X12N 276 and to send the ASC X12N 277. No disruptions in claims processing or payment would occur.

After implementation, health care plans would be able to submit claim status responses in one standard format to all health care providers. Administrative costs incurred by supporting multiple formats and manually responding to claim status requests would be greatly reduced.

b. Effects of Various Options

There are no known options for a standard claims status and response transaction.

5. Specific Impact of Adoption of the ASC X12N 834 for Enrollment and Disenrollment in a Health Plan
a. Affected entities.

The ASC X12N 834 may be used by an employer or other sponsor to electronically enroll or disenroll its subscribers into or out of a health plan. Currently, most small and medium size employers and other sponsors conduct their subscriber enrollments using paper forms. (We cannot quantify how many of these sponsors use paper forms, but anecdotal information indicates that most use paper.) We understand that large employers and other sponsors are more likely to conduct subscriber enrollment transactions electronically because of the many changes that occur in a large workforce; for example, hirings, firings, retirements, marriages, births, and deaths, to name a few. To do this, the large employers must use the proprietary electronic data interchange formats that differ among health plans. Nonetheless, it is our understanding, based on anecdotal information, that health plans still use paper to conduct most of their enrollment transactions.

We expect that the impact of the ASC X12N 834 transaction standard would differ, at least in the beginning, according to the current use of electronic transactions. As stated earlier, most small and medium size employers and other sponsors do not use electronic transactions currently and would therefore experience little immediate impact from adoption of the ASC X12N 834 transaction. The ASC X12N 834 would offer large employers that currently conduct enrollment transactions electronically the opportunity to shift to a single standard format. A single standard will be most attractive to those large employers that offer their subscribers choices among multiple health plans. Thus, we expect that the early benefits of the ASC X12N 834 would accrue to large employers and other sponsors that would be able to eliminate redundant hardware, software, and human resources required to support multiple proprietary electronic data interchange formats. In the long run, we expect that the standards would lower the cost of conducting enrollment transactions and make it possible for small and medium size companies to convert from paper to electronic transactions and achieve significant additional savings.

Overall, employers and other sponsors, and the health plans with which they deal, stand to benefit from adoption of the ASC X12N 834 and electronic data interchange. The ASC X12N 834 and electronic data interchange would facilitate the performance of enrollment and disenrollment functions. Further, the ASC X12N 834 supports detailed enrollment information on the subscriber’s dependents, which is often lacking in current practice. Ultimately, reductions in administrative overhead may be passed along in lower premiums to subscribers and their dependents.

We invite commenters to provide us with data on the extent to which employers and other sponsors conduct their health plan enrollments using paper proprietary formats rather than the ASC X12N 834 electronic data interchange standards.

b. Effects of Various Options

The only other option, the NCPDP Member Enrollment Standard, does not meet the selection criteria and would not be implementable.

6. Specific Impact of Adoption of the ASC X12N 270/271 for Eligibility for a Health Plan
a. Affected Entities

The ASC X12N 270/271 transaction may be used by a health care provider to electronically request and receive eligibility information from a health care plan prior to providing or billing for a health care service. Many health care providers routinely verify health insurance coverage and benefit limitations prior to providing treatment or before preparing claims for submission to the insured patient and his or her health plan. Currently, health care providers secure most of these eligibility determinations through telephone calls, proprietary point of sale terminals, or using proprietary electronic formats that differ from health plan to health plan. Since many health care providers participate in multiple health plans, these health care providers must maintain redundant software, hardware, and human resources to obtain eligibility information. This process is inefficient, often burdensome, and takes valuable time that could otherwise be devoted to patient care.

We believe that the lack of a health care industry standard may have imposed a cost barrier to the widespread use of electronic data interchange. The ASC X12N 270/271 is used widely, but not exclusively, by health care plans and health care providers. This may be due, in part, to the lack of an industry- wide implementation guide for these transactions in health care. We expect that adoption of the ASC X12N 270/271 and its implementation guide would lower the cost of using electronic eligibility verifications. This would benefit health care providers that can move to a single standard format and, for the first time, make electronic data interchange feasible for small health plans and health care providers that rely currently on the telephone, paper forms, or proprietary point of sale terminals and software.

b. Effect of Various Options

There were two other options, the ASC X12N IHCEBI, and its companion, IHCEBR, and the NCPDP Telecommunications Standard Format. None of these meet the selection criteria and thus they would not be implementable.

