A federal judge in Atlanta has temporarily blocked Georgia's new prompt payment law for self-funded plans' third party administrators, siding with America's Health Insurance Plans (AHIP) in citing the preemption of federal law.
In 2011, Georgia lawmakers extended the state’s 1999 prompt payment law to self-funded health plans, requiring third third party administrators (often insurance companies) to pay errorless electronic claims within 15 business days and paper claims within 30 calendar days, with no extensions.
Federal regulations, under the Employee Retirement Income and Security Act (ERISA), give third party administrators 30 days for processing and a 15 day extension. Georgia’s new law, AHIP’s lawsuit argued, “would give rise to exactly the kind of patchwork of state regulation that ERISA preemption is designed to prevent.”
Judge William Duffey, Jr., from the Northern District of Georgia, largely agreed, writing that the law would cause third party administrators to “suffer irreparable injury” and subject them to “the costs and burdens, including increased employee time, of modifying their claims processing systems, of monitoring compliance and of preparing quarterly reports to Georgia regulators.”
Georgia’s 1999 prompt payment law applied to insured ERISA plans, not self-funded ERISA plans, and since then, the percentage of workers covered by self-funded plans nationally has increased from about 40 percent to 58 percent, according to the Employee Benefits Research Institute. In Georgia, self-funded plans are estimated to cover close to 65 percent of workers, according to court documents.
AHIP’s lawsuit was filed against Ralph Hudgens, Georgia’s Insurance and Safety Fire Commissioner, who argued that the 2011 law — which passed by wide margins — was careful to apply only to third party administrators and not self-funded plans themselves. Third party administrators aren’t ERISA fiduciaries like self-insured plans, Hudgens argued, and so shouldn’t be subject to the federal law. Hudgens also argued that ERISA’s preemption doesn’t include payment timing rules.
The Georgia Medical Association and the American Medical Association filed briefs in support of the law, sensing the potential for a national precedent. “This case has national implications for resolving the regulatory void in which health insurers are unaccountable for chronically late payments when they serve as administrators for self-insured employers,” AMA President Jeremy Lazarus, MD, said in October.
Duffey, the federal judge, placed a temporary injunction on the law, which was set to take effect January 1, while the court considers a permanent ban.