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By: Jonathan Kandel
Last week, a federal appeals court found a portion of Georgia’s Insurance Prompt Payment law was preempted by the federal Employee Retirement Income Security Act (ERISA) and, therefore was invalid. The law at issue, which is known as the Insurance Delivery Enhancement Act of 2011 (IDEA), regulated employee health insurance.
As background, there are generally two ways that employers provide health insurance to employees. One way is for an employer to contract with an insurance company for a group plan, where the insurer pays claims. The other way is for an employer to provide “self-funded” or “self-insured” insurance, where the employer pays claims.
Since 1999, Georgia has had “prompt pay” laws that require accident and sickness insurers to respond to a claim – either by paying or denying the claim – within 15 days of receiving the claim. IDEA attempted to expand Georgia’s “prompt pay” laws to impose the same requirement on employers that provide “self-funded” or “self-insured” insurance. Historically, “self-funded” insurance has been regulated by ERISA, which has its own requirements for processing and paying claims.
IDEA was supported by doctors in Georgia (and the Medical Association of Georgia), who have been quarreling with insurance companies for several years over timely payment of claims. Groups representing doctors have argued that the law is necessary to protect doctors and patients because doctors are unable to expand their practices to reach areas that need care when payment on their bills is delayed.
The Eleventh Circuit Court of Appeals concluded that IDEA was expressly preempted by ERISA because the law relates to “self-funded” employee insurance. Specifically, the court noted that the time requirements under IDEA “fly in the face of one of ERISA’s main goals,” which is to allow employers to establish a uniform set of standard procedures for processing and paying claims. If IDEA took effect, the court explained, employers offering “self-funded” insurance would be forced to comply with different timeliness requirements in different states, which is inconsistent with ERISA.
The ruling, however, has no impact on Georgia’s “prompt pay” laws requiring accident and sickness insurers to respond to claims within 15 days.