In America’s Health Insurance Plans v. Hudgens, No. 13-10349 (11th Cir. 2014), the Eleventh Circuit Court of Appeals (the “Court”) reviewed an opinion and order by the district court preliminarily enjoining Defendant Ralph T. Hudgens (the “Commissioner”) from enforcing several provisions of the Georgia Code as preempted by Section 514 of the ERISA.
In this case, on May 2011, the State of Georgia enacted the Insurance Delivery Enhancement Act of 2011 (“IDEA”), which amends certain portions of Georgia’s Insurance Code, including Georgia’s “Prompt Pay” laws. These Prompt Pay laws had been in place since 1999 and required “insurers” to either pay a claim for benefits, or give notice of why a claim would not be paid, within fifteen working days after receipt of a claim. If an insurer did not comply with the Prompt Pay requirements, the insurer would have to pay annual interest of eighteen percent on the proceeds or benefits due under the terms of the plan. IDEA extended Prompt Pay to apply to self-funded ERISA plans and their third party administrators. The question for the Court: is Prompt Pay, as so extended, preempted by Section 514 of ERISA.
In analyzing the case, the Court said, first, that the district court’s grant of a preliminary injunction is reviewed for abuse of discretion. A district court may grant a preliminary injunction only if the moving party shows that: (1) it has a substantial likelihood of success on the merits; (2) irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest.
In this case, the Court found that Prompt Pay should be preempted under ERISA Section 514. It impermissibly relates to self-funded ERISA plans, since it would require such plans to process and pay provider claims, or notify claimants of claim denials, within fifteen or thirty days, depending on whether the claim is submitted electronically or conventionally, thereby creating certain timeliness requirements unique to Georgia instead of allowing uniform, national rules. Prompt Pay would not be saved by the “Saving Clause” in Section 514, which permits state regulation of insurance without preemption, since the “Deemer Clause” in Section 514 exempts self-insured plans from the Savings Clause. Given that Prompt Pay is preempted, the Court ruled that an examination of the factors (1) to (4) for granting a preliminary injunction indicate, in this case, that the district court did not abuse its discretion. As such, the Court upheld the preliminary injunction.