On Friday, a panel of the Eleventh Circuit Court of Appeals affirmed an order out of the Northern District of Georgia, enjoining the Georgia Insurance and Safety Fire Commissioner ("Commissioner") from enforcing newly enacted "prompt pay" requirements under Georgia's prompt pay statute against self-funded health plans and the third party administrators ("TPA") that often administer them. "Prompt pay" laws typically require insurance companies to pay submitted claims in a set period of time (such as 30 days) or face penalties and interest. The case, America's Health Insurance Plans v. Hudgens, garnered significant attention while pending in the district court, and following the Commissioner's interlocutory appeal of the injunction, various groups lined up as amicus curiae on both sides. The U.S. and Georgia Chambers of Commerce filed briefs in favor of the injunction, arguing for ERISA preemption of the prompt pay requirements, while the American Medical Association and Medical Association of Georgia filed a brief in support of applying Georgia's prompt pay requirements broadly to include self-funded ERISA plans.
Like many other states, Georgia enacted a prompt pay statute in 1999. When enacted, the statute by its terms applied only to insured ERISA plans and not self-funded ERISA plans. In 2011, based on the trend in recent years of more employers opting for self-funded plans, resulting in declining applicability of the prompt pay statute, the Georgia General Assembly enacted the Insurance Delivery Enhancement Act of 2011 ("IDEA") which, among other things, amended the prompt pay statute to apply to self-funded ERISA plans and the TPAs that administer them. IDEA was set to become effective on January 1, 2013, however in August 2012, America's Health Insurance Health Plans ("AHIP") filed a lawsuit in federal court, seeking a judicial declaration that the prompt pay provisions as applied to self-funded health plans and their administrators or TPAs are preempted by ERISA. AHIP also filed a motion to preliminarily enjoin the Commissioner for enforcing the challenged statutes. On December 31, 2012, the district court granted the motion and enjoined the Commissioner.
The Eleventh Circuit affirmed the district court, concluding that the challenged provisions of IDEA are preempted by ERISA because they "relate to" ERISA-governed plans. The court rejected the Commissioner's argument that ERISA governs only the relationships between "ERISA entities" like ERISA plans, beneficiaries, and fiduciaries, and not the relationship between medical providers and TPAs. The court concluded that "ERISA's overarching purpose of uniform regulation of plan benefits overshadows this distinction." The court also rejected the Commissioner's argument that statutes only "relate to" ERISA plans if they conflict with "substantive" issues, like coverage determinations, and not "procedural" requirements, like how promptly a claim must be paid or notice of the reason for non-payment provided.
This case is the latest skirmish in recent years over the extent to which ERISA preempts state prompt pay statutes, and with the increased national focus on health insurance, this likely won't be the last.
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