On August 19, HHS, DOL and the Treasury Department released a hotly anticipated final rule that includes updated guidance regarding implementation of the surprise-billing ban that was included in the Consolidated Appropriations Act (CAA) of 2021. The guidance contends primarily with the independent dispute-resolution process, an aspect of the law that has led to several lawsuits from different parts of the country.

The CAA – which passed at the end of 2020 – included the No Surprises Act, which holds patients harmless from surprise medical bills, including from air-ambulance providers, by ensuring they are only responsible for their in-network cost-sharing amounts in both emergency situations and certain non-emergency situations where patients do not have the ability to choose an in-network provider. For other claims, this new surprise-billing agreement utilizes an arbitration process with some patient safeguards. As a federal law, the No Surprises Act serves as a baseline for consumer protection in all states. Many states have their own surprise-billing law on the books, which provides at least the same level of protection as the No Surprises Act. In most cases, the state law will apply to fully insured plans but, if no state law exists, the No Surprises Act applies to both fully insured and self-funded plans.

Throughout 2021, the agencies released “Part 1” and “Part 2” interim final rules regarding implementation of the law. Last summer, NAHU submitted a letter to the administration with suggestions on future rulemaking and items we felt we needed more guidance on. Those items included questions about how the independent dispute-resolution or arbitration process would be implemented, what entities could serve as arbitrators, and what data elements could be taken into consideration, such as the median in-network rate when a claim is being considered by arbitrators. The Part 2 IFR utilizes the qualified payment amount (QPA) in an ideal fashion: When making a payment determination, arbitrators (referred to as independent dispute-resolution entities, or IDREs) must begin with the presumption that the QPA is the appropriate out-of-network amount. Essentially, the IDR process will allow for the payer and provider to give the IDRE the amount they feel is fair for the service in question, then the IDRE is required under the IFR to choose the amount that is closest to the QPA. For the IDRE to deviate from the offer closest to the QPA, additional information must be submitted to clearly demonstrate that the value of the item or service is materially different from the QPA.

However, in February of this year, a federal judge struck down the portion of the regulation that requires the IDRE to presume the QPA is the appropriate out-of-network amount. The Texas Medical Association (TMA), a trade association that represents over 55,000 physicians in the Lone Star State, filed suit against HHS in December 2021, arguing that the IDR process outlined by the agency is “arbitrary and capricious.” Specifically, TMA challenged the final rule’s requirement that IDR entities presume that the QPA is the appropriate out-of-network payment amount. This part of the rule, they claimed, violates the Administrative Procedure Act and is beyond the reach of the agencies’ legal authority. U.S. District Judge Jeremy D. Kernodle sided with TMA, ruling that HHS cannot instruct mediators to “give rates insurers and providers contracted with in the past extra weight compared with other factors."

There have been a total of eight lawsuits filed over the surprise-billing ban, including Texas Medical Association’s. The final rule released late last week is a direct response to the Texas decision as well as the other lawsuits still pending. Under the most recent guidance, IDREs no longer need to select the offer closest to the QPA. While the IDRE must still begin the process by considering the QPA, IDREs should then consider additional information submitted by a party (or requested by the IDRE) to determine which offer best reflects the appropriate out-of-network rate. Other factors that an IDRE may consider include: a provider’s training and experience, the market share of a medical facility or insurance plan in that geographic area, how many services the provider offers, and whether it is a teaching facility. However, if any of those factors were used in determining the QPA, those factors cannot them be used again to argue for a different resolution.

Another surprise-billing case, Haller v. HHS, was dismissed earlier this month. That suit was brought by New York surgeon Daniel Haller, who alleged that the ban on surprise billing and the IDR processes unconstitutional and sought to invalidate the entire law by claiming that the law deprives physicians the right to be paid a reasonable value for their services. The plaintiff’s brief also argued that the IDR process inherently favors insurers over providers. Ultimately, the judge tossed the case, finding no evidence that Haller suffered any damages from the IDR process.

While most of the cases deal with the IDR process, there are a couple of cases that deal with the air-ambulance provisions of the No Surprises Act. Air ambulances are technically separate from the IDR process for other providers, meaning that the TMA ruling did not apply to them. The Association of Air Medical Services, along with LifeNet and PHI Health (both air-ambulance companies), filed lawsuits requesting that the TMA ruling also apply to the IDR process that pertains to air ambulances. LifeNet and PHI Health are suing out of the eastern districts of Texas and Kentucky, respectively.

PHI Health’s lawsuit is potentially the most far-reaching of the air-ambulance suits. PHI Health argues that the No Surprises Act violates the Takings Clause of the Fifth Amendment by “taking” its physical property, its services and its right to state law causes of action without just compensation. PHI Health is also seeking to have cost-sharing protections for consumers and the full IDR process for air-ambulance services struck because of “procedural issues” and for payers to be required to disclose exactly how the QPA was determined. Unless the IDRE finds that the payer’s QPA disclosures comply with the statute, PHI Health wants a court to instruct IDREs not to give any weight to the QPA whatsoever.

The Coalition Against Surprise Medical Billing, which NAHU is a member of, issued the following statement: “Providers can no longer game the system through surprise bills, but new data from the administration unfortunately shows that too many are trying to game the system through IDR. Abusing IDR – as we’ve seen with a flood of disputes already filed – will undoubtedly raise healthcare costs for hardworking families and consumers. We are concerned that changes to how IDR entities are directed to consider various factors in making their determinations may unintentionally lead to more disputes being brought to IDR. We are nevertheless hopeful that as this law is implemented, IDR will be used sparingly and with decisions based on the most accurate and relevant information about the real costs in local markets. We encourage the administration to continue to closely monitor and report on the use of arbitration and its outcomes to ensure the goal of the No Surprises Act to lower healthcare costs is achieved.”