Court Strikes Key Arbitration Provision of the No Surprises Act

Mar 6

A federal judge in Texas has struck down a key provision of the No Surprises Act’s (NSA)

independent dispute resolution process (IDR) established to determine the final payment

amount beyond allowable patient cost-sharing for out-of-network health care services in

situations where the NSA prohibits surprise billing.

According to a multi-agency interim final rule issued last year, when health plans and providers

cannot agree on an appropriate out-of-network payment amount, the NSA calls for binding

arbitration before a certified IDR entity who must then select one of the parties’ monetary

offers as the appropriate payment amount. To guide the IDR entity in reaching a payment

decision, Congress enumerated in detail the factors IDR entities “shall” and “shall not” consider

in determining which party’s offer to select.

The Texas Medical Association (TMA) filed this lawsuit alleging that the language in the final

rule describing the IDR process ignores congressional intent and unfairly gives health plans the

upper hand in determining the final payment amount when a patient receives care from an out-

of-network provider. According to the TMA, “Congress directed IDR entities to consider all of

the enumerated factors and did not assign priority to any one of them, leaving it to each IDR

entity to determine how best to weigh the various factors in light of all the facts and

circumstances presented in a particular case.”

Here, however, the TMA asserted that the agencies, when issuing their interim final rule,

revised the statutory language and created a “rebuttable presumption” that requires IDR

entities to give greater weight to a single statutory factor – the “qualifying payment amount”

(QPA). The QPA is generally the median of the health plan’s contracted rates for the relevant

item or service, as calculated by the health plan. This, the TMA argued, will skew IDR results in

favor of health plans and undermine providers’ ability to obtain adequate compensation for

their services.

The court agreed with the TMA, finding that “nothing in the [NSA] instructs arbitrators to weigh

any one factor or circumstance more heavily than the others.” Therefore, because the language

of the interim final rule conflicts with the unambiguous terms of the NSA, the challenged

provisions of the NSA are vacated and remanded. The court further noted that the agencies’

failure to comply with the notice and comment period requirement for federal rulemaking

provided a second and independent basis for its holding.

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