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Prompt Payment Laws

America’s Health Insurance Plans v. Hudgens, 742 F.3d 1319 (11th Cir. 2014)

Also under ERISA preemption

Outcome:    Very unfavorable


The issue in this case was whether portions of the Georgia Prompt Pay Amendment can be declared invalid, as preempted under the federal Employee Retirement Income Security Act (ERISA).

AMA interest

The AMA supports laws that require prompt payment of health insurance benefit claims, including claims made against self-funded health insurance plans and their third party administrators (TPAs).

Case summary

On May 23, 2011, Georgia amended its prompt payment law to cover self-funded health insurance plans and the TPAs of those plans.  As a result of the Prompt Pay Amendment, self-funded plans and TPAs can be subject to interest charges and monetary penalties if they fail to pay health insurance claims promptly.

America’s Health Insurance Plans (AHIP), a health insurance trade association, sued the Georgia Insurance Commissioner (currently, Ralph T. Hudgens) to have portions of the Prompt Pay Amendment declared invalid, as preempted under ERISA.  AHIP also moved for a preliminary injunction to prevent enforcement of the Prompt Payment Amendment during the pendency of the lawsuit.  The Insurance Commissioner, in turn, moved to dismiss the complaint. 

On December 31, 2012, the court found that ERISA preempted the Prompt Pay Amendment.  It therefore denied the Insurance Commissioner’s motion to dismiss and preliminarily enjoined enforcement of sections of the Prompt Pay Amendment. 

The Insurance Commissioner appealed the preliminary injunction to the Eleventh Circuit, but the Eleventh Circuit affirmed on February 14, 2014.

AMA/Litigation Center involvement 

The Litigation Center, along with the AMA and Medical Association of Georgia, asked the court for leave to intervene as defendants and to support the Prompt Pay Amendment.  The court never ruled on that motion.  The Litigation Center attorneys also advised the Insurance Commissioner on legal strategy.

The Litigation Center filed an amicus brief in the Eleventh Circuit, urging the reversal of the preliminary injunction.  In addition, the Litigation Center participated in the oral argument.

United States Court of Appeals for the Eleventh Circuit brief

Foundation Health v. Westside EKG Associates, 944 So.2d. 188 (Fla. S.Ct. 2006)

Also under Managed care payments and Payment issues (for physicians)

Outcome:    Very favorable


The issue in this case was whether the Florida HMO prompt payment law, Fla. Stat. § 641.3155, could be enforced through a private (i.e., non-governmental) right of action.

AMA interest

The AMA supports fair policies and practices regarding payment for physician services.

Case summary

The plaintiff group of physicians, Westside EKG Associates, was outside the network of the defendant HMOs. Although the health insurance contracts between the HMOs and Westside’s patients did not refer to the HMO prompt payment law, Westside maintained that, by implication, the prompt payment law was incorporated into those contracts. Westside further contended that it was a third party beneficiary of those contracts.

The trial court entered judgment on the pleadings in favor of the HMOs. On appeal, the Florida District Court of Appeal reversed, ruling in favor of Westside. The District Court of Appeal certified the case to the Florida Supreme Court as an issue "of great public importance."

The Florida Supreme Court affirmed the District Court of Appeal, holding that the physicians could sue the HMOs for violation of the prompt payment law as third-party beneficiaries of the contract between the HMOs and their subscribers.

Litigation Center involvement

The Litigation Center, joined by the Florida Medical Association, the Florida Hospital Association, and the Florida College of Emergency Physicians, filed an amicus curiae brief in support of the physicians.

Florida Supreme Court brief.

Solomon v. Aetna U.S. Healthcare, (Pa. S.Ct.), 797 A.2d 346 (Pa. Super.Ct. 2002)

Also under Payment issues (for physicians)

Outcome:   Very unfavorable


The issues in this appeal were (a) whether physicians may bring a lawsuit on their own behalf under the Pennsylvania Healthcare Act ("Act 68") to receive interest on untimely payments from a health insurance company and (b) whether physicians have an implied contractual right to receive such interest.

AMA interest

The AMA supports fair policies and practices regarding payment for physician services.

Case summary

This case was brought as a purported class action on behalf of physicians and other health care providers practicing in Pennsylvania who had signed participation contracts with Aetna U.S. Healthcare. The complaint alleged a variety of contractual breaches, including failure to reimburse pre-approved medical services and failure to pay claims in a timely fashion. The complaint sought interest on late payments pursuant to Act 68 and pursuant to an implied right under the participation contract.

