The short answer
If an HMO, PPO or EPO plan that TDI regulates pays a contracted provider's clean claim late, it owes the contracted rate plus a penalty on billed charges minus the contracted rate (Ins. Code 1301.137 for PPO and EPO plans, 843.342 for HMOs): 50%, up to $100,000, if it pays 1 to 45 days late, 100%, up to $200,000, if 46 to 90 days late, and the same from day 91 plus 18% annual interest on the penalty. For a physician practice, that interest goes to the state, not to you. Penalties are calculated per claim. Ask the carrier first; if it refuses, complain to TDI.
Step one is the ID card
Before any math, look at the front of the patient's ID card. Cards for plans that are governed by state law and regulated by TDI must show "TDI" or "DOI" there, under 28 TAC 21.2820 (TDI Prompt Pay FAQ). With the mark, the plan is fully insured and TDI-regulated. Without it, the plan is self-funded: federal law governs it, and TDI's FAQ says the prompt pay laws are "not applicable to self-funded ERISA plans." That is most of the market. TDI says "most people with a health plan in Texas have a self-funded plan," and a large insurer's name on a card can mean it only administers one.
The same FAQ lists other coverage the law doesn't reach: traditional Medicaid and Medicaid HMOs, CHIP, Medicare Advantage and Medicare Supplement plans, TRICARE, and workers' compensation. Original Medicare runs on federal rules. And the law covers plans issued in Texas, so a fully insured plan issued in another state is outside it too. If the card is missing or unclear, ask the carrier's provider line whether the plan is fully insured and issued in Texas, and note the answer with the call reference. Record the card check once, at intake, and every later review can start from it.
Two more conditions. The penalties are owed to contracted (preferred) providers, on clean claims. And the billed charges they are computed on have to hold up: TDI says billed charges can't be unreasonable and must comply with other law, so an inflated charge doesn't buy a bigger penalty.
When a claim is late
A clean claim must be paid within 30 days of receipt if it was filed electronically, or 45 days if it was not (TDI Prompt Pay FAQ). Paying isn't the only way to meet that deadline: a carrier that denies the claim in writing, or pays the undisputed part and explains the rest, within the period hasn't paid late (Ins. Code 1301.103).
The count starts on the date the carrier received the claim, and TDI's rule fixes that date by how the claim was sent (28 TAC 21.2816):
- Electronic: the date the carrier or its clearinghouse electronically verifies receipt, or the next business day if it arrives after hours.
- First-class mail: the fifth day after it was sent.
- Overnight delivery, return-receipt mail or hand delivery: the date the delivery receipt is signed.
- Fax: the date of the transmission acknowledgment, or the next business day if sent after hours.
If the carrier's clearinghouse sends neither a confirmation nor a rejection within 24 hours of submission, your clearinghouse must provide the confirmation. Keep every acceptance acknowledgment. It fixes the receipt date the penalty math starts from, and a claim that rejected was never received, which is why the acceptance report matters.
The penalty math
Illustrative arithmetic, not legal advice.
Take a clean claim with billed charges of $850 and a contracted rate of $300. The penalty is figured on the difference, $550. If billed charges equal the contracted rate, there is no difference and so no penalty, according to TDI's FAQ.
- Contracted rate
- $300
- Penalty, 50% × $550
- $275
The carrier owes $300 + $275 = $575.
- Contracted rate
- $300
- Penalty, 100% × $550
- $550
The carrier owes $300 + $550 = $850.
- Contracted rate
- $300
- Penalty, 100% × $550
- $550
- 18% annual interest on $550 for 120 days
- $32.55
The practice receives $300 + $550 = $850. The carrier also owes the $32.55, but for a non-institutional provider the interest goes to the state.
Interest runs from the date payment was due until the claim and penalty are paid in full, so a claim paid 120 days late carries 120 days of it (1301.137(c), (l); 843.342(c), (m)).
Underpayments follow the same tiers, applied to the underpaid share (1301.137(d) to (g)). The share is the amount underpaid divided by the contracted rate, applied to billed charges minus the contracted rate: if the carrier paid $240 of the $300 on time, 20% of $550 is $110, and paying the $60 balance 1 to 45 days late adds a $55 penalty.
When a TDI-regulated plan pays as secondary, the contracted rate and billed charges used for the penalty are reduced in proportion to the share that plan owes. Institutional providers receive 50% of the penalty, interest included; the other half goes to the state (28 TAC 21.2815).
One claim is small. Thirty claims like the first example come to $8,250 in penalties, and the $100,000 and $200,000 caps only matter on very large claims.
How to find them in your own data
Pull the remittances for TDI-regulated plans
From your 835 data, list each claim from a plan with TDI or DOI on the card: claim number, receipt date, payment date, billed amount, contracted amount and any penalty line already paid. Take the receipt date from the acceptance report, not the day you sent the claim.
Keep only the late clean claims
Set aside claims the carrier asked more information about, which run on their own timeline, then keep the clean claims paid after day 30 (electronic) or day 45 (paper).
Check the remittance
The carrier must show the contracted rate paid and the penalty paid separately on the explanation of payment (843.342(j); 1301.137(j) for PPOs), and TDI's rule adds the billed charges as submitted (28 TAC 21.2815). A late claim with no penalty line is the one to flag.
Calculate each penalty
Penalties are calculated per claim, so run the tiers above claim by claim, with each claim's own billed charges and contracted rate.
Ask the carrier in writing
TDI says to contact the company and assert your right to the penalty first. List each claim with its receipt date, payment date and your calculation. Leave out any claim filed after its 95 days: it was forfeited (28 TAC 21.2806) and earns nothing, so check each claim's 95-day window before you send the list.
If it refuses, complain to TDI
File through TDI's provider complaint system. It needs a copy of the front of the patient's ID card, the EOBs, proof you exhausted appeals and a timeline of dates. Without them, TDI closes the complaint. For more than five claims, call TDI's Help Line at 800-252-3439 first.
One limit: a carrier that leaves the penalty off doesn't owe you a further penalty for that. TDI's FAQ says nothing in the statute or rule adds one, though the carrier may face administrative penalties.
Where this fits in AR
Penalties owed are AR. They sit on claims that look closed, so nobody asks for them, and they come out of the same remittances as underpayments and denials. Review late-paid claims by payer each quarter and the carriers that pay late as a habit show up on their own. If a billing company works your claims, ask it for that list; it comes from data it already has.
The pattern matters beyond your own claims. TDI collects late-payment data from carriers in quarterly data calls, and a carrier that misses the deadlines on more than 2% of clean claims faces administrative penalties (1301.137(k)). The payer rules a Texas practice works under, including the 95-day filing limit, are set out in AR recovery for Texas practices.
Other states take a different route; see how Colorado handles late claims.
Statutes and rules last checked: 24 Oct 2026
