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The following Advisory Opinion is to
advise the reader of the current position of the Kentucky Department
of Insurance ("the Department") on the specified issue. The Advisory
Opinion is not legally binding on either the Department or the
reader.
Kentucky Department of
Insurance
Advisory Opinion 99-06
In re: Claims Practice
RELEVANT FACTS AND STATUTES:
Recently the Department has encountered
noncompliance issues regarding the payment of health claims and
issuing explanations of benefits ("EOB"). The statute and regulation
involved are KRS 304.12-235 and 806 KAR 12:092. KRS 304.12-235(1)
requires, "[a]ll claims arising under the terms of any contract of
insurance shall be paid to the named insured person or health care
provider not more than thirty (30) days from the date upon which
notice and proof of claim, in the substance and form required by the
terms of the policy, are furnished the insurer." KRS 304.12-235(2)
states:
If an insurer fails to make a good
faith attempt to settle a claim within the time prescribed in
subsection (1) of this section, the value of the final settlement
shall bear interest at the rate of twelve percent (12%) per annum
from and after the expiration of the thirty (30) day
period.
806 KAR 12:092§3(4) restates the
thirty (30) day time limit to settle claims found in KRS 304.12-235
(1) and instructs the insurer, "[i]f a portion or portions of the
claim are in dispute, the insurer shall tender payment for any
portion or portions of the claim which are not in dispute within
thirty (30) days of receipt of due proof of loss." Finally, 806 KAR
12:0923(7) requires an insurer to provide an insured with a
reasonable explanation of the delay if a claim remains unresolved
for thirty (30) days. This subsection also provides, "[i]f the
investigation remains incomplete, the insurer shall, forty-five (45)
days from the date of initial notification and every forty-five (45)
days thereafter, send the claimant a letter setting forth the
reasons additional time is needed for the investigation."
KRS 304.38-200(7) states that all
health maintenance organizations ("HMOs") are subject to Subtitle
12. KRS 304.17A-300(6) provides that all provider-sponsored
integrated delivery networks ("PSNs") are subject to Subtitle 12.
Additionally, House Bill 315§1(22), codified as KRS 304.17A-005(22),
includes in the definition of "insurer" HMOs and PSNs. Therefore,
HMOs and PSNs are subject to KRS 304.12-235 and 806 KAR 12:092 and
any reference to "insurers " in this opinion includes HMOs and
PSNs.
DEPARTMENT’S POSITION: The insurer must make a good faith attempt to settle all
claims within thirty (30) days, from the date the claim is furnished
to the insurer, or the claim will be subject to 12% per annum
interest rate. The insurer is expected to make a good faith attempt
to conduct a reasonable investigation on the claim. The insurer may
extend the thirty (30) day period pursuant to 806 KAR 12:092§3(7),
without incurring the 12% per annum interest rate, provided the
investigation is reasonable and the notice requirements of 806 KAR
12:092 are met. 806 KAR 12:0923(7) requires the insurer to provide
the insured or insured’s beneficiary (the health care provider or
debtor who has received assignment of the claim) a reasonable
written explanation of why the claim is still unresolved if it is
unresolved thirty (30) days from receipt of due proof of loss. If
the investigation remains incomplete forty-five (45) days from the
date of initial notification, and every forty-five (45) days
thereafter, the insurer must send the claimant a letter explaining
why additional time is needed. The insurer must also include a
notice of the availability of interest and attorney’s fees.
806 KAR 12:0923(5) provides as
follows:
With each claim payment, the insurer
shall provide to the insured an explanation of benefits which shall
include the name of the provider of health care services covered,
dates of service, and a reasonable explanation of the computation of
benefits.
The Department has been made aware
that some insurers only send an explanation of benefits ("EOBs") to
the insured when the insurer does not cover the services 100% and
that EOBs are rarely sent when the insurer pays a claim for
prescription drugs. It is the Department’s position, pursuant to 806
KAR 12:0923(5), that EOBs must be sent whenever the insurer pays a
claim, including claims paid for prescription drugs. In the event
the claim or coverage is denied, the insurer is also required to
provide the enrollee with all information specified in KRS
304.17A-540, as well as all other applicable regulations and
statutes.
Please note that the Department will
be increasing its investigation efforts towards enforcement of the
above-named statutes, in accordance with this Advisory Opinion. Any
questions concerning this matter may be directed to Shaun T. Orme,
Counsel for the Department at (502) 564-6032.
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George Nichols III, Commissioner
Kentucky Department of Insurance
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Date
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