Tuesday, August 2, 2022
HomeHealth LawTax Break for Sure Medical Billing Companies in Texas

Tax Break for Sure Medical Billing Companies in Texas


Texas HB 1445, which went into impact on January 1, 2022, exempts medical billing providers carried out earlier than the submission of the related insurance coverage declare from state gross sales tax. The brand new laws legally exempts medical billing providers from the statutory definition of taxable “insurance coverage providers.” Virtually talking, this relieves administration providers firms, and in the end physicians and sufferers, from bearing the burden of tax funds of as much as 8.25% for the availability of sure medical billing providers. The laws is hailed by many as a significant step in reducing needlessly excessive healthcare prices, that are felt by sufferers and suppliers alike.

Historic Taxation of Medical Billing Companies

Since “medical billing providers” haven’t beforehand been outlined and even talked about within the Texas Restricted Gross sales, Excise, and Use Tax Act,[1] their tax standing has historically been topic to the interpretation of the Texas Comptroller of Public Accounts (“Comptroller”). Nevertheless, underneath the Comptroller’s discretion, medical billing providers haven’t at all times been topic to state gross sales tax.[2]It was not till 2019 that the Comptroller started taxing medical billing providers as soon as once more, this time as “insurance coverage providers” pursuant to Tex. Tax Code 151.0039, citing the truth that its earlier place resulted in disparate therapy between medical insurance coverage and different kinds of insurance coverage.

Reclassification of Medical Billing Companies

Following the Comptroller’s inconsistent therapy of medical billing providers all through the years, which resulted in frustration from trade gamers, the Texas legislature lastly spoke on the difficulty through the 2021 legislative session. The brand new laws launched by HB 1445 explicitly signifies that taxable “insurance coverage providers” do not embrace medical billing providers carried out earlier than the submission of the related insurance coverage declare.[3]

The brand new laws offers additional clarification by defining a “medical or dental billing service” as “assigning  codes for the preparation of a medical or dental declare, verifying medical or dental insurance coverage eligibility, making ready a medical or dental declare kind for submitting, and submitting a medical or dental declare.” Nevertheless, this definition may find yourself being a pitfall for service suppliers, as steering signifies {that a} medical billing service should fall squarely inside this definition so as to be exempt from state gross sales tax.

Trade Warning

The definition of medical billing service established by HB 1445  is narrower than the definition traditionally utilized by the Comptroller. Since 2019, the Comptroller has thought of taxable medical billing providers as “medical billing providers to organize a medical insurance coverage declare for submitting,” together with “these [services] carried out previous to submitting a declare to an insurance coverage firm, to offer extra info, or to regulate a submitted billing.”[4] Due to this fact, the Comptroller may nonetheless tax medical billing providers to the extent that such providers fall exterior the slender statutory definition however nonetheless throughout the Comptroller’s broader definition of medical billing service. Firms ought to narrowly tailor medical billing operations to suit throughout the statutory definition so as to safe the state tax exemption.

Because the new laws has solely been in impact for 2 months, trade individuals should wait to see whether or not the Comptroller will defer fully to the statutory language and the spirit of HB 1445 or whether or not the workplace will wield its remaining discretion to proceed taxing sure pre-submission medical billing providers.

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