7. Specific Impact of Adoption of the ASC X12N 820 for Payroll Deducted and Other Group Premium Payment for Insurance Product
a. Affected Entities

The ASC X12N 820 may be used by an employer or sponsor to electronically transmit a remittance notice to accompany a payment for health insurance premiums in response to a bill from the health plan. Payment may be in the form of a paper check or an electronic funds transfer transaction. The ASC X12N 820 can be sent with electronic funds transfer instructions that are routed directly to the Federal Reserve System’s automated health care clearinghouses or with payments generated directly by the employer’s or other sponsor’s bank. The ASC X12 820 transaction is very widely used by many industries (manufacturing, for instance) and government agencies (Department of Defense) in addition to the insurance industry in general. However, the ASC X12N 820 is not widely used in the health insurance industry and is not widely used by employers and other sponsors to make premium payments to their health insurers. This may be due, in part, to the lack of an implementation guide specifically for health insurance.

Currently, most payment transactions are conducted on paper, and those that are conducted electronically use proprietary electronic data interchange standards that differ across health plans. (We cannot quantify how many of these transactions are conducted on paper, but anecdotal information suggests that most are.) We believe that the lack of a health care industry standard may have imposed a cost barrier to the use of electronic data interchange; larger employers and other sponsors, that often transact business with multiple health plans, need to retain redundant hardware, software, and human resources to support multiple proprietary electronic premium payment standards. We expect that adoption of national standards will lower the cost of using electronic premium payments. This will benefit large employers that can move to a single standard format, and, for the first time, will make electronic transmissions of premium payments feasible for smaller employers and other sponsors whose payment transactions today are performed almost exclusively using paper.

At some point, an organization’s size and complexity will require it to consider switching its business transactions from paper to electronic. The ASC X12N 820 would facilitate that by eliminating redundant proprietary formats that are certain to crop up when there are no widely accepted standards. By eliminating the software, hardware, and human resources associated with redundancy, a business may reach the point where it becomes cost beneficial to convert from paper to electronic transactions. Those other sponsors and health care plans that already support more than one proprietary format would incur some additional expense in the conversion to the standard, but they would enjoy longer term savings that result from eliminating the redundancies.

We invite comments on the extent to which employers and other sponsors conduct their health plan premium payments using paper versus proprietary formats, compared to the ASC X12N 820 electronic data interchange standards.

b. Effects of Various Options

There are no known options for premium payment transactions.

8. Specific Impact of Adoption of ASC X12N 278 for Referral Certification and Authorization
a. Affected Entities

The ASC X12N 278 may be used by a health care provider to request and receive approval from a health plan through an electronic transaction prior to providing a health care service. Prior approvals have become standard operating procedure for most hospitals, physicians and other health care providers due to the rapid growth of managed care. Health care providers secure most of their prior approvals through telephone calls, paper forms or proprietary electronic formats that differ from health plan to health plan. Since many health care providers participate in multiple managed care plans, they must devote redundant software, hardware, and human resources to obtaining prior authorization. This process is often untimely and inefficient.

We believe that the lack of a health care industry standard may have imposed a cost barrier to the widespread use of electronic data interchange. The ASC X12N 278 is not widely used by health care plans and health care providers, which may be due, in part, to the lack of an industry-wide implementation guide for it. We expect that adoption of ASC X12N 278 and its implementation guide would lower the cost of using electronic prior authorizations. This would benefit health care providers that can move to a single standard format and, for the first time, make electronic data interchange feasible for smaller health plans and health care providers that perform these transactions almost exclusively using the telephone or paper.

