Hawaii Court of Appeals Finds Statutory Notice Required In Billing Disputes

     The Intermediate Court of Appeals recently decided two cases regarding a doctor's billing disputes with Island Insurance Company, Ltd.  See Jou v. Schmidt, No. 27369, 2008 Haw. App. LEXIS 213 (Haw. Ct. App. April 29, 2008); Jou v. Schmidt, No. 27370, 2008 Haw. App. LEXIS 215 (Haw. Ct. App. April 30, 2008).

     In No. 27369, Island reduced reimbursement claims submitted by the doctor for services rendered to Island's insured, but never provided formal notice pursuant to Haw. Rev. Stat. 431:10C-304 (3)(B).  Both the Insurance Commissioner and Circuit Court determined statutory notice was not required for billing disputes on no-fault benefits, only for denial of claims.  The ICA reversed, in light of the Supreme Court's decision in Orthopedic Assocs. of Hawaii, Inc. v. Haw'n Ins. & Guar. Co., Ltd, 109 Haw. 185, 124 P.2d 930 (2005).  There, the Supreme Court held the notice requirements were applicable to billing disputes. The same result applied here.  The statute's notice requirement was triggered by a partial denial of claims in the form of reduced or partial payments by the insurer.  Further, the doctor was entitled to interest under Haw. Rev. Stat. 431:10C-304(4) on the balance withheld by Island.  The legislative intent behind the interest provision was to encourage insurers to investigate and act on claims promptly.   Failure to do so would result in the payment of interest.

     The doctor did not do as well in the second case, No. 27370.  There, his invoice for reimbursement was also reduced and no notice was provided.  The doctor failed, however, to request an administrative hearing for over two years.  The ICA determined even though notice should have been sent by Island under Haw. Rev. Stat. 431:10C-304 (3)(B), the applicable two year statute of limitations, Haw. Rev. Stat. 431:10C-315, was not tolled by the failure to provide notice.