Fifth Circuit Upholds Certain No Surprises Act Provisions

On October 30, 2024, the Fifth Circuit Court of Appeals (Fifth Circuit) reversed a district court’s decision to vacate certain regulations promulgated by three federal agencies: the DOL, HHS, and IRS (the agencies). The regulations established priorities for independent arbitrators appointed to resolve disputes between healthcare providers and payors through an Independent Dispute Resolution (IDR) process established under the No Surprises Act (NSA). In particular, the regulations establishing parameters for determining the median in-network rate for a given service in a market, which in turn establishes a baseline for determining how much a provider will be paid for services provided out of network, were upheld in this appeal. 

In this case, the issue revolved around the qualifying payment amount (QPA), which is the median in-network rate for a given service in each market. The QPA is one of several factors that independent arbitrators must consider when determining the appropriate payment for services provided out-of-network. At the district court level, the plaintiffs (who have successfully challenged other aspects of the IDR process) pointed out that the government’s rules for determining the QPA included “ghost rates,” which are contracted rates that technically exist but have never been used. The plaintiffs argued that including these ghost rates artificially lowers the median rate. In addition, the plaintiffs argued that the agencies' regulations that exclude consideration of “case-specific” rates (which are rates agreed to between the provider and the payor that are not included in the standard rates paid to other participants in the network) exceed the agencies' authority under the NSA because these are contracted rates that must be considered. Similarly, the plaintiffs argued that the regulations’ exclusion of bonus payments exceeded their authority. The district court agreed that the agencies exceeded their authority and ruled that the regulations should be vacated. However, the Fifth Circuit disagreed, reasoning that the agencies had the authority under the NSA to include (or exclude) these rates in their regulations. 

The Fifth Circuit also rejected another of the plaintiffs’ arguments. The plaintiffs argued that certain disclosure requirements imposed on insurers do not provide providers with enough information and hinder their ability to challenge the insurer’s QPA. Although the district court agreed that the disclosure requirements were arbitrary and capricious, the Fifth Circuit ruled that the responsibility for establishing disclosure requirements was well within the agencies’ scope and the fact that the plaintiffs would have required other information in those disclosures does not, by itself, mean that the agencies were being arbitrary and capricious. 

The Fifth Circuit did agree with the plaintiffs and the district court that the agencies’ rule establishing a deadline for insurers to provide either an initial payment or notice of denial of payment to a provider exceeded their authority. The Fifth Circuit found that the NSA establishes the deadline as not later than 30 calendar days after the bill for such services is transmitted by such provider. However, the agencies’ rule states that the thirty-day clock starts on the date that the plan or issuer receives the information necessary to decide a claim for payment for such services, commonly known as a “clean claim” under many existing state laws. Accordingly, the Fifth Circuit determined that this rule exceeded the authority granted under the NSA. 

Overall, this ruling is a deviation from the pattern of rulings against the agency regulations that administer the NSA’s IDR process. Despite this decision, this process's status is in constant flux, and there is uncertainty about how the growing number of payment disputes will be resolved. Although this case does not explicitly halt the IDR process, it is not unreasonable to expect the agencies to pause the process while they figure out what to do next, which will likely create more backlog and uncertainty. Accordingly, employers should be aware of this issue.

Texas Medical Association vs. HHS