The trial court dismissed a number of the claims on motion and held, via a summary judgment, for the defendants on the remaining claims. The court noted that the alleged unpaid amounts were, by admission of the plaintiffs, in fact paid. The court further found that a private physician, acting on his own behalf, could not seek interest on these late payments in a lawsuit. The court held that Act 68 allows interest charges only at the order of the Pennsylvania Insurance Commissioner, which had not happened here. Furthermore, the court held, the provider contract neither explicitly nor implicitly promised to pay interest charges.

The plaintiff physicians appealed to the Superior Court which affirmed, holding, among other things, that physicians do not personally have the right to sue for the late payment interest that the Pennsylvania statues require be paid to them.

The plaintiffs then asked the Pennsylvania Supreme Court to hear the case. However, the Pennsylvania Supreme Court denied the petition for review, concluding the lawsuit.

Litigation Center involvement

The Pennsylvania Medical Society and the Litigation Center filed an amicus curiae brief in the Superior Court in support of the physicians. The brief argued that an implied private right of action should be found under Act 68.

The Litigation Center, along with the Pennsylvania Medical Society, also submitted two amicus curiae briefs to support the physicians’ request for appeal in the Pennsylvania Supreme Court. The first brief pointed out that 47 states have laws governing prompt payment of medical claims, and some of the courts interpreting their state laws have resolved the private right of action issue differently from the Pennsylvania Superior Court. The second brief advised the Supreme Court of a recent decision by the United States Supreme Court, to whom the Pennsylvania Supreme Court has traditionally looked for guidance, which sets forth new criteria to establish the viability of an implied private right of action. Thus, this matter is of great national importance, and the issues are unsettled. Both considerations were offered as reasons for granting Supreme Court review.

Pennsylvania Superior Court brief.PDF File

Pennsylvania Supreme Court initial brief.PDF File

Pennsylvania Supreme Court second brief.PDF File

Southern Rehabilitation Group v. Sebelius, 732 F.3d 670 (6th Cir. 2013)

Also under Medicare

Outcome:    Favorable


The issue in this case was whether the Medicare Program must pay interest for late payment of “clean claims” for medical services.

AMA interest

The AMA believes that all third party payers, including the Medicare Program, should pay promptly for medical services.

Case summary

Southern Rehabilitation Group and its owner, Dr. James P. Little, provided rehabilitation services, with most of their patients covered by Medicare. Plaintiffs billed the services pertinent to this case to a Part B Medicare contractor, Cigna.

The plaintiffs took issue with the way Cigna processed their reimbursement claims, asserting that such claims were improperly downcoded or denied.  Following prosecution of their claims at the administrative level, which took several years, plaintiffs sued the Secretary of Health and Human Services (HHS) and Cigna in the United States District Court for the Eastern District of Tennessee.  The plaintiffs raised several legal theories, both against CMS and against Cigna. As part of their claim for relief, plaintiffs sought interest on their unreimbursed “clean” claims, pursuant to 42 U.S.C. § 1395u(c)(2).

More than a year and a half after the plaintiffs filed their lawsuit, the defendants moved to have certain of the payment claims remanded for further consideration at the administrative level. The trial court granted this motion. On remand, HHS allowed and then paid the principal amounts of the claims -- but not late payment interest.

Following notification that the remanded claims had been paid, the court granted summary judgment in favor of the defendants and against the plaintiffs on all open issues.  As justification for denying interest, the court quoted a passage from the Medicare Claims Manual, which maintained that “interest payments are not payable on clean claims initially processed to denial and on which payment is made subsequent to the initial decision as a result of an appeal request.”  The plaintiffs appealed to the Sixth Circuit.

On October 18, 2013, the Sixth Circuit affirmed the district court on all issues, except on the late payment claim.  That issue was reversed and remanded for further consideration.


Litigation Center involvement

The Litigation Center filed an amicus brief in the sixth Circuit to support the plaintiffs.  The amicus brief argued that the Medicare Claims Manual misstated the law regarding the obligation of the Medicare Program to pay interest on clean claims, and the plaintiffs had a right to recover interest on their clean claims.

United States Court of Appeals for the Sixth Circuit brief