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The agency proposal follows:

On July 1, 1999, the Health Information Electronic Data Interchange Technology Act ("The Act") P.L. 1999, c. 154, was adopted. The Act, which is commonly known as "HINT," requires the Commissioner of the Department of Banking and Insurance ("Commissioner" and/or "Department") to adopt, by regulation, a timetable that requires all hospital, medical and health service corporations, individual and group health insurers, group health insurers, health maintenance organizations, dental service corporations, dental plan organizations and prepaid prescription service organizations ("payers") to implement systems for the electronic receipt and transmission of health care claim information.

These electronic systems will encompass the fullest possible range of health care related information exchanges, including receipt and transmission of health claims; enrollment and disenrollment information; eligibility for coverage; health care payment and remittance advice; health care premium payments; first report of injuries; health claim status; and referral certification requests and authorization information. Ultimately, all health care transactions will be transmitted electronically using common electronic formats and code sets acceptable by all health care payers.

HINT requires the Department to adopt rules that:

1. Establish one set of standard health care enrollment and claim forms in paper and electronic format to be used by all payers authorized to do business in Ó£»¨ÊÓƵ;

2. Fix timetables for the implementation of the use of enrollment and claim forms (electronic and paper formats) in all health care related transactions by all payers authorized to do business in this State;

3. Create a procedure for the receipt and processing of operational status reports in which payers report to the Department their ability to achieve compliance with the timetables for electronic processing of enrollment and claim information;

4. Develop procedures to dispose of requests for extensions of time and waivers from compliance that are to be filed by payers unable to comply with the timetables;

5. Acquire, assemble and report payer compliance; extensions of time granted; any waivers granted; and reasons therefor to the Governor and Legislature; and

6. Reduce and consolidate wherever possible, paper health care transactions by all payers and health care service providers.

The implementation of the requirements mandated by HINT is a part of a collaborative effort by the Department with the Department of Health and Senior Services ("DHSS"), Thomas A. Edison State College and the Ó£»¨ÊÓƵ Institute of Technology ("NJIT"). This effort began in 1993, when the HINT Advisory Council was formed by members of the Legislature together with other essential stakeholders from government, providers, health care facilities, health care payers and members of industry to weigh the value of electronic data interchange ("EDI") in handling health care claims information. In March 1995, the HINT Advisory Council reported the potential for enormous savings upon implementation of EDI in the health care industry. The work of the HINT Advisory Council continued until its efforts eventually resulted in the Act. Notwithstanding this effort, it was recognized that Ó£»¨ÊÓƵ could not practicably move forward without coordination regionally and nationally.

On a parallel track with the Ó£»¨ÊÓƵ HINT initiative, the Federal Government enacted the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") (P.L. 104–191). Among other things, HIPAA required the United States Department of Health and Human Services ("HHS") to develop national standards for the administrative simplification of health care transactions. Starting in mid 1998, HHS proposed a series of administrative regulations that will create the architecture for a national system of health care claims transactions by EDI. This HHS system is monumental in scope and will include transaction and code sets for processing health care claims information; national provider, employer and plan identifiers; and privacy and security standards, claims attachments and enforcement.

In recognition of the need for national standards and structure, HINT imposed a condition precedent on the implementation of EDI systems in Ó£»¨ÊÓƵ: HHS must adopt uniform electronic transaction and code sets before the Ó£»¨ÊÓƵ HINT timetable starts to run.

On July 17, 2000, at 45 CFR Section 162.100 et seq., HHS promulgated rules establishing the transaction and code set standards as well as the related administrative simplification requirements imposed by HIPAA. These Federal rules and health care transaction standards are effective October 16, 2000, thus triggering the HINT mandates.

In an effort to alert payers to the HHS adoption and to obtain some understanding of the then current status of payer's plans for development of HINT/HIPAA complaint systems, the Department issued Order A00-138 on August 29, 2000. The Order required all affected payers to report to the Department specific details about the extent of any compliance plans and efforts. The Department was gratified to learn from the responses that most of the responding payers had already established project development teams and were making specific plans to achieve compliance with the anticipated requirements.

