Patient Support & Advocacy

Court: No Surprises Act final rule favors insurers, must be revamped

Tanya Albert Henry , Contributing News Writer

In a win for physicians, a federal court for the second time in less than two years has rejected the government’s attempt to implement an independent-dispute resolution process that Congress created with the 2020 “No Surprises Act.”

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The Texas Medical Association (TMA) and others challenged the final rule, showing how language in it still favored insurers in payment disputes and didn’t clean up problems in the interim rule that the court had previously said didn’t do what Congress intended.

The court agreed.

Unlike the interim rule, the final rule didn’t go as far as explicitly telling arbitrators to favor the qualifying payment amount (QPA)—the median rate paid to in-network physicians, hospitals and others—when settling disputes between physicians or facilities and health insurers, the U.S. District Court for the Eastern District of Texas Tyler Division said in its recent ruling.

But the final rule “nevertheless continues to place a thumb on the scale for the QPA by requiring arbitrators to begin with the QPA and then imposing restrictions on the non-QPA factors that appear nowhere in the statute,” the court said in its ruling in the case, Texas Medical Association et al. v. U.S. Department of Health and Human Services et al.

The court ruled that the government must set aside the challenged provisions and reconsider them in light of the February ruling.

The court cited an amicus brief that the AMA and American Hospital Association (AHA) filed jointly in the case, noting that the brief supported the TMA’s position that “the QPA does not reflect the actual market rates.”

The U.S. District Court decision “to invalidate the misguided dispute-resolution rules” is very welcome, said AMA President Jack Resneck Jr., MD.

“The court’s decision is an important confirmation of the shared consensus among physicians, hospitals and lawmakers that federal agencies exceeded their statutory authority and created rules that ignored the Act’s requirements for a balanced and independent arbitration process,” he said.

Find out more about the cases in which the AMA Litigation Center is providing assistance and learn about the Litigation Center’s case-selection criteria.

Congress passed the No Surprises Act to protect patients from unexpected medical expenses when they receive care at facilities outside their insurance network or from out-of-network physicians or other nonphysician clinicians at an in-network hospital, ambulatory surgery center or freestanding emergency department.

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The AMA and AHA support protecting patients from receiving surprise medical bills and want the law to succeed. But the way government agencies have so far attempted to implement the law threatens harming patients and the nation’s health care system because insurers would know that they can use independent-dispute resolution arbitration to pay physicians, hospitals and others near the below-market QPA.

The clear language in the No Surprises Act intends for arbitrators to consider the QPA along with five other factors when deciding payment disputes, including the level of training of a physician or other health professional and the acuity of the person getting the health service. The law also says arbitrators must consider any other relevant information that either party submits.

In sending aspects of the final rule back to the drawing board, the U.S. District Court ruled that “rather than instructing arbitrators to consider all the factors pursuant to the Act, the Final Rule requires arbitrators to consider the QPA first and then restricts how they may consider information relating to the non-QPA factors.”

The court also said the current version “improperly limits arbitrators’ discretion by dictating how they may consider the statutory factors” and “attempts to control how arbitrators evaluate the information properly before them,” in contrast to what Congress laid out in the law.

Dr. Resneck urged officials to align the regulations with the law Congress passed.

“Arbitrators must be able to settle billing disputes between providers and health insurers without having their hands tied by misguided rules that conflict with the letter of the law,” he said. “The AMA continues to support the Act’s goal of protecting patients from surprise medical billing, but we remain very concerned that the implementation of the statute has not supported physicians’ ability to meaningfully engage in the dispute resolution process, contrary to the intent of Congress.”

In a separate but related lawsuit, the TMA and other plaintiffs are challenging the way that the No Surprises Act’s final rule calculates the QPA. They argue that it’s done in a way that allows—and even encourages—insurers to set the QPA well below the market rate.

The lawsuit, also called Texas Medical Association et al. v. U.S. Department of Health and Human Services et al., is similarly in the U.S. District Court for the Eastern District of Texas, Tyler Division. The AMA has filed an amicus brief in the case urging the court to set aside portions of the law’s final rule that depress QPA calculations and remand it for further rulemaking.

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The AMA’s brief notes that the rule lets insurers calculate the QPA based on contracted rates for services never provided, even though the law says the QPA must be based on the contracted rates for services actually provided to patients. Also, the AMA brief tells the court that the rule ignores the law’s clear mandate that the QPA be based on contracted rates for services provided in the same or similar specialty.

“Because neither the July Rule nor the August 2022 FAQs fix the problem of undervaluing the QPA, the AMA’s members expect insurers to continue to drive providers out of network, reducing patient choice and access to care, which is the opposite of what Congress intended,” the brief says. Even those “who opt to remain in-network are seeing dramatic rate reductions—not just below market average, but significantly below Medicare rates.”

Ultimately, patients will suffer the most. Insurers’ cuts threaten the scope of services that physicians provide and the viability of their practices, the brief says.

Meanwhile, the AMA and other stakeholders met with leaders from the Departments of Health and Human Services (HHS), Labor and Treasury to discuss issues surrounding how the No Surprises Act is being implemented.

The AMA and others offered solutions to address the claims backlog, including more audits and enforcement, flexibility in batching claims, enhanced transparency for QPA calculations and a rescission of the increased administrative fee. AMA Executive Vice President and CEO James L. Madara, MD, outlined the AMA’s recommendations in a recent letter to the secretaries of the three departments (PDF).

Visit AMA Advocacy in Action to find out what’s at stake in creating fairness in surprise-billing disputes and other advocacy priorities the AMA is actively working on.