New standards move insurers toward electronic payment

February 21, 2012

The Centers for Medicare & Medicaid Services (CMS), announced new standards for the use of electronic funds transfers (EFT) and the electronic issuance of remittance advice (RA) by health insurance plans on Jan. 5.

The new standards, to be implemented by insurers between now and 2014, will effectively prompt more private health plans to pay doctors via electronic funds transfer, according to AOA Advocacy Group Director Jon Hymes.

Most health care practitioners are already receiving Medicare payments electronically, the AOA Advocacy Group noted.

The new standards will also apply to Medicaid, State Children’s Health Insurance Plans (S-CHIP), other state or local government health plans, and private charitable health plans, although most Medicaid and S-CHIP plans are already using EFT, the AOA Advocacy Group noted.

Many private health plans already encourage practitioners to accept payments electronically. EFT provides payments faster by eliminating the steps necessary to create, deliver, and deposit a paper check, according to the CMS.

The new standards will not result in substantial new administrative burdens for practitioners, Hymes emphasized.

Under the new regulation, EFT can be used by insurers only to deposit reimbursements in a provider’s or practitioner’s bank account, the AOA Advocacy Group noted.

The use of EFT does not give payers access to a practitioner’s bank accounts or financial information, the CMS emphasized.

The regulation announced last month is the second in a series of new CMS regulations regarding electronic funds transfer and establishes standards that, when implemented by health plans, will save physician practices and hospitals $3 billion to $4.5 billion over the next 10 years, according to the agency.

Environmental benefits from the use of an electronic payment in contrast to payments made by paper checks will result in an estimated 800,000 pounds of paper saved and 2.2 million pounds of greenhouse gases avoided over 10 years, according to the CMS.

The new EFT standards are required under the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

Future administrative simplification rules will address adoption of the following:

  • A standard unique identifier for health plans;
  • A standard for claims attachments; and
  • Requirements that health plans certify compliance with all HIPAA standards and operating rules.

The new EFT rule (CMS-0024-IFC) may be viewed at www.ofr.gov/inspection.aspx.

A news release on the rule may be viewed at www.hhs.gov/news.

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