The Department also notes that the Act does not require providers to implement electronic systems for the processing of health care transactions. The Act merely states that 12 months after HINT becomes operative all health care providers shall file claims on behalf of patients unless the patient elects to personally file the claim. It should be noted, however, that the Act does provide incentives where providers file electronically. For instance, electronically filed claims must be paid in 30 days while paper claims must be paid in 40 days. Electronically filed claims must be acknowledged by payers within two days of receipt, and paper claims within 15 days of receipt. The Department recently adopted rules that implement the prompt pay aspect of the Act at N.J.A.C. 11:22-1 (See 33 N.J.R. 105(a)).

The Department, in consultation with the Department of Health and Senior Services and the HINT Advisory Board (established in accordance with the Act), is now proposing a new subchapter for the electronic receipt and transmission of health care claims information by EDI.

Proposed N.J.A.C. 11:22-3.1 sets forth the purpose and scope of the subchapter.

Proposed N.J.A.C. 11:22-3.2 contains the definitions which are used in the new subchapter. These include "claim," "Commissioner," "covered person," "covered service or supply," "health care provider," "provider," "health benefit payer," "payer," "health care transaction," "standard," "system" and "small employer health benefits plan."

Proposed N.J.A.C. 11:22-3.3 contains the standard enrollment and claim forms in paper and electronic format as required by the Act.

Proposed N.J.A.C. 11:22-3.4 will establish the timetables for payers to comply with the provisions of the Act. These timetables as proposed are expressed as a number of days after the adoption of the rules. When the adoption occurs, the Department will calculate the precise date and it will be added to the rule. This section also contains a provision for payers to file operational status reports pursuant to HINT, in which they report the development and implementation of HINT compliant systems.

Proposed N.J.A.C. 11:22-3.5 establishes the procedure for payers to petition the Commissioner for extensions of time and/or waivers from the obligations established by HINT and these rules.

Proposed new rule N.J.A.C. 11:22-3.6 establishes the obligation that requires payers to accept health care claims only from a licensed professional filing on behalf of the patient unless the patient elects to file the claim directly. The Act provides that twelve months after the adoption of these rules, all payers shall require that all providers, and not patients, shall file claims for payment. The only exception to this is where the patient elects to file the claim directly. In addition, the rule also provides, consistent with the Act, that claims not filed in a timely manner may be denied pursuant to the guidelines contained in this section.

Proposed N.J.A.C. 11:22-3.7 establishes the timetable for the sequential implementation of the remaining transaction and code sets. HINT requires that enrollment and claims forms be implemented within one year of the adoption of these rules. The remaining HHS transaction and code sets will be implemented by October 16, 2002, in accordance with the schedule and standards established in the HHS rules.

Proposed N.J.A.C. 11:22-3.8 establishes provisions for the computation of time limits when payers and/or providers use the services of a clearinghouse for the transmission and/or receipt of electronic claims information.

Proposed N.J.A.C. 11:22-3.9 provides that all information and materials obtained or used by health care payers, their agents and vendors in the processing of health care claims are subject to the provisions of N.J.S.A. 17:23A-1 et seq. On December 28, 2000, HHS adopted Federal privacy and security rules that will apply to all electronic and paper health care transactions in the entire country. (See 45 CFR 160.101 et seq.) These Federal rules will not become effective until March 2003. Between now and the effective date, many issues need to be addressed and resolved. These include the coordination with other Federal and State laws dealing with privacy and security. When these issues are resolved, further review of this provision may be necessary. However, HINT does not permit any delay in implementation pending the effective date of privacy and security rules. In the meantime, the Department will continue to apply the Ó£»¨ÊÓƵ statutory law that applies to these transactions unless it is preempted by more restrictive Federal law.

