The Department of Health and Human Services (HHS) recently published an interim final rule with comment period entitled “Administrative Simplification: Adoption of Standards for Health Care Electronic Funds Transfers (EFTs) and Remittance Advice.”  The rule establishes streamlined standards for the format and content of transmissions that health plans send to financial institutions when making electronic funds transfers.  Health plans often initiate electronic funds transfers — which involves an electronic order or authorization for a financial institution to credit or debit an account — when they pay claims to health care providers. 

The rule also requires the use of trace numbers to associate electronic funds transfers with related “remittance advice,” which is the term used for the notice that health plans send to health care providers explaining how much the plan is paying.  Currently, many health care providers expend considerable resources to “re-associate” related electronic funds transfers and remittance advice that are sent in separate communications.

As an interim final rule with comment period, the rule is final as of its effective date, but HHS has invited the public to provide comments by March 12, 2012.  HHS could change the rule, but, in the absence of such changes, covered entities must comply with the regulation by January 1, 2014.

The interim final rule is part of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) administrative simplification standards.  HIPAA requires that the Secretary of HHS establish standards for certain financial and administrative transactions that involve the transmission of health information.  HHS has already adopted standards for a wide range of transactions, including those that pertain to health care claims, eligibility for a health plan, health care claim status, and health plan premium payments. In 2010, the Patient Protection and Affordable Care Act amended HIPAA, requiring the Secretary of HHS to establish uniform standards for electronic funds transfers.  Under HIPAA, the interim final rule applies to “covered entities,” which include health plans, health care clearinghouses, and certain health care providers.  HHS predicts that the interim final rule will reduce administrative burdens on covered entities and save approximately $3 billion to $4.5 billion over the next ten years.