A billing manager at a gastroenterology practice in Houston pulled a report she had never run before: claims paid more than 45 days after the payer received them, by payer, for the first quarter of 2026. One regional PPO had paid 640 clean claims late, most of them 50 to 70 days after receipt. None of the remits showed a penny of interest. When she called provider relations, the representative said the practice would need to submit a request. In eleven years nobody at the practice had ever asked.
That is how state prompt pay laws work in most of the country. The statute sets a clock, the payer is supposed to pay interest automatically when it runs out, and in practice the interest is paid only to providers who track the clock and ask. The amounts per claim are small. The pattern across a year of claims is not, and the record of late payments is worth more than the interest when the contract comes up for renegotiation.
A definition first, because the whole subject turns on it. A clean claim is a claim that has no defect, impropriety or missing information that would prevent the payer from adjudicating it, submitted on the standard form with the required fields complete. Statutes vary in wording; the practical version is: a claim that passed the payer's front-end edits and needed nothing more from you.
Key takeaways
- Most states give payers 30 days for electronic clean claims and 45 days for paper, with interest or penalties when they miss it, but the specifics differ enough that you need your own state's numbers written down.
- The clock starts at the payer's receipt date, so your clearinghouse acceptance report (the 277CA) is the proof you will need.
- Self-funded employer plans governed by ERISA are outside state prompt pay laws entirely; Medicare, Medicare Advantage and Medicaid have their own federal timeliness rules.
- Interest on one claim is a few dollars; the value is in the aggregate demand letter and the state insurance department complaint that follows a payer that ignores it.
- California's AB 3275 took effect January 1, 2026 and moved plans to a 30 calendar day clock, a good example of why the state table needs an annual review.
How the clean claim clock works
Three dates matter on every claim. The date you submitted it, which is in your practice management system. The date the payer received it, which is the date on the 277CA claim acknowledgment your clearinghouse returns once the payer accepts the claim into adjudication (for paper claims, the mailing date plus a few days). And the date the payer paid or denied it, which is the check or EFT date on the 835 remittance. The clock runs from receipt to payment or denial. A request for additional information, sent within the time the statute allows, usually stops the clock until you respond.
The payer's obligations differ by state but follow a pattern: pay the clean claim within the period, or deny it within the period with a reason, or request specific additional information within a shorter period. Silence past the deadline is the violation. Underpayment is also a violation in most states, with the clock running on the unpaid portion.
Interest is the usual remedy, at a statutory annual rate applied per day late. Some states add penalties on top. A few, Texas being the largest, calculate the penalty from the gap between billed charges and the contracted rate, which is why the Houston billing manager's numbers are much bigger than they would be in New York.
State prompt pay laws in four states: four different clocks
These are the rules for fully insured commercial plans as we understand them in mid 2026. Each statute has exceptions, and the state insurance department pages are the source of record; confirm before you send a demand.
| State and statute | Electronic clean claim | Paper clean claim | Remedy for late payment | Notes |
|---|---|---|---|---|
| Texas, Insurance Code Chapters 843 and 1301 | 30 days | 45 days | 1 to 45 days late: lesser of 50% of the difference between billed charges and contracted rate, or $100,000. 46 to 90 days late: lesser of 100% of the difference, or $200,000. Over 90 days: the 46 to 90 day penalty plus 18% annual interest | Underpayments carry parallel penalties on the underpaid amount. Texas Department of Insurance enforces and takes provider complaints |
| New York, Insurance Law 3224-a | 30 days | 45 days | 12% annual interest, paid automatically; no interest owed if under $2 on a claim | Payer must pay, deny or request information within 30 days of receipt. Department of Financial Services takes complaints |
| California, Health and Safety Code 1371 and Insurance Code 10123.13, as amended by AB 3275 | 30 calendar days from January 1, 2026 (previously 30 working days, 45 for HMOs) | Same | 15% annual interest; if the plan fails to pay interest automatically, an added fee of the greater of $15 or 10% of the accrued interest | AB 3275 signed September 27, 2024. Department of Managed Health Care regulates most plans, Department of Insurance the rest |
| Florida, Statute 627.6131 | Pay, deny or contest within 20 days | Pay, deny or contest within 40 days | 12% simple annual interest on overdue claims | Electronic claims must be paid or denied within 90 days, paper within 120; failure by 120 or 140 days creates an uncontestable obligation to pay. Office of Insurance Regulation |
The California change is the one to notice this year. Before January 1, 2026, plans regulated by the Department of Managed Health Care had 45 working days for HMO claims and 30 working days for others. AB 3275 moved all of them to 30 calendar days and raised the fee for not paying interest automatically. If your fee schedule variance or aging reports still use the old clock, they are wrong for every California claim since January.
The plans state law cannot reach
This is the part everyone skips, and it explains why a demand letter sometimes gets a polite refusal. Self-funded employer health plans are governed by the federal Employee Retirement Income Security Act (ERISA), which preempts state insurance laws. A plan administered by a large insurer's name on the card but funded by the employer is not subject to the state prompt pay statute. Most covered workers with employer coverage are in self-funded plans, so a substantial share of your commercial claims are outside the state law. The 271 eligibility response sometimes identifies the plan as self-funded; the payer's provider portal usually does; when in doubt, ask provider relations in writing.