Proposed N.J.A.C. 11:22-3.10 will require that payers implement appropriate fraud detection and prevention practices in order to prevent, wherever possible, the payment of fraudulently submitted claims, and to report cases of suspected fraud to the Office of the Insurance Fraud Prosecutor in accordance with HINT and N.J.S.A. 17:33A-1 et seq.

Proposed N.J.A.C. 11:22-3.11 establishes the penalties for failure to comply with these provisions.

The proposed new subchapter will have a positive impact on the public and the health care community by lowering the cost associated with the administration of health care claims. As these rules for the electronic transmission of health care claims are implemented, the result in savings may be passed on to consumers in the form of lower premiums and greater coverages.

The proposed new subchapter should ultimately have a positive economic impact on insureds and persons covered under health benefit plans. Claims and other health care transactions should be processed more quickly and efficiently resulting in less overall costs of administration. Where approval is needed for tests, treatment and referral to other health care professionals, the necessary certification and authorization should be obtained more rapidly and with a greater degree of predictability.

There is no doubt that health care benefits payers, their agents and vendors will be required by these rules to expend substantial funds to achieve compliance with these rules. Some currently existing processes will need to be abandoned and other new and costly systems implemented. Precise estimates of the cost of implementation are not available; however, some experts have opined that compliance with HINT and HIPAA will equal or exceed that required for Y2K preparedness.

Notwithstanding the substantial cost in achieving compliance, studies show that the savings will far exceed the cost of investment. Where paper claims are processed at a rate of dollars per claim, electronic claims can be processed at a rate of pennies per claim. Thus, a return on investment should be realized by all payers within the foreseeable future.

These rules do not require medical providers to implement electronic systems for the filing of claims. Medical providers are simply required, one year after the date of the adoption of these rules, to file claims on behalf of their patients. There is no question, however, that providers are being encouraged to file claims electronically. HINT, HIPAA and these rules should result in a quick return on investment for those medical providers investing in electronic systems. Providers should also find that claims are acknowledged and paid much faster.

It should also be noted that the expenditures required by these rules are mandated by HINT and will also be required for compliance with HIPAA. As a result, the Department, in consultation with DHSS, Thomas A. Edison State College and NJIT, is proposing these rules to provide a regulatory framework within which there can be strategic implementation of the obligations imposed by HINT and HIPAA. In conclusion, all significant interests should ultimately benefit from compliance with these rules.

A Federal standards analysis is required when any State agency proposes to adopt, readopt or amend State rules that exceed any Federal standards or requirements, and must include in the rulemaking document a comparison of Federal law.

The Department has determined that these rules, which are based upon requirements established in the Act, do not exceed any current Federal standards insofar as payers will be required to implement systems for the electronic transmission of health care claims and enrollment information many months before compliance is required by Federal regulations.

October 16, 2002 is the Federal deadline by which all payers must be HIPAA compliant, notwithstanding the early implementation mandated by Ó£»¨ÊÓƵ’s HINT requirements. HINT and these rules require that payers implement systems for claims and enrollment transactions 12 months after these rules are adopted. The accelerated timetables are mandated by the Act and these rules reflect the requirements of the statute.

In Section 1178 of HIPAA, Congress adopted the general rule that the Federal provisions will preempt state law that is contrary to the Federal rules. There are three exceptions to this general rule: (1) state laws and rules to prevent fraud or abuse; (2) state laws and rules enforcing a state’s controlled dangerous substances laws; and (3) state laws or rules that relate to the privacy of individually identifiable health information. While it may be that the HIPAA privacy rules will ultimately be more stringent than Ó£»¨ÊÓƵ’s Insurance Information Privacy Act, they will not become effective until after these rules are adopted. Thus, in the absence of operative HIPPA rules on this subject of privacy, the Department is compelled to follow State law until such time as the Federal rules may be effective. The Department will re-visit this issue as the effective date of the HIPAA privacy rules approaches.

