The Kentucky legislature has approved a bill (HB 5) that grants the Department of Insurance (DOI) the authority to enforce the state’s prompt pay laws as to Medicaid managed care organizations (MCOs).

In September 2011, the state received federal approval from the Centers for Medicare & Medicaid Services to expand Medicaid managed care statewide. Beginning in November 1, 2011, the state contracted with three new MCOs to coordinate healthcare for most of Kentucky’s Medicaid members.

According to a summary of the legislation, the bill amends KY. REV. STAT. § 304.17A-730 to allow Medicaid recipients or providers to file a claim with DOI if an MCO fails to comply with the state’s prompt pay statutes. Specifically, under the bill, Medicaid recipients and providers may request a hearing when a claim is denied or after 30 days of nonpayment. A hearing also may be requested for a claim designated as “less than clean” after 120 days of nonpayment.

The bill also authorizes DOI to investigate issues identified through the reporting process and impose a 14% interest rate for nonpayment as well as additional penalties on the MCOs for failing to meet prompt pay requirements.

In a statement, the Kentucky Hospital Association (KHA) said it “strongly supported the bill as an important measure to improve the oversight of Medicaid managed care and require private, out-of-state managed care organizations to pay the millions of dollars they currently owe Kentucky hospitals for treatment provided to Medicaid patients.” According to statement, a recent state audit highlighted the need for better oversight of Medicaid managed care, particularly related to payment of claims.

“We applaud the legislature’s action,” noted KHA President Michael Rust. “House Bill 5 gives more than 500,000 citizens under Medicaid managed care the same prompt pay protections afforded Kentuckians with private health insurance. This change is critical to the financial health of Kentucky hospitals and their 79,000 employees.”

The bill, which was passed unanimously by the Kentucky House of Representatives and Senate, was sent to Governor Steve Beshear on March 25, but he had yet to sign the measure as of this writing.