New prompt pay rules for self-funded insurance plans put AMA, AHIP at odds

America's Health Insurance Plans (AHIP) is fighting to prevent new prompt pay rules for self-funded insurance plans from taking effect that have the support of the American Medical Association and the Medical Association of Georgia, which have joined the state Insurance Commissioner in defending them.

Georgia’s prompt payment law, passed last year, brings self-funded health plans under the same payment rules as other health plans. According to AHIP, it violates the Employee Retirement Income Security Act (ERISA), which established national regulations, with some exemptions, for employer-sponsored health insurance, self-funded health plans and many other workplace benefits.

In August, AHIP filed a lawsuit in the U.S. District Court of Atlanta, seeking an injunction blocking the new law from taking effect. AHIP argues that Georgia’s new law for self-funded plans is preempted by ERISA, a law passed in 1974 that has been heavily litigated throughout federal courts. “Allowing Georgia to proceed down this path would give rise to exactly the kind of patchwork of state regulation that ERISA preemption is designed to prevent,” the AHIP lawsuit reads.

The outcome of the dispute, as both AHIP and AMA note, could have national implications.

If Georgia’s law stands, physicians would be freed of time-consuming claims disputes, as AMA puts it, and states could feel free to require shorter payment deadlines for self-funded plans and their often insurer-owned third party administrators. AMA President Jeremy Lazarus, MD, said in a media statement that Georgia’s law resolves a “regulatory void in which health insurers are unaccountable for chronically late payments when they serve as administrators for self-insured employers.”

Or as AHIP argues, if the law takes effect it would mean more complex and varying regulations to navigate and would lead to more administrative waste. “Having state law apply to self-funded employer plans sets a very troubling precedent,” Robert Zirkelbach, AHIP’s vice president of strategic communications, said.

Georgia’s "Insurance Delivery Enhancement Act” brings self-funded plans and their third party administrators under the same deadlines as other health plans, requiring processing and payment of electronic claims within 15 business days and paper claims within 30 calendar days, with no extensions. (U.S. Labor Department regulations, under ERISA, allow 30 days for processing and a 15 day extension.)

In January, when Georgia’s new law is set to take effect, self-funded plan administrators who miss deadlines will have to pay 12% interest on unpaid claims and face state fines if deadlines are missed excessively.

It’s not entirely clear how many other states have passed prompt payment laws for self-funded plans. AHIP’s Zirkelbach said they’re not common and by AMA’s estimate, Indiana, Rhode Island and Ohio have similar laws.

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