The Department also wishes to note that it considered the application of the Gramm-Leach-Bliley Act ("GLB"), Pub. L. 106-102, §§ 501 et seq. to these proposed rules. It appears that GLB may limit the ability of financial institutions to disclose personal information about consumers to other parties and require that customers be advised about the institution’s privacy policies and practices. However, of significance is the fact that Congress did not specifically state that GLB was applicable to health insurers. As a result, it now appears to the Department that only the Ó£»¨ÊÓƵ Insurance Information Practices Act applies to the subject matter of the proposed rules. Thus, the Department has determined in the proposed rules to make clear that payers, their agents and vendors are processing information relative to insurance claims and, thus, the provisions of N.J.S.A. 17:23A-1 et seq. (the Insurance Information Practices Act) apply. The Department will act as deemed appropriate with regard to future privacy and security issues when HHS’s position becomes clearer.

The Department anticipates that jobs may be generated as a consequence of the proposed new subchapter. The implementation of these rules will require the development of elaborate new EDI systems which are certain to generate new employment opportunities. In addition, new opportunities may be manifested as clearinghouse and other vendors seek to provide EDI services to medical providers and payers. The Department is not in possession of any workforce development studies, but welcomes input on this subject from all knowledgeable commenters.

The Department does not expect any impact on the agriculture industry from the proposed new subchapter.

The new subchapter will apply to all hospital service corporations; medical service corporations; health service corporations; health insurers issuing individual policies of insurance; health insurers issuing group policies of insurance; health maintenance organizations; dental service corporations; dental plan organizations; and prepaid prescription service organizations. Some of these payers are "small businesses" as that term is defined in the Regulatory Flexibility Act, N.J.S.A. 52:14B-16 et seq. To the extent that the subchapter will apply to such small businesses, they will be required to incur costs necessary for the development and/or implementation of HINT compliant systems. Because the Act which mandates these obligations does not allow for any small business exception in the deployment of these systems, all payers, regardless of size, will be required to comply with these requirements.

The Department does note, however, that certain small payers have been granted additional time to achieve compliance with the HIPAA requirements and thus the Department, upon application, will extend the time for small payers to comply. The Department is defining small payers in accordance with the definition used by HHS, which are those group health plans having less than 50 participants and/or $5 million in annual receipts.

The provisions of proposed N.J.A.C. 11:22-3.5(c) will permit small employer health benefits payers to receive an additional six months time for compliance upon application to and approval by the Department. Such payers must submit proof that the group plan has less than 50 participants and/or less than $5 million annual gross receipts.

While HINT does not impose any obligation on providers to file claims electronically, it does provide certain incentives that should make the electronic filing option more compelling in the eyes of providers. As noted above, 12 months after adoption of these rules, payers will only accept claims filed by providers and not from patients, unless undertaken by the patient. Also, electronically filed claims will be paid in 30 days and acknowledged in two days while paper claims will be paid in 40 days and acknowledged in 10 days. In electronic claims the acknowledgement process will be an automatic response from the payer’s system once it passes through a routine screening process, whereas payer claims will be subject to the uncertainties of manual handling.

Full text of the proposed new subchapter follows:

11:22-3.1 Purpose and scope

1. Pursuant to N.J.S.A. 17B:30-23 et. seq., P.L. 1999, c. 154 (the Health Information Electronic Data Interchange Technology Act ("HINT" or "the Act")), the purpose of this subchapter is to establish timetables for the introduction and implementation of systems for the electronic receipt and transmission of health care claim information, including, but not limited to, eligibility, premium payments, reports of injury, claim status, referral requests, authorization for referral, enrollment, disenrollment, and other health care claims transactions in accordance with the standards developed by the United States Department of Health and Human Services (hereinafter referred to as "DHHS") for the electronic administration of health care benefits.
2. In accordance with N.J.S.A. 17B:30-23b, this subchapter also establishes one set of standard health care enrollment and claim forms in paper and electronic formats to be used by all health care benefit payers referred to in (d) below.

3. Pursuant to N.J.S.A. 45:1-10.1 and 26:2H-12.12, this subchapter also establishes rules requiring health care professionals, institutions and facilities to file claims on behalf of their patients when seeking payment or reimbursement of health care claims.