Government programs have their own rules. Medicare fee-for-service must pay clean electronic claims within 30 days of receipt and owes interest if it does not, at a rate the Treasury sets and updates periodically. Medicare Advantage plans must pay 95 percent of clean claims from non-contracted providers within 30 days under 42 CFR 422.520 and owe interest on late ones; contracted providers are governed by their contract. State Medicaid agencies must pay 90 percent of clean claims within 30 days and 99 percent within 90 days under 42 CFR 447.45, and Medicaid managed care plans are held to whatever the state contract says, which is often the same standard or a stricter one.
So before you build a late-payment demand, sort the claims into four buckets: fully insured commercial (state law applies), self-funded (contract and ERISA only), Medicare and Medicare Advantage (federal rules), and Medicaid (federal floor plus state contract). Only the first bucket goes in the state law letter.
What the interest is actually worth
Do the arithmetic before deciding how much effort to spend. Interest at an annual rate, applied to a claim, for the number of days late: claim amount times rate times days late divided by 365.
- New York: a $180 clean claim paid 40 days late at 12 percent. 180 times 0.12 times 40 divided by 365 is $2.37. It is over the $2 floor, so it is owed.
- Florida: a $400 claim paid 30 days past the 20-day electronic deadline at 12 percent. 400 times 0.12 times 30 divided by 365 is $3.95.
- California: a $150 claim paid 20 days late at 15 percent. 150 times 0.15 times 20 divided by 365 is $1.23; if the plan did not pay it automatically, add the $15 fee, which is the part with teeth.
- Texas: a claim with billed charges of $250 and a contracted rate of $120, paid 50 days late. The penalty is 100 percent of the $130 difference, capped at $200,000 in aggregate, so $130 on a $120 claim.
Now multiply. The Houston practice's 640 late claims from one payer, if the average billed-to-contracted gap was $110 and most fell in the 46 to 90 day tier, represent a penalty claim in the neighborhood of $70,000 for one quarter from one payer. The same 640 claims in New York, averaging $160 and 25 days late, would be worth about $840 in interest. Both numbers are worth pursuing, for different reasons. The Texas number is real money. The New York number is a documented pattern of 640 statutory violations, which the Department of Financial Services takes seriously and which the payer's contracting team knows it does.
How to collect it
The process is the same in every state; only the numbers change. First, build the report. From the practice management system, export paid claims for the period with payer, claim number, patient account, date of service, billed amount, paid amount, contracted amount and remit date. Add the payer receipt date from the 277CA archive in the clearinghouse. Compute days from receipt to remit, subtract the statutory period, and keep the rows above zero. Remove denials with a legitimate information request inside the allowed window, remove self-funded plans, remove government programs.
Second, compute the amount owed per claim using your state's formula and check whether any interest was already paid (it appears on the 835 as a separate line or adjustment code when it is paid). Third, send a written demand to the payer's provider relations or claims dispute address named in your contract, with the spreadsheet attached, the statute cited, and a 30-day response request. Keep the tone administrative: it is a request for a payment the statute already requires.
Fourth, if the payer does not pay or respond, file a complaint with the state regulator using the same spreadsheet. Texas, New York, California and Florida all have provider complaint processes. Fifth, bring the report to every contract negotiation. A payer that owes you interest on 640 claims a quarter has a hard time arguing about a 2 percent rate increase. Our payer performance review builds this report as a standard deliverable, because in our experience most practices have never seen their own late-payment data.
Questions we hear
The payer says the claim was not clean because it pended for review. Does the clock stop?
Not just because the payer chose to review it. The clock stops when the payer sends you a request for specific additional information within the statutory window, and restarts when you respond. An internal medical review with no request to you is the payer's problem, not yours. Ask for the date and content of the information request; if there is none, the claim was clean.
Is it worth doing this for a small practice?
Run the report once. If your late-payment rate is under a few percent and the payers pay interest automatically, file it and check yearly. If one payer stands out, and in our experience one usually does, the report costs a few hours and pays for itself in the contract conversation even if the interest never arrives.
Can we charge the patient interest or a late fee instead?
No. Prompt pay obligations run from the payer to the provider. Most participation agreements prohibit billing the patient for anything but their cost share, and your patient financial policy should treat payer delay as the practice's problem to chase.
What to do this week
- Write down your state's clean claim period, interest rate, penalty structure and regulator on one page, with the statute citation and the date you checked it.
- Confirm your clearinghouse retains 277CA acknowledgments for at least two years and that you can export receipt dates by claim.
- Run the late-payment report for the last full quarter by payer and sort the claims into the four buckets.
- Tag self-funded plans in the practice management system so the report can exclude them automatically next time.
- Send the first demand letter to the single worst payer and calendar a 30-day follow-up.
- Add the late-payment rate by payer to the monthly revenue cycle dashboard next to days in AR.
