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Administrative Simplification

Timeline of Provisions

Administrative Simplification

Eligibility and claim status


The Administrative Simplification provision under Section 1104 of the Patient Protection and Affordable Care Act (the Act) intends to improve the standards for electronic transactions mandated by the Health Insurance Portability and Accountability Act (HIPAA). The intent of this provision is to reduce administrative costs by adopting a set of operating rules for each transaction and to create as much uniformity in implementing electronic standards as possible.

Video: Administrative Simplification and the Affordable Care Act

Paying for a doctor visit or seeing a specialist often involves complex paperwork. This provision has the potential to simplify our experience with the health care system. View video

The rules for Administrative Simplification govern the compliance by covered entities – health benefit plans, health care clearinghouses, and certain health care providers.

To date, the Department of Health and Human Services (HHS) released two interim final rules (IFR) that govern compliance for eligibility and claim status and the second for electronic funds transfer (EFT) and electronic remittance advice (ERA). A final rule was issued on health plan and national provider identifiers.

Health Plan Identifier and National Provider Identifier

A final rule adopted a 10-digit health plan identifier (HPID) for health plans to use in electronic HIPAA transactions. HIPAA transactions include: medical and dental claims and encounters, payment and remittance advice, claims status request and response, eligibility and benefit inquiry and response, benefit enrollment and disenrollment, referrals and authorizations, and premium payment.

Certain health plans (including self-funded plans) are required to obtain an HPID by Nov. 5, 2014, and small health plans by Nov. 5, 2015. Health plans apply for an HPID through the Centers for Medicare and Medicaid Services (CMS). Third-party administrators cannot obtain an HPID for self-funded health plans. Fully insured customers are not required to obtain an HPID for their standalone fully insured medical plans.

The final rule also requires certain individual health care providers, who previously were not required to do so, obtain and disclose a national provider identifier (NPI) in 2013. At this time, the use of an HPID would only be required for electronic transactions.

The effective date to comply is Nov. 5, 2014, and small health plans Nov. 5, 2015.


On April 1, 2014, President Obama signed into law legislation that states that the Department of Health and Human Services (HHS) cannot require the ICD-10 code set as the standard until at least Oct. 1, 2015.

ICD-10 refers to the International Classification of Diseases, 10th Revision developed by the World Health Organization. ICD-10 replaces ICD-9 codes used by physicians and health care professionals to record and identify diagnoses and procedures for purposes of claims payment and reporting. ICD-10 affects diagnosis and inpatient procedure coding; it does not affect CPT coding for outpatient procedures.

The transition to ICD-10 is significant and challenging for both payers and providers. The number of codes under ICD-10 will increase dramatically. In total, the number is increasing from approximately 18,000 to 140,000 codes. Over time, a number of benefits from the ICD-10 implementation will emerge: improved payment accuracy, fewer rejected claims and improved disease management.

UnitedHealthcare was on track to comply with the previous compliance date of Oct. 1, 2014.

Electronic Funds Transfer and Remittance Advice Transactions

On Jan. 5, 2012, HHS released an IFR addressing the standards for EFT and ERA transactions that a health plan must comply with to transmit payments to providers via EFT.

Today, with few exceptions, the electronic remittance advice and the health care payment/processing information are sent in different electronic formats through different networks, contain different data that have different business uses, and are often received by the health care provider at different times. The two transmissions must be "reassociated" or matched back together by the provider.

The HHS believes this issue can be alleviated by requiring that a single electronic file format be used by all health plans that transmit health care EFT to their financial institutions.

UnitedHealthcare is compliant under the requirements outlined in the IFR and continues to encourage providers to sign up for EFT and ERA which they can request at:

Eligibility and Claim Status

On July 8, 2011, the IFR outlined operating rules covering two electronic health care transactions:

  • Eligibility – verifying if a patient has sufficient coverage (e.g., benefit coverage, copays, base deductible and remaining deductible); and
  • Claim Status – the stage of a health care claim (pending, allowed, settled, denied, etc.) after it's submitted to a health insurance company.

UnitedHealth Group completed the CORE Phase I and II testing process that certifies that UnitedHealth Group can deliver more efficient and predictable patient-eligibility and claims-verification information to physicians, hospitals, physician offices and other care providers. UnitedHealth Group is the first health care organization to complete certification using the updated 5010 platform.


Jan. 1, 2013 Eligibility and claim status operating rules compliance date.
May 6, 2013 National Provider Identifier compliance date.
Jan. 1, 2014 Electronic funds transfer and electronic remittance advice compliance date.
Nov. 5, 2014 Health Plan Identifier compliance date. For small health plans, the date is Nov. 5, 2015.
At least Oct. 1, 2015 ICD-10 new compliance date.

