New Washington Rule Clarifies Authority to Issue Penalties Against TPAs

by Polsinelli

The Washington State Department of Health has promulgated a new rule clarifying the Department's authority to issue civil penalties against health carriers and third-party administrators. This rule, which is outside the Washington Insurance Code, applies to third-party administrators, which are not otherwise licensed or regulated in the state of Washington. The new rule, which became effective July 18, 2014, clarifies the civil penalties for health carriers and third-party administrators who are notified by the Washington Vaccine Association ("WVA") of the obligation to pay an assessment or to reimburse the WVA for the cost of an audit.

This new rule that affects third-party administrators is among those that we have begun classifying as part of the "All-Payer Claims Database" requirements, which are often associated with the delivery of vaccines to children. Often, these requirements are imposed by entities other than state insurance departments and are located outside of the state insurance laws and regulations. Many states have begun considering adopting legislation or regulations imposing similar requirements in order to fund vaccination programs or to implement claims databases.

The WVA was formed by legislation in 2010 for the purpose of funding the purchase of vaccines for privately insured children under the age of 19. The WVA administers the flow of vaccine funds by collecting payments from health carriers and third-party administrators. Under this program, RCW 70.290.060 requires third-party administrators to register with the WVA and to report a change of its legal name, business name, business address, or business telephone number to the WVA within ten days after the change. Third-party administrators may register with the WVA through its website.

A third-party administrator is defined for purposes of the WVA as "any person or entity who, on behalf of a health insurer or health care purchaser, receives or collects charges, contributions, or premiums for, or adjusts or settles claims on or for, residents of Washington state or Washington health care providers and facilities." RCW 70.290.010(8). The term "health care purchaser" is not defined by statute or rule for purposes of the WVA. The term "health insurer" is similarly not defined, but the term "health carrier" is defined to mean "a disability insurer regulated under chapter 48.20 or 48.21 RCW, a health care service contractor as defined in RCW 48.44.010, or a health maintenance organization as defined in RCW 48.46.020, and includes "issuers" as that term is used in the patient protection and affordable care act." RCW 48.43.005(25).

The WVA notifies each health carrier and third-party administrator of the health carrier's or third-party administrator's estimated total assessment by November 15th of each year. Under the new rule (Chapter 246-120 of the Washington Administrative Code ), a health carrier's or third-party administrator's failure to remit an assessment to the WVA within 90-days after receiving notice of the assessment will lead to a civil penalty equal to 150 percent of the assessment, and the failure to reimburse the WVA for audit costs within 45 days after receiving notice of the costs will result in a civil penalty equal to 150 percent of the cost of the original audit. According to the new rules, a health carrier or third-party administrator who receives notice of such a civil penalty has the right to request a brief adjudicative proceeding.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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