Organized medicine moves to block end run on prompt pay for physicians

Physicians rely on timely claims processing for the smooth operation of their practices. When legitimate, clean claims languish in the administrative netherworlds of insurance companies without forthcoming payments, practices struggling to keep up their thin margins can find themselves in serious financial trouble.

Physician advocates have worked diligently to hold insurers’ feet to the fire on this issue, pursuing action at statehouses and in the courts when needed. Every state has some law on the books to penalize health insurers that fail to pay claims promptly.

Unfortunately, one of the stronger doctor protection laws for which organized medicine worked the hardest is facing a serious threat before it even takes effect. And once again, physician organizations responded by heading to the courts to fight for doctors’ rights to be paid on time for their hard work.

The national health insurance lobby has filed a lawsuit seeking to stop the Insurance Delivery Enhancement Act of 2011, a Georgia law set to take effect in January 2013. The statute requires companies that provide third-party administrative services for self-funded health plans to pay timely claims.

The law is an inherently reasonable one. It simply says that the insurance companies that administer self-funded plans be subject to the same prompt-pay requirements as for any of the other types of insurance products they offer in the state.

Under the law, both traditional insurers and third-party administrators have 30 days to pay paper claims and 15 days to pay electronic claims — or to explain why the claims will be denied or not paid on time. For any late payments for which they fail to give notice, administrators must tack on 12% annual interest to recompense the practices that were left waiting around for their hard-earned money with no explanation.

But insurers are trying to get out of these requirements when it comes to self-funded plans. They are not challenging the merits of the law in court; rather, they are attempting to get the law blocked on a legal technicality. Their claim is that the federal Employee Retirement Income Security Act of 1974 should trump state law in this instance.

Physicians aren’t going to stay on the sidelines during such an end-run attempt. That’s why the Litigation Center of the American Medical Association and the State Medical Societies joined the Medical Assn. of Georgia to get involved in the legal case. At this article’s deadline, a hearing was scheduled before the U.S. District Court for the Northern District of Georgia. The hearing is to consider the insurers’ demand for an injunction as well as a motion by the Litigation Center and MAG to intervene in the lawsuit as defendants. Their motion is designed to ensure that doctors would be represented directly on an issue that is of great importance to them.

Physicians are on solid legal footing on this issue. Prompt-pay statute regulates only a financial relationship between doctors providing care to patients and the insurers that administer self-funded plans that cover those patients. It has absolutely nothing to do with the coverage and benefits issues that are under the purview of ERISA.

The fate of the law is about more than one state’s insurance market. If insurers manage to win their faulty argument that a state prompt-pay law does not apply to self-funded plans, they will be emboldened to challenge similar statutes in other states using the same line of attack. And given that employers increasingly are gravitating toward self-funded coverage for workers — six out of 10 of whom already are in such coverage arrangements — insulating such plans from prompt-pay requirements would be a massive step backward for physician practices everywhere.

This fight shouldn’t be necessary. The AMA and other physician organizations in 2000 sued several major insurers over their failure to pay claims promptly, and the resulting series of settlements put such pay protections in place for physicians for several years. The fact that insurers operated during that period with prompt-pay requirements for both traditional and self-insured plans demonstrates that their argument for shirking those responsibilities now — saying their businesses would be harmed — is clearly bogus.

Diligent work by organized medicine helped shepherd the Georgia legislation into law even after a veto of an earlier version, and doctor organizations will continue to defend it and other state prompt-pay laws against all threats to their existence. The alternative of regressing to a time in which struggling practices desperately wait without word for checks that aren’t coming anytime soon is unacceptable.