The Texas prompt pay law: what it requires, what it pays you, and when it doesn't apply

The short answer: for plans regulated by the Texas Department of Insurance (fully insured HMOs, PPOs and EPOs), a contracted provider must file within 95 days of the service, and the plan must pay, deny or pay-and-audit a clean claim within 30 days if it was filed electronically or 45 days on paper. It may ask once, within 30 days, for more information it truly needs. Paid late, the plan owes the contracted rate plus a penalty based on your billed charges: up to 50% of the difference between billed and contracted (capped at $100,000), 100% from day 46 to 90 late (capped at $200,000), and 18% annual interest on top after that. To recover an overpayment, it must notify you within 180 days of paying. None of this applies to self-funded employer plans, Medicare or Medicaid.

Does it apply to your claim?

Question	Prompt pay applies when…
What kind of plan?	A state-regulated HMO (Insurance Code chapter 843) or preferred or exclusive provider plan (chapter 1301). TDI says a card without "TDI" or "DOI" is usually self-funded, which it doesn't regulate.
Are you in network?	You have a contract with the plan (a "preferred provider" or HMO network provider). The Texas Attorney General has said the deadlines also apply to out-of-network emergency claims, but the penalty sections don't (Opinion KP-0250).
Which payers are outside it?	Not Medicare, not Medicaid, not self-funded ERISA plans, not TRICARE or VA. Those have their own rules (see timely filing limits).
Who processes behavioral health?	Send the claim to the company that processes the plan's behavioral health claims, and keep that company's acknowledgment as your received date (carve-outs).

The timeline, both sides

When	Who	What has to happen
By day 95 after the service	You	File the claim, unless your contract gives longer. A late claim forfeits payment except after a catastrophic event (§843.337, §1301.102).
Day 0 of the plan's clock	The plan	The day it receives a clean claim. Keep the acknowledgment that shows the date.
Within 30 days of a clean claim	The plan	If it needs more information to decide, it may ask once, in writing, for information that's truly necessary. After you answer, it generally has 15 days or the original deadline, whichever is later, per TDI Bulletin B-0034-20.
Day 30 (electronic) or day 45 (paper)	The plan	Pay the whole claim; or pay the undisputed part and explain the rest in writing; or deny it in writing with the reason; or, if it means to audit, pay the claim (at 100% of the contracted rate) and tell you it's auditing (§843.338, §1301.103, §1301.105).
After the deadline	The plan	A clean, payable claim not paid on time owes the contracted rate plus the penalty below (§843.342, §1301.137).
Within 180 days of paying you	The plan	The last day it can send written notice that it wants an overpayment back (§1301.132; 28 TAC §21.2818).

The 30-day electronic deadline is a reason by itself to send claims electronically: it's two weeks faster than paper, and the clearinghouse gives you a dated receipt.

What makes a claim "clean"

The clock runs from a clean claim, so this definition is where most prompt-pay disputes are won or lost. TDI's rule, 28 TAC §21.2803, lists the required and conditionally required data elements for each claim form (CMS-1500 for professional claims, UB-04 for facility claims) and for electronic claims, and TDI requires them to be complete, legible and accurate. In practice, a claim is at risk of being called unclean when:

• the billing or rendering NPI, taxonomy or tax ID doesn't match what the plan has on file, or the clinician isn't credentialed with the plan yet;
• the member ID, the subscriber's name and date of birth, or the patient's relationship to the subscriber is wrong;
• a facility claim is missing the type of bill, revenue codes, admission and discharge information, or the attending provider;
• an authorization number the plan requires isn't on the claim;
• a diagnosis code, place of service or modifier is invalid for the date.

These are the same things our claim engine checks before it lets a claim go (the full list is in the denials guide). A claim that passes them, is accepted by the payer's front end and is acknowledged with a date is the strongest position you can be in.

Late-payment penalties, with an example

For a clean claim from a contracted provider that's payable and isn't paid on time, the plan owes the contracted rate plus a penalty (§843.342 for HMOs, §1301.137 for PPOs):

Paid…	Penalty
Up to 45 days after the deadline	The lesser of 50% of the difference between billed charges (as submitted) and the contracted rate, or $100,000
46 to 90 days after the deadline	The lesser of 100% of that difference, or $200,000
91 or more days after the deadline	The 100% penalty plus 18% annual interest, accruing from the date payment was due until it's paid
Part on time, part late	Figured on the underpaid portion only

TDI's rule on calculating penalties (28 TAC §21.2815) counts the member's share (copay, coinsurance, deductible) as part of the contracted rate. For HMOs, a plan that misses the deadlines on more than 2% of clean claims can also face administrative penalties from TDI (§843.342).

Worked example (made-up numbers)

An IOP day is billed electronically at $600. The contracted rate is $180, of which the member owes a $40 copay. The plan receives the clean claim on March 2, so payment is due by April 1 (30 days).

