Group health plans with 50 or more participants, including self-insured plans, must be able to conduct electronic transactions in accordance with HHS standards and operating rules.  One of the more challenging aspects of the electronic transaction rules has been the transition to the new International Classification of Diseases, 10th Revision (ICD-10) codes for health claims.

Why ICD Codes Are Important to Group Health Plans

Health care providers have used the current ICD-9 codes (as modified for use in the United States) since 1979 to identify diagnoses and inpatient procedures.  When a provider submits a claim for payment, group health plans, insurers, and other payers use the ICD-9 code supplied by the provider to determine whether the service is covered and to identify the appropriate level of payment.  When the ICD-10 codes become effective, HHS regulations require group health plans to accept and use the new codes when the plans process electronic health claims for payment or conduct other standard electronic transactions.

Employer group health plans must follow prescribed procedures when the plans review a participant’s claim for payment of health care costs.  If a group health plan denies a participant’s claim for coverage of an item or service, the plan must notify the participant of his right to receive the diagnosis code associated with the denied claim and the meaning of the code.  Some group health plans automatically provide this information as part of the claim denial.  The preamble to the regulation implementing this requirement indicates that plans must use ICD codes, when applicable, to identify the diagnosis.  When the ICD-10 codes become effective, group health plans must update their claim procedures to use the new codes.

Health plans also use ICD codes in situations where the codes are not mandated.  For example, plans might use the current ICD-9 diagnosis and inpatient procedure codes to administer disease management programs for certain diagnoses; to evaluate utilization and outcomes for specific procedures; to track cost trends associated with a diagnosis or procedure; or to coordinate care for patients receiving services from multiple providers.  When the ICD-10 codes become effective, the plans will have to switch to the new codes if they wish to continue to track this information.  It will be difficult to relate information gathered using ICD-9 codes to information gathered using ICD-10 codes: plans using data covering multiple years might discover that they must build a new database from scratch after ICD-10 becomes effective.

Making the Transition to ICD-10

ICD-10 updates and modernizes the coding system by creating a much larger number of codes that will allow health care providers to identify medical conditions and inpatient procedures more accurately.  For example, the number of codes for inpatient procedures will increase from 3,824 under ICD-9 to 71,924 under ICD-10; diagnosis codes will increase from 14,025 to 69,823.  There is no direct correspondence between the ICD-9 code and the ICD-10 code for the same diagnosis or procedure: a procedure represented with one code under ICD-9 might have hundreds of possible codes under ICD-10.  Even the format of the ICD-10 codes is different from the ICD-9 format.

Once ICD-10 becomes effective, it will completely replace ICD-9: providers and group health plans will no longer be permitted to use ICD-9 codes for services performed after the effective date.  For a time, however, ICD-9 codes will still be in circulation for services performed before the effective date.  Accordingly, group health plans and other payers will have to process claims using either code set during a transition period.

In the long run, the ICD-10 codes are expected to provide more detailed information about diagnoses and inpatient treatment that will lead to better coordination of patient care, more accurate payment of claims, improved public health information, and other benefits.  In the short term, however, the transition to ICD-10 will be difficult and costly for providers and payers alike.  For a time after the ICD-10 effective date, it is likely that claims processing will be delayed, and that some claims will be incorrectly granted while others are incorrectly denied.

The ICD-10 Effective Date is Postponed

The original date for transition to ICD-10 was October 1, 2013.  In September 2012, HHS concluded that a high percentage of health care providers would not be ready by that date, and the agency postponed the ICD-10 effective date to October 1, 2014.  When HHS refused to postpone the ICD-10 effective date a second time, Congress stepped in.  The Protecting Access to Medicare Act of 2014, enacted on April 1, prohibits HHS from implementing ICD-10 before October 1, 2015.

HHS has announced that it will soon issue an interim final rule establishing October 1, 2015, as the new compliance date for ICD-10.  By that date, group health plans must be able to process health claims that use the new ICD-10 codes.  To the extent that health plans use third-party administrators and other vendors to process health claims, the plan administrator must ensure that the vendors are ready to process claims using ICD-10 codes by the new compliance date.  Plans will need substantial lead time to prepare for ICD-10: for example, HHS estimates that it will take up to 23 months for payers to test their systems for compliance.

Group health plans must be prepared to provide the proper ICD-10 code, and the code’s meaning, upon request to a participant whose claim is denied.  In addition, group health plans that use the current ICD-9 codes for other administrative purposes—such as establishing diagnoses under disease management programs or tracking the cost of inpatient procedures—must adapt affected systems to the ICD-10 codes, and must determine how to resolve the “apples-to-oranges” comparison of information coded under ICD-9 with information coded under ICD-10.

As we explained in our earlier post, here, group health plans must conduct testing and certify to HHS by December 31, 2015, that they comply with the standards and operating rules for certain electronic transactions.  For plans that are conducting their certification testing in the fall of 2015, the new ICD-10 effective date will occur during the period when they are testing electronic transactions with their business partners.  Group health plan sponsors and administrators should develop a compliance strategy that allows for this complication.

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Photo of Amy N. Moore Amy N. Moore

Amy Moore advises public and private companies and tax exempt organizations on a wide range of tax, ERISA, and employment law issues concerning all types of benefit programs.  Ms. Moore counsels some of the world’s largest multinational companies on the design and implementation…

Amy Moore advises public and private companies and tax exempt organizations on a wide range of tax, ERISA, and employment law issues concerning all types of benefit programs.  Ms. Moore counsels some of the world’s largest multinational companies on the design and implementation of innovative benefit strategies, including the restructuring of retirement programs to meet the needs of the modern work force; the use of surplus pension and insurance assets to provide non-traditional benefits; and the establishment of funding and security arrangements for welfare plans and executive compensation.  She represents clients in connection with pension fund investments in private equity funds, hedge funds, group trusts, and derivatives.  She also advises on benefits and compensation issues in acquisitions and divestitures, debt finance, joint ventures, and other corporate transactions.  Ms. Moore represents companies in audits and contested agency proceedings involving benefit plans and advises clients on employee benefits issues that arise in connection with ERISA litigation and settlements.  She also counsels employers on issues of plan administration and the correction of operational problems under government-sponsored remedial programs.