Prompt-Pay Reform in Georgia Blocked by Judge Temporarily

January 02, 2013

In a case pitting physicians against health insurers, a federal judge on Monday temporarily blocked an amendment to Georgia's prompt-pay law that would require companies cutting checks on behalf of self-funded employer health plans to pay errorless electronic claims within 15 working days or suffer a 12% penalty.

The law originally applied only to traditional health insurers, not third-party administrators (TPAs) of self-funded plans. Such plans are governed by a federal law called the Employee Retirement Income Security Act (ERISA), which allows these plans to pay claims through TPAs within 45 days. In 2011, the Georgia state legislature amended its prompt-pay law to cover ERISA plans and their TPAs.

In his ruling, US District Judge William Duffey, Jr., in Atlanta, Georgia, said that ERISA explicitly takes precedence over state law.

That is the same argument made by America's Health Insurance Plans (AHIP), a trade association with members that sometimes function as TPAs for ERISA plans as opposed to providing traditional insurance. AHIP sued Georgia to overturn the amendment to its prompt-pay law, which was scheduled to take effect on January 1. In his ruling, Duffey stated that AHIP was likely to win the case on the merits of its position, which was enough to justify a preliminary injunction.

The legal combatants include the American Medical Association and the Medical Association of Georgia, which have filed briefs in support of the Georgia law. They contend that physicians need more expansive prompt-pay protection because employers increasingly are switching from traditional insurance to self-funded ERISA plans managed by TPAs. As a result of this trend, only 35% of the health insurance market in Georgia was subject to the prompt-pay law and its 15-day deadline in 2011, according to the societies.

The societies also maintain that ERISA does not trump the Georgia law. Although it regulates the relationship between self-funded plans and beneficiaries, their argument goes, ERISA does not pertain to dealings between TPAs and physicians.

US District Judge William Duffey, Jr. disagreed with that line of reasoning, stating that the prompt-pay law as amended indeed encroaches on ERISA plans and therefore is preempted by the federal law. He also said AHIP members that function as TPAs would suffer "irreparable" financial injury if they had to retool their operations to comply with the law as amended.

AHIP spokesperson Robert Zirkelbach recently told Medscape Medical News that the lawsuit is not about paying physicians on time, which the association affirms. Rather, AHIP wants to ensure that self-funded plans operating in multiple states are subject to a single federal law, not a jumble of state laws, which would make uniform coverage harder and more expensive to achieve. Physicians who seek faster pay from TPAs should lobby Congress to amend ERISA, Zirkelbach said.

Organized medicine worries that if the federal court ultimately issues a permanent injunction against extending Georgia prompt-pay deadlines to TPAs of ERISA plans, other states would be loath to enact similar legislation.

processing....