• Paid April 20 (within 45 days after the deadline): the plan owes its $140 share of the contracted rate, plus a penalty of 50% × ($600 − $180) = $210.
• Paid June 1 (61 days after the deadline): the penalty is 100% × $420 = $420.
• Paid August 1 (more than 90 days after the deadline): $420 plus 18% annual interest from April 1.

The penalty uses billed charges, so check that your fee schedule is the one on the claim. Plans sometimes pay the penalty as a separate line or a separate check; post it as its own entry so it doesn't look like an overpayment of the claim.

When the plan wants money back

Recoupments hit programs hardest, because a plan can claw back weeks of per diem days at once. For state-regulated plans, TDI's rule on overpayments (28 TAC §21.2818) requires:

• Written notice within 180 days after you received the payment, listing the specific claims and amounts and the reason for each, with your appeal rights.
• 45 days for you to respond: appeal in writing or arrange repayment. The plan can't offset the money against other claims until that period, or your appeal, runs out.

A notice that arrives late, lumps claims together without amounts, or gives no reason doesn't meet the rule. Answer every notice in writing within the 45 days anyway, and keep the record that supported each day: the note, the hours and the authorization. If your notes don't hold up, the rule won't save you; a chart audit finds that before the plan does.

Using it: a routine and a TDI complaint

1. Know which claims qualify. Mark each payer and product in your payer table as fully insured (prompt pay applies) or not.
2. Record the received date from the payer's acknowledgment for every claim. Count 30 days (electronic) from it.
3. Run a weekly list of qualifying claims past day 30 with no payment or written denial. Your AR aging report, filtered to those payers, is the starting point.
4. Ask the plan first, in writing, citing the claim, the received date and the statute. Many late claims turn out to have a "request for information" you never saw.
5. Check every late payment for the penalty. If it wasn't included, ask for it in writing.
6. Complain to TDI when the plan doesn't fix it. TDI takes prompt-pay complaints from providers; see its prompt pay page. Include the claim, the received date, the proof the claim was clean, and your correspondence. Never include more patient information than the claim requires.

Prompt pay doesn't make a plan pay a claim it has a valid reason to deny. If the problem is a denial, see how to appeal; if it's a contract rate, see negotiating insurance rates.

Tracking it in Cima

• Every claim's history records the day it was sent, the clearinghouse's receipt and the payer's acceptance with its claim number, and none of it can be edited, so the received date is never in dispute.
• Electronic remittances post the payment, the contractual adjustment and the client's share with their reason codes; a reversal is flagged for a person instead of posted blindly.
• Ask the payer for a claim's status from the claim itself (a 276/277 request), with the answer written on the claim.
• AR aging by payer, 0–30, 31–60, 61–90 and over 90 days, so late payers stand out. See billing and reports.

Getting contracts in place comes first: how to get insurance contracts for an IOP or PHP, or Cima Consulting's credentialing and billing services.

Questions

How long does an insurance company have to pay a claim in Texas?

For state-regulated HMOs and PPOs and contracted providers: 30 days after it receives a clean claim filed electronically, or 45 days on paper. In that time it must pay, deny in writing, pay the undisputed part, or pay the claim and notify you of an audit. One written request for necessary information, made within 30 days, extends the time.

Does the Texas prompt pay law apply to self-funded plans?

No. Self-funded employer plans are governed by federal ERISA, not the Texas Insurance Code, so the Texas deadlines and penalties don't apply. Neither do Medicare, Medicaid, TRICARE or VA Community Care.

What is a clean claim in Texas?

A claim with every data element TDI's rule (28 TAC §21.2803) requires or conditionally requires for that claim form or electronic format, complete, legible and accurate. The payment clock starts only when the plan receives a clean claim.

What is the penalty for late payment under Texas prompt pay?

On a clean claim from a contracted provider: the contracted rate plus the lesser of 50% of billed charges minus the contracted rate or $100,000 if paid within 45 days after the deadline; 100% of that difference or $200,000 if 46 to 90 days late; and that plus 18% annual interest after 90 days. Check the current statute (§843.342, §1301.137) before you calculate a demand.

How long does a Texas insurer have to recoup an overpayment?

It must send written notice within 180 days after the provider received the payment, listing each claim, the amount and the reason. The provider then has 45 days to appeal or arrange repayment before the plan can recover it.

How do I file a prompt pay complaint with TDI?

Start from TDI's prompt pay page for providers, and include the claim number, the date the plan received the clean claim, proof it was clean (the acceptance and acknowledgment), what was paid and when, and your letters to the plan. Ask the plan first; many problems are fixed with one written request.

Sources

• Texas Insurance Code chapter 843, subchapter J (HMO prompt pay: §§843.337, 843.338, 843.342) and chapter 1301 (preferred provider plans: §§1301.102, 1301.103, 1301.105, 1301.132, 1301.137)
• 28 TAC chapter 21, subchapter T: §21.2802, §21.2803 (elements of a clean claim), §21.2815 (penalty calculation), §21.2818 (overpayments)
• Texas Department of Insurance, Prompt pay, Prompt pay guidelines, Bulletin B-0034-20 and Self-funded plans
• Texas Attorney General, Opinion KP-0250 (2019)