After a federal district judge temporarily blocked a Georgia prompt payment law applying to self-funded plans and third party administrators (TPAs), the American Medical Association (AMA) is challenging some of the pillars of federal preemption under the Employee Retirement Income Security Act (ERISA).
After America's Health Insurance Plans successfully sought an injunction to the law, the AMA has filed a legal brief supporting the Georgia Insurance Commissioner's appeal of the ruling.
As self-funding and TPA contracting has grown nationally and to 65 percent of the Georgia health benefits market, AMA President Jeremy Lazarus, MD, said there is "a regulatory void where the state's third-party administrators are unaccountable for chronically late payments, and it jeopardizes a sustainable practice environment for Georgia's physicians."
Georgia's prompt payment law required self-funded plans and TPAs to pay errorless digital claims within 15 business days and paper claims within 30 calendar days, with no extensions (the same schedules for traditional health plans), while the federal ERISA regulations allow 30 days for processing claims and a 15 day extension.
In a friend of the court brief in the Eleventh Circuit Court of Appeals in Atlanta, AMA and the Georgia Medical Association are seeking a lift of the injunction and a declaration that Georgia's prompt payment law is not preempted by ERISA -- which would allow other states to regulate self-funded plans and TPAs -- or another chance to argue the case in a trial or lower appeals court.
AHIP says it's not necessarily opposed to shorter payment schedules for self-funded plans and TPAs, but that the industry is trying to avoid the "the kind of patchwork of state regulation that ERISA preemption is designed to prevent," as its lawsuit argues.
The AMA, meanwhile, is arguing that ERISA wasn't necessarily designed to prohibit more local regulations in all cases. With counsel from Barnes & Thornburg attorney Thomas Gallo, the AMA is making several counterarguments to the precedent of ERISA preemption applying to physician payments: that ERISA does not "substantively" regulate TPAs in the same way it does self-funded plans, that ERISA's "default position is no preemption," and that the Georgia law is not affected the ERISA "deemer clause" that does prohibit state regulation from treating self-funded plans as traditional insurers, which states can regulate under ERISA's "savings clause."
The AMA brief says there are two main reasons for the appeals court to "wade into the 'morass' of ERISA preemption" -- the question of what entities ERISA "relates to" and the "deemer clause," which the Supreme U.S. Court last visited in 1990.
In FMC Corp v. Holliday, the high court read the deemer clause "to exempt self-funded ERISA plans from state laws that 'regulate insurance' within the meaning of the saving clause." In that case, a self-funded health plan bringing negligence claims on behalf of a Pennsylvania woman injured in a vehicle accident was precluded by a state law that barred tort reimbursement for benefit payments by a group contract. Overturning an appeals court ruling that deferred to state law, the Supreme Court ruled in favor of ERISA preemption.
On the question of what entities ERISA can regulate, the AMA is arguing that the provisions covering TPAs in the Georgia prompt payment law are not preempted because they "regulate insurance" and, "insofar as they regulate TPAs, do not 'deem' employee benefit plans to be 'insurance companies'" -- avoiding the deemer clause.
Another case cited by the AMA (also decided in Atlanta's Eleventh Circuit), established some precedent for what entities ERISA "relates to." In 1996, the appeals court ruled that a Georgia insurance agent accused of fraudulent inducement and negligence did not qualify for ERISA preemption because he was not considered to be ERISA entity in the same category of self-funded plans or a plan fiduciaries.
The AMA's brief argues that the Supreme Court's view of ERISA's employee benefit plan preemption has narrowed over time, from broad interpretations in the years after the law was passed in 1974, to a limiting of the preemption scope in the 1980s and 1990s.
In a 1995 case known as Travelers, the Supreme Court ruled that ERISA preemption did not exempt health plans from a New York tax placed on commercially insured members at hospitals, a decision that "turned the tide on the expansion of the preemption doctrine," the AMA says.
Travelers "'unequivocally concluded' that the 'starting presumption' in ERISA preemption cases, like other cases, is 'that Congress [did] not intend to supplant state law,'" the AMA argues. "So, it is not enough for a law to have an 'indirect economic influence' on ERISA plans...or even a "'direct impact.'"
While the Eleventh Circuit Appeals Court considers whether and how deeply to wade into this "morass" of ERISA, the AMA says that the question is also one more broadly of state sovereignty: Can "Georgia regulate at the intersection of healthcare and insurance – each of which 'historically has been a matter of local concern'"?