October 22, 2024

Currently, the Fifth Circuit Court of Appeals (Fifth Circuit) is considering an appeal by air ambulance providers Guardian Flight, LLC and Med-Trans Corporation (appellants) of a district court decision dismissing their claim against insurer Health Care Service Corporation (appellee). As reported in our July 31, 2024, edition of Compliance Corner, the appellants sought to compel payment of an amount awarded them under the CAA No Surprises Act (NSA) independent dispute resolution (IDR) process. However, the district court ruled that NSA IDR awards were unenforceable by federal courts, increasing existing concerns regarding the efficacy of the NSA IDR process.

The NSA, which took effect in 2022, protects health plan participants from surprise bills by limiting their cost-sharing (to in-network rates) for protected out-of-network (OON) emergency and air ambulance services and certain OON services at in-network facilities. As a result, OON healthcare providers must resolve the remaining OON bills with plans and carriers through arbitration (i.e., the IDR process) if negotiations are unsuccessful. However, the IDR process and related CMS guidance has been subject to numerous legal challenges by healthcare providers. These legal cases have caused disruptions in an IDR process already burdened by a much higher-than-anticipated volume of claims.

Additionally, the expectation was that the NSA and IDR process would largely result in OON rates becoming more aligned with the median contracted in-network rates for items or services in a particular geographic region, which are termed qualifying payment amounts (QPAs) under the NSA. But successful legal challenges by healthcare providers have resulted in the QPAs being emphasized less in the IDR process and calculated more favorably to providers; please see our prior article in the May 7, 2024, edition of Compliance Corner for further information.

Recent CMS reports on the IDR process illustrate how the actual IDR process has deviated from the original conception. (The NSA requires the DOL, IRS, and HHS to publish on a public website certain information about the IDR process, which is made available on the CMS IDR reports webpage.) The most recent report (for the second half of 2023) reflects that certified IDR entities (i.e., the arbitrators) contended with a large volume of disputes, making substantially more payment determinations than in the first six months of 2023. Significantly, the healthcare providers won the IDR process 82% of the time; health plans and insurers prevailed in only 18% of the disputes. Also notably, the prevailing offer was higher than the QPA in approximately 88% of payment determinations. However, as in the first half of 2023, the reports only reflect the activity of a small number of OON claims covered by the NSA and thus may not provide the complete picture.

Of course, it’s unknown at this time whether the Fifth Circuit will uphold the district court’s dismissal of the appellants’ claim. If so, Congress may act to address the enforcement of IDR rewards. In addition to the litigating parties, the Departments of Justice and Labor filed a brief in the case, asserting that the district court interpreted the NSA too narrowly and focused too much on the absence of a specific statutory provision authorizing a healthcare provider to seek federal judicial enforcement of an IDR reward. Regardless, from a plan sponsor’s perspective, the question remains as to whether the NSA will achieve the intended effect of lowering OON costs for group health plans as well as participants.

We will continue to monitor the litigation and CMS reports and provide relevant updates in Compliance Corner.