4. The subchapter applies to all hospital service corporations; medical service corporations; health services corporations; health insurers issuing individual policies of insurance; health insurers issuing group policies of insurance; health maintenance organizations; dental service corporations; dental plan organizations; prepaid prescription service organizations; and all health care providers.

11:22-3.2 Definitions

The following words, phrases and terms, when used in this subchapter, shall have the following meanings unless the context clearly indicates otherwise.

"Claim" or "insured claim" means a request by a covered person, a participating health care provider, or a nonparticipating health care provider who has received an assignment of benefits from the covered person, for payment relating to health care services or supplies or dental services or supplies covered under a health benefits plan or dental plan issued by a carrier.

"Commissioner" means the Commissioner of the Department of Banking and Insurance.

"Covered person" means a person on whose behalf a payer has an obligation to pay benefits for health care services pursuant to a plan, policy, contract, certificate, or any other document.

"Covered service or supply" means a health care service or supply provided to a covered person under a health benefits or dental plan for which the payer is obligated to pay benefits or provide services or supplies subject to any applicable deductible, coinsurance or co-payment.

"Health benefit payer" or "payer" means those entities identified in N.J.A.C. 11:22-3.1(d) above that are subject to the provisions of this chapter.

"Health care provider" or "provider" means an individual or entity which, acting within the scope of its licensure or certification, provides a covered service or supply defined by the health benefits or dental plan. Health care provider includes, but is not limited to, a physician, dentist or other health care professional licensed pursuant to Title 45 of the Revised Statutes; a hospital and other health care facility licensed pursuant to Title 26 of the Revised Statutes; and/or a purveyor of prescription, pharmaceutical products or durable medical goods or equipment.

"Health care transaction" or "transaction" means the exchange of information between two or more parties to carry out the financial and administrative activities related to coverage under a health benefits or dental plan, including, but not limited to, health claims and equivalent encounter information, health care payment and admittance advice, health claims status, enrollment and disenrollment in a health plan, eligibility for a health plan, health or dental plan premium payments, first report of injury, deferral certification and authorization and health care attachments.

"Standard" means a prescribed set of rules, conditions, transaction sets or requirements concerning classification of components, specification of materials, performance or operations, or delineation of procedures, in describing products, systems, services or practices.

"System" or "system for the electronic receipt and transmission of health care claim information" means that electronic network established in accordance with 42 U.S.C. §§ 1320d et seq. for the transaction of health care related information including:

1. Health claims or equivalent encounter information, including institutional, professional, pharmacy and dental health claims;

2. Enrollment and disenrollment in a health plan;

3. Eligibility for a health plan; health care payment and remittance advice;

4. Health care premium payments;

5. First report of injury;

6. Health claim status; and

7. Referral certification and authorization.

"Small Employer Health Benefits Plan" means any plan identified as such by N.J.S.A. 17B:27A-17.

11:22-3.3 Standard enrollment and claim forms

1. 45 C.F.R. 162.1101, Subpart K, the Health Care Claims or Equivalent Encounter Information Standard, and 45 CFR 162.1501, Subpart O, the Enrollment and Disenrollment in a Health Plan Standard, are adopted by the Department, in consultation with the Department of Health and Senior Services, as the electronic standard format for enrollment, disenrollment and claim forms, and are incorporated and made a part herein by reference.

2. The UB-92, HCFA 1450 (the uniform claim for use by health care institutions and facilities) and the HCFA 1500 (the uniform claim for health care providers) are recognized and adopted by the Department, in consultation with the Ó£»¨ÊÓƵ Department of Health and Senior Services, as the paper standard format for claims by medical institutions, facilities and providers. These forms are located at the website maintained by the Federal Health Care Financing Administration () and incorporated herein by reference.

3. The paper standard format for a universal enrollment form is located at subchapter Appendix Exhibit 1 and is incorporated herein by reference.