ATLANTA (CN) - Georgia cannot yet require timely claims payments by insurers that provide third-party administrative services to self-funded health plans, a federal judge ruled.
Self-funded plans, in which employers pay the plan members' claims, are governed by the Employee Retirement Income Security Act (ERISA), which allows these plans to pay claims through third-party administrators within 45 days.
Georgia had previously enacted a prompt-pay statute to curb insurers' late-payment tactics. The law initially applied only to health insurance companies that issued policies to ERISA-regulated insured health plans, and excluded self-funded plans.
In recent amendments passed as the Insurance Delivery Enhancement Act of 2011, Georgia expanded this law to target both traditional health insurers and TPAs.
Slated to take effect Jan. 1, 2013, the amendments now require TPAs to process and pay paper claims within 30 days and electronic claims within 15 days, or pay 12 percent interest on unpaid claims.
Interest rates on untimely payments dropped under the amendments from 18 to 12 percent, but the law also authorized Georgia's insurance commissioner to impose administrative penalties on insurers that fail to timely process at least 95 percent of claims in a quarter.
America's Health Insurance Plans (AHIP), a national health insurance trade association, challenged the amendments in August 2012. It argued that compliance with the amended prompt-pay statute has caused, and will continue to cause, its TPA members to incur associated costs, such as increased employee time to modify the claim-processing system, monitor compliance and prepare reports for regulators.
It claimed that ERISA takes precedence over state law, and asked the Northern District of Georgia to block the amendment.
Georgia's insurance commissioner moved to dismiss, arguing that the court lacked subject-matter jurisdiction, and that AHIP had failed to state a claim for relief.
The state claimed that the amendments applied only to TPAs, which ERISA does not govern directly, and not to self-funded plans, and that they did not conflict with any ERISA regulations.
The court allowed the American Medical Association and the Medical Association of Georgia to file briefs in support of the law. The associations claimed that ERISA does not trump the state law because it regulates only the relationship between self-funded plans and beneficiaries, not between TPAs and physicians.
Finding that the requirements of the Georgia law do apply to self-funded health plans, and are not limited to the regulation of their TPAs, U.S. District Judge William Duffey Jr. concluded that ERISA "expressly" pre-empts them.
Georgia failed to prove that amendment deadlines are not burdensome or costly, or that the law is limited to a "ministerial activity," which can be regulated by the state, according to the 50-page ruling.
What's more, the imposition of a state's prompt-pay law on ERISA-governed plans would interfere with uniformity in administering those plans, the ruling adds.
"The ability to withhold payments for long periods of time certainly benefits plans by allowing them to earn income on the unpaid funds," Duffey wrote. "Whether plans should be able to take advantage of funds owed to providers is not for the Court to remedy in this action."
Georgia also failed to show that the court lacks authority to overturn the amendment under the Tax Injunction Act, which prohibits district courts from enjoining the assessment or collection of taxes. The prompt-pay amendment is regulatory rather than revenue-raising in purpose, therefore the court retains jurisdiction, the ruling states.
AHIP also has standing to sue, because the statute is likely to apply to its members, Duffey noted.
He granted a preliminary injunction on New Year's Eve, finding that AHIP is likely to succeed on the merits of its claim because its members will suffer irreparable injury if the law takes effect.