ERISA Reform

Texas laws and regulations require prompt payment to physicians for health care services. However, those requirements are not enforced against most self-funded, employer-based benefit plans. The Texas Department of Insurance (TDI) has concluded that the Employee Retirement Income Security Act of 1974 (ERISA) preempts its authority to require prompt payment to physicians. TDI says that preemption applies even when the physician provides services under a contract with an HMO or preferred provider benefit plan acting as a self-funded plan's administrator.

TDI also has authority to regulate third-party administrators (TPAs). Again, because of ERISA preemption, TDI does not enforce Texas' regulations against TPAs acting on behalf of self-funded, employer-based ERISA benefit plans. However, since TDI has developed its position, federal district courts in all of the federal districts that cover Texas have held that ERISA does not preempt Texas prompt pay laws. The courts point out that ERISA regulates the delivery of benefits from an employer to an employee. Since Texas prompt pay does not address the delivery of benefits, but rather regulates contractual relationships with physicians, the state law survives and is not preempted.

Medicine's 2009 Agenda

  • Congress should enact legislation to ensure that health plans are required to pay timely and accurately for the medical care services their enrollees receive. Federal regulations do not address the periods within which payments that have been decided must be paid or within which approved services must be rendered.
  • Congress should enact laws clarifying that ERISA preemption does not apply to physician-insurer contracting issues, requiring third-party payers administering ERISA plans to accept assignment of benefits, and prohibiting "all products" clauses or linking participation in one product to participation in other products.
  • Congress should require health plans to provide consistent data measures regarding how premiums dollars are being spent for health care services. Health plans should be required to disclose separately expenditures relating to direct patient care. Other categories should assess costs for personnel, operational expenses, and profit.
  • Congress should clarify that states can enforce prompt payment laws and otherwise regulate self-funded ERISA plans under their authority for contract enforcement.

Medicine's Message

  • HMOs, preferred provider benefit plans, and third-party administrators are acting in a system with no accountability or regulation. Patients and providers are being treated unfairly and harmed - to the benefit of corporate entities. Plans increasingly use ERISA as a means to sidestep state regulatory oversight.
  • The Department of Labor maintains that when the physician has no recourse with the patient for amounts not paid by the health plan (aside from a copayment or other plan-stipulated payment), federal regulation does not apply. This would not be a claim for benefits under the plan, but rather for payment under the terms of the provider contract. States clearly have authority for contract enforcement and therefore, state regulation should apply.

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