Timely Filing Issues

A Day Late and a Dollar Short: Claims Denied Due to Failure to Timely File Can be Appealed

The Problem:  Your business office missed the timely filing deadline by 30 days. The claim is filed and comes back denied.

The Solution:  Now you have to make a decision - pursue the patient, write-off or appeal. If the coverage is managed care, your choices are narrowed to just two. The answer is simple.

Timely filing deadlines are getting shorter and medical billing more complicated. With the heightened concern over fraud and abuse, medical business offices must scrutinize claims even more closely before submitting. This is a poor combination for any medical business office trying to meet an arbitrary deadline imposed by the carrier, but an advantageous one for the insurers. Providers must take an aggressive appeal position on such claims.

Medical providers do have a valid basis for appealing any denial based solely on failure to file a claim by the filing deadline.

Prior to 1980, a majority of courts held that notice provisions in insurance policies were mutually agreed upon conditions of coverage.

Therefore, failure by the insured party to adhere to such provision were grounds for claim denial. However, many courts now look at insurance contract provisions as far from a mutual agreement and acknowledge that the true nature of insurance contract negotiating is a take-it-or-leave-it offer by an insurance carrier. Such non-negotiable contracts are known as adhesion contracts and the courts have determined that unfair contract clauses should not be a technical "out" for insurance carriers to avoid liability.

According to Insurance Coverage Litigation by Anderson, Stanzer, Masters and Rodriquez, there has been a dramatic shift in recent years toward this line of thought and its application to policy notice provisions. The "modern rule," followed by most states including Texas, is that an insurance carrier must prove that it was prejudiced by the policyholder's delay in providing notice in order to avoid coverage.

"Courts following the old rule tend to view insurance policies as consensual contracts; according to this view, an inexcusable breach of a condition precedent may result in the complete forfeiture or rights under the insurance policy. Courts that follow the modern rule, in contrast, tend to see insurance policies more as they really exist today, as contracts of adhesion. According to this view, a technical provision that might work to the disadvantage of the nonassenting party - the policyholder - should not be strictly enforced," states the authors.

"Similarly, several states have rejected the old notice rule in part because it was antithetical to the policyholder's reasonable expectations of coverage, a doctrine that has been adopted in a number of jurisdictions, in part, to address the imbalance of bargaining power in typical insurance policy sales transactions."

Terms such as "imbalance of bargaining power" and "take or leave it" aptly describe the unfair contraints under which most medical providers sign managed care contracts today. Providers do not like signing documents agreeing to no reimbursement if a claim is not filed within 90 days; however, they do so daily. Most providers can and do submit claims within such time constraints. However, an occassional claim does not follow routine procedures and, in those cases, there is a basis for appeal.

Your appeal letter should raise the question of whether the insurer was prejudiced by the late filing. In Insurance Coverage Litigation, the authors state that most court cases applying the modern rule have recognized that the purpose of notice provisions are to give the carrier an opportunity to investigate the claim, prepare a defense and to protect against fraud. If the carrier can still fully perform these routine claim processing and risk management functions, it may not be able to prove any prejudice resulted from the late filing. In Texas, the burden of proof is on the carrier to establish it was not prejudiced by receipt of a claim beyond the contractual deadline.

Since the burden of proof is on the carrier, your appeal letter should demand an explanation of how it was prejudiced by the late filing of the claim. Ask that the legal department review the matter and provide a written explanation as to the specific prejudice resulting from the late filing. Further, point out that the complete medical record is available and contains all the necessary information to process the claim.

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