DATED: MAY 21, 1998

The Senate Budget and Appropriations Committee reports favorably and with committee amendments the Senate Committee Substitute for Senate Bill Nos. 323, 324, 325, 326, 327, 328, 329, 330 and 331.

The purpose of this legislation is to promote the development and use in New Jersey of health care information electronic data interchange (EDI) technology in accordance with standards adopted by the Commissioner of Banking and Insurance pursuant to the federal "Health Insurance Portability and Accountability Act of 1996" ("HIPAA"), Pub.L.104-191. The bill would implement recommendations of the Healthcare Information Networks and Technologies (HINT) report to the Legislature under the joint auspices of Thomas A. Edison State College and the New Jersey Institute of Technology.

Standardization of health care forms and data communication. Section 1 of the bill directs the Commissioner of Banking and Insurance ("B & I") to (a) adopt by regulation a single set of health plan enrollment and claim forms, in both paper and electronic formats, for use by health care providers and health, dental and prescription plan insurers in New Jersey, and (b) establish standards for electronic conduct of insurance-related transactions (e.g., filing benefit claims, transmitting payment or remittance advice, authorizing or certifying a referral, etc.). The Commissioner is directed to adopt the same forms and standards that are adopted by the federal government under HIPAA, thereby ensuring their consistency with the national regimen. The Commissioner is also directed to establish timetables for health, dental and prescription plan insurers' implementation of the standards, but is authorized to allow extensions and waivers in cases of potential undue hardship. The Commissioner is to report to the Governor and the Legislature, within one year of establishing the timetable, on the number of extensions and waivers of the implementation requirement granted, and the reasons therefor.

Sections 2 through 10 of the bill require the several types of health, dental, and prescription service insurers to (a) implement use of the standardized enrollment and claim forms within 12 months of the regulatory adoption of those forms, and (b) demonstrate to the Commissioner of B & I, within 180 days of the regulatory adoption of the timetable for the electronic transaction and communication standards referred to above, that they will implement those standards in accordance with the appropriate timetable as a condition of continued authorization to do business in New Jersey.

Provider submission of benefit claims. Sections 2 through 10, 16 and 17 of the bill require that, effective 12 months after adoption of the regulations establishing the standardized claim forms, health care providers must submit all health care claims to health, dental and prescription service insurance carriers for payment. A person covered by a health, dental or prescription service benefits plan who receives health care services would be allowed, but could not be required, to submit claims to a carrier.

Prompt payment of claims. Sections 2 through 10 of the bill require insurance carriers to pay promptly any uncontested ("clean") health, dental or prescription service benefits claims that are electronically submitted, so that beginning 12 months after the adoption of regulations establishing the standardized claim forms, the carriers would be required to pay those claims within the applicable number of calendar days, following submission, as provided for payment of claims under the federal Medicare program. An overdue payment would bear simple interest at the rate of 10% per year. In the case of contested claims that are submitted electronically, a carrier would be required to notify the claimant within 30 days that the claim was contested or denied and pay the uncontested portion of the claim within 30 days.

The intent of these special "prompt payment" rules is to encourage electronic filing of claims.

Tax incentives for investment in EDI technology. Sections 11 through 13 of the bill allow a temporary 10% tax credit, against the corporation business tax, the franchise tax on insurance companies generally, and the gross income tax, for the purchase, lease or rental of EDI technology to receive and transmit health care information. The gross income tax credit would be available only to licensed health care providers (e.g., doctors and dentists), entities that process enrollments or claims under health care benefits plans, employers that self-insure for employee health benefits, and vendors of computer software that supports health care EDI. The corporate business tax credit would be generally available to these taxpayers and also to licensed health care facilities.

Advisory board on EDI technology policy. Section 14 of the bill directs the Commissioner of Health and Senior Services ("HSS"), in consultation with the Commissioner of B & I, to establish an advisory board to make recommendations to the commissioners on health information EDI technology policy, including measures to protect the confidentiality of medical information. The advisory board would include representation from health insurance carriers, health care professionals and facilities, higher education, business and organized labor, and health care consumers.

Annual report. Section 15 of the bill directs the Commissioner of HSS, in conjunction with the Commissioner of B & I, to present an annual report to the Governor and the Legislature on the development and use of health information EDI technology in New Jersey. The report is to include any recommendations for regulatory or legislative changes to promote the development and use of health information EDI technology.

Continuing study of EDI technology. Sections 19 and 20 direct Thomas A. Edison State College to study and monitor the use of EDI technology and its effectiveness in reducing administrative costs, and appropriate $250,000 to the Department of State to fund a grant to the College to support this study.

COMMITTEE AMENDMENTS:

The committee adopted amendments to the bill to:

(1) Incorporate the requirement that the Commissioner of Banking and Insurance shall report to the Legislature on the number of extensions and waivers granted to health, dental and prescription plan insurers with respect to the requirement to implement the electronic receipt and transmission of health care claim information;

(2) Revise the deadline for implementation of the requirement that providers file payment claims for their services from two years following the date of the bill's enactment to 12 months following the adoption of the regulations prescribing the standardized forms;

(3) Delete a provision prohibiting these insurers from restricting a subscriber's right to assign payment owed to the subscriber's care provider;

(4) Adopt, as the insurer prompt payment deadline for "clean" claims electronically filed, the Medicare program's standard (currently, 30 days) in place of provisions for a 17-day deadline following a two-year phase-in period and provide that the deadline shall be implemented twelve months after adoption of the regulations standardizing the claim forms;

(5) Substitute civil penalty for disciplinary action as the sanction to which a health care professional may be liable upon violation of the bill's provision that the professional is to be responsible for filing third party payment claims on behalf of their insured patients and provide the same civil penalties for such violations by health care facilities;

(6) Incorporate the provision directing Thomas A. Edison State College to study and monitor the use of EDI technology and its effectiveness in reducing administrative costs, and appropriating $250,000 to support that study; and

(7) Make technical corrections.

FISCAL IMPACT

The only portions of this legislation having potential fiscal impact on the State are the provisions allowing temporary tax credits for the purchase of EDI technology. Because no data is available regarding the variables implicated by these provisions -- e.g., the potential Statewide cost of EDI technology, the proportion of EDI technology consumers who are New Jersey corporation business taxpayers or insurance premiums taxpayers, the annual tax liability of these taxpayers, and the proportion of EDI technology usage that is directly attributable to New Jersey health and medical transactions -- it is impossible to provide a reliable estimate of the cost of the bill.