At some point, an organization’s size and complexity will require it to consider switching its business transactions from paper to electronic. The ASC X12N 278 would facilitate that by eliminating redundant proprietary formats that are certain to crop up when there are no widely accepted standards. By eliminating the software, hardware, and human resources associated with redundancy, a business may reach the point where it becomes cost beneficial to convert from paper to electronic transactions. Health care plans and health care providers that already support more than one proprietary format would incur some additional expense in the conversion to the standard but would enjoy longer term savings that result from eliminating the redundancies.

b. Effects of Various Options

There are no known options for referral and certification authorization transactions.

List of Subjects in 45 CFR Part 142

[Please label any written comments or e-mailed comments about this section with the subject: Reg Text]

Administrative practice and procedure, Health facilities, Health insurance, Hospitals, Incorporation by reference, Medicare, Medicaid.

Accordingly, 45 CFR subtitle A, subchapter B, would be amended by adding Part 142 to read as follows:

NOTE TO READER: This proposed rule and another proposed rule found elsewhere in this Federal Register are two of several proposed rules that are being published to implement the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996. We propose to establish a new 45 CFR Part 142. Proposed Subpart A--General Provisions is exactly the same in each rule unless we have added new sections or definitions to incorporate additional general information. The subparts that follow relate to the specific provisions announced separately in each proposed rule. When we publish the first final rule, each subsequent final rule will revise or add to the text that is set out in the first final rule.

PART 142--ADMINISTRATIVE REQUIREMENTS

Subpart A--General Provisions

Sec.

142.101 Statutory basis and purpose.

142.102 Applicability.

142.103 Definitions.

142.104 General requirements for health plans.

142.105 Compliance using a health care clearinghouse.

142.106 Effective dates of a modification to a standard or implementation specification.

142.110 Availability of implementation guides.

Subparts B - I [RESERVED]

Subpart J - Code Sets

142.1002 Medical data code sets.

142.1004 Code sets for nonmedical data elements.

142.1010 Effective dates of the initial implementation of code sets.

Subpart K - Health Claims or Equivalent Encounter Information

142.1102 Standards for health claims or equivalent encounter information.

142.1104 Requirements: Health plans.

142.1106 Requirements: Health care clearinghouses.

142.1108 Requirements: Health care providers.

142.1110 Effective dates of the initial implementation of the health claim or equivalent encounter information.

Subpart L - Health Claims and Remittance Advice

142.1202 Standard for health care payment and remittance advice.

142.1204 Requirements: Health plans.

144.1206 Requirements: Health care clearinghouses.

142.1210 Effective dates of the initial implementation of the health claims and remittance advice.

Subpart M - Coordination of Benefits

142.1302 Standard for coordination of benefits.

142.1304 Requirements: Health plans.

144.1306 Requirements: Health care clearinghouses.

142.1308 Effective dates of the initial implementation of the standard for coordination of benefits.

Subpart N - Health Claim Status

142.1402 Standard for health claim status.

142.1404 Requirements: Health plans.

144.1406 Requirements: Health care clearinghouses.

142.1408 Requirements: Health care providers.

142.1410 Effective dates of the initial implementation of the standard for health claims status.

Subpart O - Enrollment and Disenrollment in a Health Plan

142.1502 Standard for enrollment and disenrollment in a health plan.

142.1504 Requirements: Health plans.

144.1506 Requirements: Health care clearinghouses.

142.1508 Effective dates of the initial implementation of the standard for enrollment and disenrollment in a health plan.

Subpart P - Eligibility for a Health Plan

142.1602 Standard for eligibility for a health plan.

142.1604 Requirements: Health plans.

144.1606 Requirements: Health care clearinghouses.

142.1608 Requirements: Health care providers.

142.1610 Effective dates of the initial implementation of the standard for eligibility for a health plan.

Subpart Q - Health Plan Premium Payments

142.1702 Standard for health plan premium payments.

142.1704 Requirements: Health plans.

144.1706 Requirements: Health care clearinghouses.

142.1708 Effective dates of the initial implementation of the standard for health plan premium payments.

Subpart R - Referral Certification and Authorization

142.1802 Referral certification and authorization.

142.1804 Requirements: Health plans.

144.1806 Requirements: Health care clearinghouses.

142.1808 Requirements: Health care providers.

142.1810 Effective dates of the initial implementation of the standard for referral certifications and authorizations.

Authority: Sections 1173 and 1175 of the Social Security Act (42 U.S.C. 1320d-2 and 1320d-4)

Subpart A--General Provisions

§ 142.101 Statutory basis and purpose.

