State Comptroller Glenn Hegar will postpone until late 2021 the date that medical practices will be required to pay taxes on medical billing services provided by an outside company.
The delay will allow industry time to seek a legislative change. The policy remains that medical billing services that occurred before a claim was submitted are not taxable insurance services.
Prior to this update, the comptroller’s office announced in November 2019 that medical billing services would be subject to sales and use taxes starting Jan. 1st, 2020. The original announcement stated:
Beginning January 1, 2020, it is agency policy that medical billing services, including those performed prior to submitting a claim to an insurance company, to provide additional information, or to adjust a submitted billing, are taxable insurance services. The services may include assigning codes for the preparation of claims, verifying insurance eligibility, preparing claim forms for filing, filing the claim, resubmitting and adjusting claims, reviewing and appealing denied claims, settling claims, and posting payment for a claim.
In an earlier review in 2002, the agency determined that “merely completing a form for the insured did not rise to the level of claim processing” and that “claim processing does not begin until receipt of a claim by an insurance company.” So, medical billing services before the claim was submitted were not taxable. Now, the Attorney General has determined that the timing of the start of an insurance service is irrelevant as long as the services relate to an insurance policy. Considering preparing a claim “an inherent part of the insurance claim process,” medical billing services are deemed to be insurance services.
The Texas Medical Association has raised concerns that preparing an insurance claim should not be considered an inherent part of the insurance claim process. Also, it’s noteworthy that Physicians unlikely to be able to pass along this tax to patients because payment rates are typically established. The Texas Medical Association has reached out to the Comptroller’s Office to discuss the change. Read more about this update on the Texas Medical Association website.
