Prompt-pay laws are finally getting teeth

Statutes haven't done the job. So now state regulators are getting tough with the insurance tortoise, trying to turn him into Turbo Turtle.

By Wayne J. Guglielmo
Senior Editor

In early 1999, Georgia passed one of the toughest prompt-pay laws in the nation.

The legislation, which amended a weaker existing statute, requires health plans to pay undisputed physician claims within 15 working days or face an 18 percent interest penalty. The new law should have reassured Georgia doctors frustrated by a pattern of late payments.

But when regulators eager to know how the law was working ordered plans to submit third-quarter claims data later in the year, the review proved disturbing. "Few if any plans were in compliance with the statute," says David Crim, deputy commissioner of the Georgia department of insurance.

Georgians aren't the only ones to discover that prompt-pay laws are no guarantee that the check's in the mail. Indeed, despite the existence of such laws in 40 states, AMA-designed surveys by state and local medical societies have documented widespread discontent among physicians. According to the AMA, 38 percent of the physician practices surveyed said that it takes more than 45 days on average to be paid for a clean claim. In the worst cases, physicians report average payment delays of nearly one year.

The managed care industry dismisses these findings, saying that the vast majority of clean claims are paid promptly. And to the extent there are delays, industry officials say, there are "sometimes good reasons" for them. "A plan serving 1.6 million members probably processes 1 million claims per month," says Susan Pisano of the Washington, DC-based American Association of Health Plans. Add to these "sheer numbers" the time it takes to review for fraud, the ambiguity over what constitutes a clean claim, and the bumpy transition to electronic filing, says Pisano, and the delays become more understandable.

Many physicians aren't convinced: They believe the delays are intentional, and some even charge plans with holding up payments in order to earn additional interest on invested funds.