Prompt Pay Law Set to Shift in GA

An ill wind is blowing in Georgia, and I don't mean Hurricane Sandy.

Two national healthcare organizations, America's Health Insurance Plans and the American Medical Association, are waging a battle of legal documents over an amendment to the state's existing prompt pay law that would extend prompt pay regulations from traditional insurers to include third party administrators (TPA).

The problem, according to AHIP, is that the Insurance Delivery Enhancement Act of

2011, set to take effect January 1, 2013, wades into an area where a decades-old federal law already reigns supreme. The Employee Retirement Income Security Act, commonly known as ERISA, exempts self-funded payers from state health insurance laws.

Not so fast, says the AMA, which along with the Medical Association of Georgia, has filed a petition to be added to the case as co-defendants along with Ralph Hudgens, Georgia's insurance commissioner.

In 25-words or less, the IDE Act, which was signed by Gov. Nathan Deal (D) in May 2011, says TPAs must pay clean claims within 15 days if submitted electronically and 30 days if submitted by mail.

According to a MAG advocacy brief, without the law "there is no deadline for a TPA to pay a healthcare provider or notify the healthcare provider why the claim will not be paid."

Historically, self-funded payers have included large employers that can afford to take on the risk of healthcare coverage. A third party administrator, typically a health insurer, is paid to administer the account, including the claims process. Because the employers aren't insurance companies, regulations such as prompt pay laws don't apply to them.

States have never been happy that this significant chunk of insurance business doesn't fall under their regulations. The tension has mounted in recent years as there has been a move among smaller and medium-sized companies, and even some smaller governments to become self-funded plans. That means that states face having their prompt pay laws cover an even smaller piece of the enrollee pie.

In Georgia, self-funded plans account for 65% of enrollment, according to Donald J. Palmisano Jr., the MAG executive director. That leaves only 35% who fall under the state's existing prompt pay law.

And that frustrates physicians who contend that TPAs slow walk claims payments.

"We have a general idea, from an informal sampling, that a majority of the claims (fully insured and self-insured) were paid after 30 days," Palmisano explained in an e-mail exchange. "The problem is that an explanation of benefits is not clear if it is fully insured or self-funded. That is why the new law gives the commissioner of insurance the ability to get this information."

The lawsuit, which began in late August and is still in the document stage, is filed in the U.S. District Court in Atlanta. On Oct. 26 AHIP filed a number of new documents, including one that requests that a date be set for oral arguments on the case and another that opposes the AMA and MAG efforts to intervene.

Last week I spoke with Robert Zirkelbach, an AHIP spokesperson. He is quick to note that the suit is not an issue about how quickly doctors are paid. "We want physicians to be paid in a timely manner for their services."

This lawsuit, he says, is about preserving the sanctity of ERISA and "enabling self-funded employers to offer affordable, uniform benefits to their employees."

AHIP's concern, Zirkelbach explains, is that without ERISA protection, employers (and health plans) could face a patchwork of insurance laws and that would create "a very troubling precedent." He added that Georgia lawsuit is about "who governs ERISA plans. Longstanding federal law states very clearly that these plans are governed at the federal level. This is not about how doctors are paid."

He noted that AHIP is asking the court to only throw out the part of the IDE Act that applies to self-funded employer plans.

Prompt pay laws have been on the books since the 1990s. Today all 50 states have some type of prompt pay laws that require clean claims to be paid within 15 to 60 days. Noncompliance can result in fines and penalties, including interest payments.

It's unclear which states, if any, have duplicated Georgia's efforts to apply prompt pay laws to self-funded companies.

The AMA has cited Indiana and Ohio as having similar laws, but a quick check revealed that the Ohio Department of Insurance says on its website that its prompt pay law "does not apply to Medicare, Medicaid or self-insured ERISA plans." In Indiana, the state medical association's website has a similar prompt pay disclosure.

Jeremy Lazarus, MD, the AMA president told me in an interview that the AMA views the Georgia case as having a "national precedence" that will fill a "regulatory void." The issue is that "physicians want to be taking care of patients and not hassling with insurers to get paid."

Be sure and keep an eye on this one.