Mid-Atlantic Health Law TOPICS

The Health Insurance Portability and Accountability Act (HIPAA) contains administrative simplification provisions that are designed to encourage health care providers and health plans to process health claims and payments (and to perform other administrative functions) electronically, using standard transactions and uniform code sets. The theory is that uniformity and electronic processing will reduce the administrative costs associated with health care, and the savings can be used for health care services, rather than administration. The administrative simplification provisions call for the use of unique health identifiers for employers, health plans, and health care providers; adoption of transaction standards and uniform code sets; and improved privacy and security protection for health information. Over the next year, TOPICS will include a regular column on HIPAA administrative simplification to help providers and health plans prepare for compliance.
A. Electronic Transactions The HIPAA administrative simplification provisions require all health plans (insured and self-funded) to accept electronic transactions that comply with the standards adopted by the U.S. Department of Health and Human Services (HHS), and prohibit health plans from requiring health care providers to make changes or additions to the standard transactions.
Providers are not required to submit transactions electronically, but if they do, they must use the standards adopted by HHS. Eventually, health plans may refuse to accept paper transactions, so that providers who are not equipped to submit their transactions electronically will have to pay a third-party to translate and submit their transactions.
The theory is that the standard transactions and electronic processing will be so efficient that providers will voluntarily leave paper behind, and conduct their health care transactions electronically.
HHS estimates that, in 2002 and 2003, providers and health plans will incur about $2 billion in net costs in this regard. However, HHS estimates net savings for providers and health plans beginning in 2004. For the 10-year period from 2002 through 2011, HHS estimates that the standard transactions and electronic processing will result in net savings to health plans and providers of approximately $19 billion (expressed in 2000 dollars).
B. Standard Transactions and Code Sets HHS has issued final regulations adopting standards for the following health care transactions:

1. Health care claims or equivalent encounter information;
2. Eligibility;
3. Referral certification and authorization;
4. Health care claim status;
5. Enrollment in, or disenrollment from, a health plan;
6. Health care payment and remittance advice;
7. Health plan premium payments; and
8. Coordination of benefits.

HHS will also adopt standards for health claims attachments, and the first report of injury, but HHS has not yet done so.
C. Delay in Compliance Date Originally, the transaction standards required compliance by October 16, 2002. However, because many providers and health plans reported that they would have difficulty complying with the deadline, Congress passed legislation granting a conditional extension of the deadline, and President Bush signed the legislation on December 27, 2001.
Known as the Administrative Simplification Compliance Act, it provides that any health care provider or health plan that would otherwise be required to comply with the transaction standards by October 16, 2002, will be given an additional year to comply, IF (and only if) the provider or plan submits a compliance plan to HHS.
The compliance plan must include a summary of the following points: an analysis of the extent to which, and why, the entity is not in compliance; a budget, schedule, work plan, and implementation strategy for achieving compliance; whether the entity plans to use or might use a contractor or other vendor to assist in achieving compliance; and a timeframe for testing that begins not later than April 16, 2003.
HHS is also required to issue a model form, by March 31, 2002, that entities may use in preparing their compliance plans.
The extension also includes a provision that might prove helpful to providers and health plans that have difficulty determining how to incorporate the new requirements into their existing processes and operations. It calls for the National Committee on Vital and Health Statistics to review compliance plans that are submitted, and to issue regular reports on effective solutions to compliance problems.
The legislation also provides that by October 16, 2003, all Medicare claims (with only very limited exceptions) must be submitted electronically.
Providers and health plans that have not yet considered how they will comply with the administrative simplification provisions of HIPAA should begin analyzing their processes and operations immediately, so that they can determine what needs to be changed, and how best to accomplish the changes, to reap the predicted economic benefits.