Article Date: 5/1/2005

claims payments
Learn about one small, but significant chink in ERISA's seemingly impenetrable armor.
BY GIL WEBER, M.B.A., Davie, Fla.

As more optometrists bill commercial third-party payers for medical eyecare services, they experience the same problems that cause so much anxiety and frustration for their physician colleagues. Optometrists are finding out what it's like to deal with payers who'll use any means at their disposal to delay, deny or downcode claims and make it more difficult for practices to collect the monies they've worked so hard to earn.


Dirty rotten scoundrels

Resubmitting delayed, denied and downcoded claims is more than just an annoyance -- these are tasks that can place extraordinary resource demands and costs on a practice pursuing revenue that should have been paid promptly and properly in the first place. Sadly, in addition to using a variety of questionable ploys, some payers have also used the Employee Retirement Income Security Act (ERISA) as a shield in many of their battles with practitioners -- just as they've used it to defuse patient-initiated lawsuits by transferring court battles from less- to more- favorable courts.

Though ERISA was enacted with good intentions, the collateral damage fallout as a result of the turf wars between state and federal legislation also seem to have consistently come down unfavorably on the shoulders of the doctors. Never the type to let go of a good thing, some payers have tried to use ERISA wherever possible to avoid paying claims.

However, I'm going to tell you about a little-known but significant provision in California law (and a Supreme Court decision based on the law), that has shifted the ERISA balance, if ever so slightly, in favor of healthcare practitioners in a number of other states.

Timing is everything

Many, if not most payers will refuse to honor a claim if not submitted within some mandated time frame. The issue of timely claims filing is one that can prove problematic and also unfair for practitioners. Practices have legitimate reasons why it might not file a claim in what a payer deems a timely manner. And sometimes it's not the practice's fault.

For example, patients, particularly the elderly, may be confused as to their insurance coverage. By the time primary and secondary responsibilities are resolved it may be past the "X" days filing window mandated by a payer. But to deny payment of an otherwise legitimate claim at that point is absurd and unfair. After all, the payer had the financial responsibility to pay the claim filed, for example, within 90 days. What real difference is there if that claim is submitted in less than 90 days or, perhaps is submitted at 103 days? The financial responsibility was and remains there.

Be prepared

Occasionally a practice submits a claim in a timely manner, but the payer makes a total hash of things and then tries to shift responsibility to the practice. One administrator told me of a dispute with a payer that rejected some claims, stating that the doctor who provided the care was not on the panel.

The dispute went back and forth for some time until the payer finally found the paperwork and admitted that the doctor was, in fact, a credentialed provider when the patients received care. But the payer also then told the practice that the filing deadline for those claims had passed and now they were no longer valid (not payable)!

Outrageous. Disingenuous. But this sort of thing is not an isolated incident.

There's hope

Well, take heart. In some states (26 as of the last count I could find) you might have a lifeline when facing this issue of payers denying payment for claims they say were filed too late. The lifeline, first put into the law in California and now mirrored in full or in part by other states, is called the "notice prejudice rule."

In essence, it says that an insurer can only deny a late-filed claim if it can prove it would be prejudiced (hurt) by the late filing. Absent that, an otherwise valid claim must be honored. The burden of proof to show damage is shifted to the insurer.

What makes this "notice prejudice rule" all the more interesting is that in some states, providers can use it in disputes with payers who would try to hide behind the ERISA regulations. Fortunately for doctors, in some states the rule "trumps" ERISA -- an astounding fact given how provider-unfriendly ERISA has always been. (If your attorney is interested, the key ruling came from the U.S. Supreme Court and is found in: UNUM LIFE INSURANCE CO. OF AMERICA v. WARD, Supreme Court of the United States, No. 97 - 1868.)

It could work for you

Some months ago, a California practice that was having problems getting some "late" claims paid contacted me. I advised the doctor to check into this "notice prejudice rule." Later, I heard back that they had done as I suggested.