These rules are part of a series of administrative simplification rules expected over the next several years required by the Act. Below are future regulations and their proposed effective dates for compliance:

  • Requirements that health benefit plans certify compliance with all HIPAA standards and operating rules, and phased in beginning Jan. 1, 2014
  • Operating rules for claims and encounters, enrollment/disenrollment, premium payments, referral certification/authorization, and claim attachments, effective Jan. 1, 2016

For More Information

Frequently Asked Questions

Terms and Definitions

What is an operating rule?

The Act defines operating rules as "the necessary business rules and guidelines for the electronic exchange of information that are not defined by a standard or its implementation specifications as adopted for purposes of this part."

What is the difference between operating rules and standards?

Operating rules support the adopted standards for health care transactions. Operating rules foster and enhance uniform use of the adopted standards and implementation guides across the health care industry. Standards and operating rules overlap in their functions to increase uniformity, but differ in their purposes.

What is electronic funds transfer (EFT)?

EFT is the electronic message used by health plans to order, instruct or authorize a depository financial institution to electronically transfer funds through the ACH network. The EFT includes information about the transfer of funds such as the amount being paid, the name and identification of the payer and payee, bank accounts of the payer and payee, routing numbers, and the date of the payment.

What is remittance advice (RA)?

An RA is an explanation from the health plan to the provider about the claim payment. A health plan rarely pays a provider the exact amount a provider bills the health plan for claims. A health plan adjusts the claim charges based on contract agreements, secondary payers, benefit coverage, expected copays and coinsurance, etc. These adjustments are described in the remittance advice.

What is ACH?

ACH stands for Automated Clearing House (ACH) and is an electronic network for financial transactions in the United States.

What is a trace number?

The trace number is also referred to as the TRN Segment. It is a type of tracking code for ERA and the health care payment/processing information transmitted via EFT. Ideally, the TRN Segment within a specific ERA is duplicated in the health care payment/processing information transmitted via EFT. After the health care payment/processing information is transmitted with the TRN Segment to a health care provider, the provider's practice management system can use the TRN Segment to automatically reassociate the health care payment/processing information with its corresponding ERA and post the payment in the provider's accounts receivable system.

What is a National Provider Identifier?

NPI is a unique 10-position all numeric identifier that providers must use to identify themselves in HIPAA-related transactions and communication. NPIs are assigned by the Centers for Medicare & Medicaid Services.

Health Plan Identifiers

What is a Health Plan Identifier?

In the final rule, HHS defined the primary purpose of the HPID is for use in standard transactions to identify health plans in the appropriate loops and segments and to provide a consistent standard identifier so a health plan no longer uses multiple identifiers in HIPAA-covered transactions. HHS proposed a 10-digit identifier that mirrors the format for NPI.

How does a health plan identifier work?

Health plan identifiers facilitate routing of covered transactions or, in other words, "to determine either where the standard electronic transactions are to be sent if the receiver is [a] health plan or from where they came from if the sender is a health plan." The primary function of the HPID is to create a standard data element for covered entities to identify health plans in HIPAA-covered transactions.

What is the cost impact of a health plan Identifier?

The final rule states that the HPID is expected to yield the most benefit for providers, while health plans will bear most of the costs. Costs to all commercial and government health plans together (Medicare, Medicaid programs, IHS, VHA) are estimated to be $650 million to $1.3 billion. However, commercial and government health plans are expected to make up those costs in savings. The final rule states that the industry will not find that the HPID overly burdensome. HPID's anticipated 10-year return on investment for the entire health care industry is expected to be between $1.3 billion to $6 billion.

What is the advantage of a health plan identifier to providers?

Health care providers can expect decreased administrative time spent by providers interacting with health plans, and a material cost savings through the automation of processes for every transaction that moves from manual to electronic implementation.

Will self-funded customers need to obtain a health plan identifier?

Yes, under the final rule, self-funded customers would need their own HPIDs by Nov. 5, 2014, if they meet the definition of a Controlling Health Plan (CHP). Third party administrators (TPA) cannot obtain a HPID for self-funded health plans. A CHP is defined as a health plan that (1) controls its own business activities, actions, or policies; or is controlled by an entity that is not a health plan and (2) if it has a subhealth plan(s) (SHPs), exercises sufficient control over the subhealth plan(s) to direct its/their business activities, actions, or policies. Under the final rule, all CHPs are required to obtain a HPID. The number of HPIDs required will depend on how the customer has set up their plan.

After Nov. 7, 2016, UnitedHealthcare will be required to use the HPID in covered HIPAA transactions if UnitedHealthcare identifies a health plan in the transaction. However, if UnitedHealthcare does not identify the self-funded plan as the payer or source in HIPAA transactions, but instead identifies a UnitedHealthcare entity that acts as a TPA (as is permitted under HIPAA standards), then UnitedHealthcare is not required to use the plan's HPID. But if the self-funded plan is a CHP, it is still required to obtain an HPID, regardless as to whether its HPID is used in transactions. (Fully insured customers would not need an HPID as UnitedHealthcare manages the claim transactions, and they do not meet the definition of a CHP. Only health plans need an HPID.)