Sections 1171 through 1179 of the Social Security Act, as added by section 262 of the Health Insurance Portability and Accountability Act of 1996, require HHS to adopt national standards for the electronic exchange of health information in the health information system. The purpose of these sections is to promote administrative simplification.

§ 142.102 Applicability.

(a) The standards adopted or designated under this part apply, in whole or in part, to the following:

(1) A health plan.

(2) A health care clearinghouse when doing the following:

(i) Transmitting a standard transaction (as defined in § 142.103) to a health care provider or health plan.

(ii) Receiving a standard transaction from a health care provider or health plan.

(iii) Transmitting and receiving the standard transactions when interacting with another health care clearinghouse.

(3) A health care provider when transmitting an electronic transaction as defined in § 142.103.

(b) Means of compliance are stated in greater detail in § 142.105.

§ 142.103 Definitions.

For purposes of this part, the following definitions apply:

ASC X12 stands for the Accredited Standards Committee chartered by the American National Standards Institute to design national electronic standards for a wide range of business applications.

ASC X12N stands for the ASC X12 subcommittee chartered to develop electronic standards specific to the insurance industry.

Code set means any set of codes used for encoding data elements, such as tables of terms, medical concepts, medical diagnostic codes, or medical procedure codes.

Health care clearinghouse means a public or private entity that processes or facilitates the processing of nonstandard data elements of health information into standard data elements. The entity receives transactions from health care providers, health plans, other entities, or other clearinghouses, translates the data from a given format into one acceptable to the intended recipient, and forwards the processed transaction to the appropriate recipient. Billing services, repricing companies, community health management information systems, community health information systems, and “value-added” networks and switches are considered to be health care clearinghouses for purposes of this part.

Health care provider means a provider of services as defined in section 1861(u) of the Social Security Act, a provider of medical or other health services as defined in section 1861(s) of the Social Security Act, and any other person who furnishes or bills and is paid for health care services or supplies in the normal course of business.

Health information means any information, whether oral or recorded in any form or medium, that--

(1) Is created or received by a health care provider, health plan, public health authority, employer, life insurer, school or university, or health care clearinghouse; and

(2) Relates to the past, present, or future physical or mental health or condition of an individual, the provision of health care to an individual, or the past, present, or future payment for the provision of health care to an individual.

Health plan means an individual or group plan that provides, or pays the cost of, medical care. Health plan includes the following, singly or in combination:

(1) Group health plan. A group health plan is an employee welfare benefit plan (as currently defined in section 3(1) of the Employee Retirement Income and Security Act of 1974 (29 U.S.C. 1002(1)), including insured and self-insured plans, to the extent that the plan provides medical care, including items and services paid for as medical care, to employees or their dependents directly or through insurance, or otherwise, and

(i) Has 50 or more participants; or

(ii) Is administered by an entity other than the employer that established and maintains the plan.

(2) Health insurance issuer. A health insurance issuer is an insurance company, insurance service, or insurance organization that is licensed to engage in the business of insurance in a State and is subject to State law that regulates insurance.

(3) Health maintenance organization. A health maintenance organization is a Federally qualified health maintenance organization, an organization recognized as a health maintenance organization under State law, or a similar organization regulated for solvency under State law in the same manner and to the same extent as such a health maintenance organization.

(4) Part A or Part B of the Medicare program under title XVIII of the Social Security Act.

(5) The Medicaid program under title XIX of the Social Security Act.

(6) A Medicare supplemental policy (as defined in section 1882(g)(1) of the Social Security Act).

(7) A long-term care policy, including a nursing home fixed-indemnity policy.

