By Elaine A. Lisko, Health Law & Policy Institute

A patient undergoes a medical procedure. The patient submits what the patient believes to be all charges associated with the procedure to his or her insurer for payment. The insurer pays the portion of the charges that are covered by the insurance policy. Two years later, the hospital at which the medical procedure was performed conducts an audit and discovers that it failed to charge the patient for some service. The hospital then issues an invoice for the service and forwards it to the patient for payment. The patient submits the invoice to the insurer shortly after receiving it but is informed that the insurer will not pay any portion of it because the patient did not submit it within the time required under the terms of the insurance policy. Who is responsible for the bill? Under current Texas law, it appears that the patient is.

The Texas Insurance Code does afford an insured/patient some relief from inadvertent errors in billing. Under certain conditions, it grants an insured, who is not legally incapacitated, an extension for submitting a charge to his or her insurer for payment up to one year from the time required under the insurance policy. The insured’s failure to submit the charge timely will not reduce or invalidate his or her claim: (1) if it was not reasonably possible to provide the insurer with proof of loss within the time required; and (2) proof of loss is provided as soon as reasonably possible. See Tex. Ins. Code Ann. art. 3.70-3(A)(7).

The Texas Insurance Code does not afford relief, however, where the mistake is not discovered until after the one-year period. Because Texas law prescribes a four-year statute of limitations to debt actions (e.g., a suit to recover on a hospital bill), the insured arguably faces potential liability for late-billed charges even with an extension for up to three years after the period for seeking coverage has expired. This three-year gap in the law presents the insured with a real and potentially expensive dilemma. It places the entire burden for inadvertent billing errors on the insured. A bill that otherwise would have been paid by the insurer, in whole or in part, is now the insured’s sole responsibility. If the insured does not pay the bill, he or she may be subject to suit.

Importantly, Texas is not alone in placing this burden on the insured. No state appears to grant an insured an extension to file a proof of loss in excess of one year, unless the insured lacks the legal capacity to do so. Some states have shorter limitations periods, however, reducing the gap to one or two years.

Representative Scott Hochberg (D-Houston) of the Texas House of Representatives is seeking to close the gap completely through Texas House Bill 213, pre-filed on November 13, 1998. The bill requires timely billing and bars recovery where billing is untimely. It shifts a large portion of the burden for inadvertent billing errors from the insured to the health care provider. Specifically, House Bill 213 requires that a health care provider bill for services "not later than the first day of the 11^th month after the date the services are provided." A health care provider who fails to bill within this period may not recover from the patient or from anyone else responsible for the patient’s debts any amount for which the patient would have been covered by insurance.

While Texas House Bill 213 arguably places the burden where it belongs, it will more than likely receive constitutional challenge. Health care providers can be expected to attack the bill on the ground that it applies a shorter statute of limitations period to them than to other types of creditors. Interestingly, however, the bill only bars the portion of a health care provider’s claim that would have been covered by insurance had it been submitted timely. As a result, the health care provider’s entire claim is not barred, only the portion that subjects the insured to an unfair burden through no fault of the insured.

11/25/98