Do health reimbursement accounts (HRAs) need an HPID?

Health reimbursement accounts (HRAs) with 50 or more participants are considered self-funded health plans under HIPAA because HRAs are funded by the employer. This means that a customer with a fully insured medical plan that also manages an HRA will likely be a controlling health plan and need to obtain an HPID for the HRA. If an HRA is a small health plan, with annual receipts of $5 million or less, it has until Nov. 5, 2015, to obtain the HPID. (Fully insured customers are not required to obtain health plan identifiers for their standalone fully insured medical plans.)

Where do self-funded customers apply for an HPID?

The online application was posted March 29, 2013, on CMS's Health Plan and Other Entity Enumeration System (HPOES). HPOES is housed in the CMS Health Insurance Oversight System and must be accessed via the CMS Enterprise Portal. HPOES users first must register themselves and their organizations, then select the type of HPID application (CHP, SHP or OEID). For step-by-step instructions or more information, visit the CMS Health Plan Identifier page.

Do self-funded customers need just one HPID as an employer or one for each account plan?

Self-funded customers should review the definition of a controlling health plan (CHP) to determine how many health plan identifiers they need. A CHP is defined as a health plan that (1) controls its own business activities, actions, or policies; or is controlled by an entity that is not a health plan and (2) if it has a subhealth plan(s) (SHPs), exercises sufficient control over the subhealth plan(s) to direct its/their business activities, actions, or policies. Under the Final Rule, all CHPs are required to obtain a HPID. The number of HPIDs required will depend on how the customer has set up their plan. Self-funded customers with questions should contact CMS and click on "Submit a Request" in the upper right of the page.

How will health plan identifiers be assigned?

HPIDs would only be assigned by an enumeration system through an online application process. A health plan or other entity, when applying online, would be required to provide certain identifying and administrative information.

Operating Rules and EFT Standards

Why are operating rules needed? Aren't the HIPAA standards sufficient?

While the standards significantly decrease administrative burden on covered entities by creating greater uniformity in data exchange and reduce the amount of paper forms needed for transmitting data, gaps created by the flexibility in the standards permit each health benefit plan to use the transactions in very different ways. The operating rules help close these gaps.

What are the advantages to the new operating rules for EFT and RA?

The automated reconciliation saves time for providers' accounts receivable process. Ideally, the time savings that will be realized will increase provider migration from paper checks to EFT for claim payments. And, there will be savings to health plans in transmitting EFT in place of the time and material cost of sending paper checks as more health care providers migrate to EFT.

Do the EFT standards mean that health plans must submit EFT through the ACH Network?

No, this interim final rule neither prohibits nor adopts any standards for EFT transmitted outside of the ACH Network. But, when health plans do send health care EFT through the ACH Network, they must do so using the new EFT standards.

Do the EFT standards apply to all claim payments made via EFT?

No, the new EFT standards do not apply to claim payments made outside of the ACH Network.

Impact of Administrative Simplification on Entities and Transactions

What organizations or entities are impacted by the interim final rule on administrative simplification?

All HIPAA-covered entities would be affected as well as software vendors and any other business associates providing transaction-related services, such as billing support and third party administrators. Covered entities include:

  • All health benefit plans
  • Health care clearinghouses and vendors
  • Physicians, facilities and health care professionals
What if providers do not submit transactions electronically?

Some health care providers may choose not to conduct transactions electronically, but they are required to use these operating rules for HIPAA transactions that they do conduct electronically.

In practice, health plans will only have to use the health care EFT standards if the provider wants to receive claim payments via EFT through the ACH Network.

What do providers need to do to prepare for conducting transactions electronically?

The EFT standards are the implementation specifications for the electronic format that a health plan is required to use. The standards do not impact how a provider's financial institution transmits the TRN segment to the provider. There will be no direct systems costs to physician practices and hospitals to implement the new EFT standards.

What if a provider chooses not to accept electronic funds transfers?

Physician practices and hospitals drive overall adoption and usage of EFT. Most health plans give physician practices and hospitals a choice of payment between paper checks (sometimes accompanied by paper remittance advice) or EFT.

What if a health plan does not transmit payment electronically?

HHS estimates that it will cost health plans, on average, $4,000 to $6,000 to implement the EFT standards. This is a one-time cost to health plans. HHS assumes that many commercial health plans will have minimal to no costs; for example, health plans that must simply update their vendor contracts to accommodate this change without any additional operational costs.

What are the financial benefits of EFT for the health care industry?

The IFR cited a 2009 UnitedHealth Group working paper that reported $108 billion could be saved industry wide over the course of 10 years if health care claim payments were required.