(8) An employee welfare benefit plan or any other arrangement that is established or maintained for the purpose of offering or providing health benefits to the employees of two or more employers.

(9) The health care program for active military personnel under title 10 of the United States Code.

(10) The veterans health care program under 38 U.S.C., chapter 17.

(11) The Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), as defined in 10 U.S.C. 1072(4).

(12) The Indian Health Service program under the Indian Health Care Improvement Act (25 U.S.C. 1601 et seq.).

(13) The Federal Employees Health Benefits Program under 5 U.S.C. chapter 89.

(14) Any other individual or group health plan, or combination thereof, that provides or pays for the cost of medical care.

Medical care means the diagnosis, cure, mitigation, treatment, or prevention of disease, or amounts paid for the purpose of affecting any body structure or function of the body; amounts paid for transportation primarily for and essential to these items; and amounts paid for insurance covering the items and the transportation specified in this definition.

Participant means any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan that covers employees of that employer or members of such an organization, or whose beneficiaries may be eligible to receive any of these benefits. “Employee” includes an individual who is treated as an employee under section 401(c)(1) of the Internal Revenue Code of 1986 (26 U.S.C. 401(c)(1)).

Small health plan means a group health plan or individual health plan with fewer than 50 participants.

Standard means a set of rules for a set of codes, data elements, transactions, or identifiers promulgated either by an organization accredited by the American National Standards Institute or HHS for the electronic transmission of health information.

Transaction means the exchange of information between two parties to carry out financial and administrative activities related to health care. It includes the following:

(1) Transactions specified in section 1173(a)(2) of the Act, which are as follows:

(i) Health claims or equivalent encounter information.

(ii) Health care payment and remittance advice.

(iii) Health claims status.

(iv) Enrollment and disenrollment in a health plan.

(v) Eligibility for a health plan.

(vi) Health plan premium payments.

(vii) First report of injury.

(viii) Referral certification and authorization.

(ix) Health claims attachments.

(2) Other transactions as the Secretary may prescribe by regulation. Coordination of benefits is a transaction under this authority.

§ 142.104 General requirements for health plans.

If a person conducts a transaction (as defined in § 142.103) with a health plan as a standard transaction, the following apply:

(a) The health plan may not refuse to conduct the transaction as standard transaction.

(b) The health plan may not delay the transaction or otherwise adversely affect, or attempt to adversely affect, the person or the transaction on the basis that the transaction is a standard transaction.

(c) The health information transmitted and received in connection with the transaction must be in the form of standard data elements of health information.

(d) A health plan that conducts transactions through an agent must assure that the agent meets all the requirements of this part that apply to the health plan.

§ 142.105 Compliance using a health care clearinghouse.

(a) Any person or other entity subject to the requirements of this part may meet the requirements to accept and transmit standard transactions by either--

(1) Transmitting and receiving standard data elements, or

(2) Submitting nonstandard data elements to a health care clearinghouse for processing into standard data elements and transmission by the health care clearinghouse and receiving standard data elements through the health care clearinghouse.

(b) The transmission, under contract, of nonstandard data elements between a health plan or a health care provider and its agent health care clearinghouse is not a violation of the requirements of this part.

§ 142.106 Effective dates of a modification to a standard or implementation specification.

If HHS adopts a modification to a standard or implementation specification, the implementation date of the modified standard or implementation specification may be no earlier than 180 days following the adoption of the modification. HHS determines the actual date, taking into account the time needed to comply due to the nature and extent of the modification. HHS may extend the time for compliance for small health plans.

§ 142.110 Availability of implementation guides.

The implementation guides specified in subparts K through R of this part are available as set forth in paragraphs (a) through (c) of this section. Entities requesting copies or access for inspection must specify the standard by name, number, and version.

(a) The implementation guides for ASC X12 standards may be obtained from the Washington Publishing Company, 806 W. Diamond Ave., Suite 400, Gaithersburg, MD, 20878; telephone 301-590-9337; and FAX: 301-869-9460. They are also available, at no cost, through the Washington Publishing Company on the Internet at http://www.wpc-edi.com/hipaa/