Court Strikes Down Portions of Federal Regulations Concerning No Surprises Act

Last month, we published an article summarizing new surprise billing laws that prohibit nonparticipating providers from balance billing patients when the patient’s insurance company pays less than the provider’s usual and customary charge.  The Michigan law, known as the Surprise Medical Billing Law, has been in effect since last year.  The Federal law, known as the No Surprises Act, took effect on January 1, 2022. The prior article summarized the circumstances under which each Act applies.

At the end of our prior article, we discussed two pending challenges to the Act, one of which involved a lawsuit filed by the Texas Medical Association and others. On February 23, 2022, the United States District Court for the Eastern District of Texas issued a lengthy opinion striking down certain portions of the regulations that address the independent dispute resolution process outlined in the Federal Act.[1]  Under the Act, the dispute resolution process determines the amount a nonparticipating provider is to be paid by the patient’s insurance company unless the parties agree to a different amount.

According to the language in the statute, the provider and insurer each submits proposed payment amounts, and an arbitrator is charged with selecting one of the two proposed amounts – a process known as “baseball-style” arbitration.  The Act states that the arbitrator must take into account many considerations, including the median rate the insurer would have paid for the service if provided by an in-network provider or facility (known as the “qualifying payment amount” or “QPA”), the level of training and experience of the provider, the acuity of the patient, and whether there have been good faith efforts to enter into a provider agreement.

The Act charged the Secretaries of Health and Human Services, Labor, and the Treasury to enact regulations establishing a dispute resolution process.  On September 30, 2021, the Departments issued an interim final rule.

Among other things, the Rules issued by the Departments required the arbitrator to select the offer closest to the QPA unless there was credible information submitted by a party that clearly demonstrated the QPA was materially different from an appropriate out-of-network rate.

The Texas Medical Association and others challenged the Rules, arguing that they improperly required arbitrators to give more weight to the QPA than the other factors and that by doing so; the Rules conflicted with the terms of the Act, which required consideration of multiple factors without emphasis on any particular one.

The Court in Texas agreed with the Medical Association, holding that by “requiring arbitrators to presume the correctness of the QPA and then imposing a heightened burden on the remaining statutory factors to overcome that presumption,” the Rule “places its thumb on the scale for the QPA.”[2] The Court also held that the Departments improperly bypassed the traditional “notice and comment procedure” when they enacted the Rules.  The Court vacated those portions of the Rules, leaving arbitrators to “decide cases under the statute as written without having their hands tied by the Departments’ QPA presumption.”[3]

As a result of this decision, arbitrators will now be allowed to weigh all of the statutory factors to determine which amount to choose, without a presumption that the QPA (essentially the median amount paid to an in-network provider) is the correct amount.

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About the Author:

Christopher Ryan is Of Counsel in Dickinson Wright’s Ann Arbor office. He is Co-Chair of the firm’s Health Care Litigation Task Force. He can be reached at 734-623-1907 or and you can visit his firm bio, here.

[1] Texas Medical Association et al v United States Dept of Health and Human Services, No. 6:21-CV-425-JDK, 2022 WL 542879 (E.D. Tex. Feb. 23, 2022).

[2] Id at *8.

[3] Id at *14.