Their attorney was not aware of the "notice prejudice rule," but he checked and found that it was for real. Apparently, many attorneys, including many of those in health plan legal departments, aren't aware of the rule. So don't be surprised if your attorney or your state society's legal counsel hasn't heard of it.

The attorney drafted a letter (used as a model for the sample letter included with this article). They then presented the letter to the problematic payers -- in this case secondary to Medicare -- and it worked. The practice has received payment on several claims that previously had seemed destined for write-off.

It's not a slam-dunk, but . . .

The "notice prejudice rule" is one of those rare, provider-friendly instances of insurance law that can tip the scales in your favor. However, understand that you can use the rule successfully in some states but not in others. Even within those favorable states, you can use it in some circumstances, but not necessarily in all. Thus, it's not a slam-dunk, and a lot depends on state-specific laws that vary greatly.

For example, Texas has a "notice prejudice rule," but it also has a "Prompt Payment" law that mandates claims must be filed within 95 days or a payer can reject them. The apparent conflict has yet to be tested.

Your success may also rest, in part, on the wording of your Provider Agreement. So it's essential that you check with an experienced attorney in your state to see if the "notice prejudice rule" can help you collect when a payer says the time has passed and you're out of luck.

Show your attorney the sample letter on page 52. If counsel says that the rule does apply in your state, then use it as a starting point from which your attorney can craft a letter customized to your specific circumstances and the rule's applicability in your state.

Carpe diem! 

Author's Note: The author believes that the information is as authoritative and accurate as is reasonably possible, but no assurance or warranty of completeness or accuracy is intended or given; all warranties of any type are disclaimed. The materials are not intended as legal advice, nor as a replacement for legal or professional advice. Information contained herein is presented only for illustrative purposes and it should not be used to establish any fees or fee schedules, nor is it intended and should not be construed as encouraging any user of the materials to take any actions that would violate any state or federal laws.

Sample Letter


<Insert claim number>

<Insert patient's name>

The above-referenced claim was submitted to Medicare on or about <insert date>, via Medicare's electronic claims processing system. Medicare promptly paid its portion of the charges and forwarded the claim to <XYZ Plan> for further processing on <insert date>. Subsequently, on <insert date> we billed <XYZ Plan> directly. As of the date of this letter, the claim still has not been paid.

This is far from an isolated incident. We have had ongoing difficulties in collecting balances owed by <XYZ Plan> on its Medicare supplemental policies.

<ABC VisionCare>'s patients, many of whom are elderly, sometimes cause delays in the processing of the initial claim due to confusion over their insurance coverage. This can cause delays in the billing of secondary and supplemental insurers, and <XYZ Plan> has provided itself with a convenient means of denying claims by stating that they are late-filed.

Please be advised that under California law, a denial based on late filing of a claim will only be upheld where the insurer can show actual prejudice from the late filing.

In the present matter, Medicare forwarded the claim to <XYZ Plan> almost a year and a half ago, and <XYZ Plan> has failed to pay the claim. A denial based on late filing at this point would be disingenuous and entirely unjustified. <XYZ Plan> has failed to show that it has been prejudiced in any way. On the contrary, <XYZ Plan> has been aware of this claim since <insert date>, and has enjoyed continuous use of the money that it owes its insured as a policy benefit.

<XYZ Plan>'s stubborn refusal to promptly pay this and other claims puts <ABC VisionCare> in a very uncomfortable position vis-à-vis our patients. The patients expect insurers to pay their appropriate share of claims. When insurers do not, and the doctor approaches the patients directly for payment, this results in a disruption of the trust that must exist between doctor and patient.

Please respond in writing directly to me. We hereby request that you pay the claim in full within <insert number> days of the date of this letter. If you do not, then we may have no choice but to take further action to protect our interests.

Thank you for your attention to this matter.

<Insert name>

<Insert title>


Mr. Weber is a nationally recognized author, lecturer and practice management consultant to the managed care and ophthalmic industries. He is also a member of Optometric Management's editorial board. You can reach him at (954) 915-6771 or by e-mail at Also, visit his Web site at



Optometric Management, Issue: May 2005