Passed with bipartisan support, signed into law by President Trump, and implemented under the Biden administration, the No Surprises Act (NSA) might seem to have the hallmarks of successful political compromise. In fact, as the Departments of Health and Human Services, Labor, and Treasury have released interim final rules and final rules for the Act, the arbitration process it calls for has become the focus of heated debate.

Background

The NSA was passed as part of the Consolidated Appropriations Act of 2021 in December 2020 and signed into law by President Trump on Dec. 27, 2020. Its support from both sides of the aisle was in large part driven by media attention to the financial harm to families and individuals resulting from “surprise” billing for healthcare services.

In surprise billing, patients with health insurance are unpleasantly surprised to find that they are responsible for the balance of payment for services rendered by healthcare providers whom they reasonably—but incorrectly—assumed to be enrolled with their insurance plan.

There was a significant increase in surprise billing in the decade before the passage of the No Surprises Act. As more hospitals outsourced staffing to third-party firms, fewer physicians were included in the insurance networks covering the populations served by the hospitals at which they worked. This was especially true for emergency departments (EDs). According to one study, between 2011 and 2015, one in five ED visits in the U.S. resulted in a “surprise bill.”

Journalists, consumer advocates, and legislators took note, with programs such as NPR’s Bill of the Month, drawing attention to especially egregious examples of balance billing and financial injury to patients. Some advocates for reform attempted to characterize the practice of surprise billing as the direct result of healthcare investments by private equity firms, even though many cases of surprise billing stemmed from publicly traded companies.

The problem was such that at least 30 states had individually passed some form of legislation aimed at protecting consumers from surprise billing by the time the national legislation came up for a vote.

Overview

At its most basic, the NSA as passed protects patients covered under group and individual health plans from surprise billing by instituting reforms on both the provider and payor side of the healthcare equation.

The NSA prohibits healthcare providers from charging patients more than in-network amounts for services rendered by out-of-network providers. It also requires insurance companies to apply in-network cost sharing to out-of-network claims.

Importantly, the NSA also provides for the establishment of an independent arbitration system under which healthcare providers and insurance companies can negotiate the cost of a service provided by an out-of-network provider. Defining the specifics of this independent dispute resolution (IDR) program has proven especially challenging.

The dispute over the QPA

Under an interim final rule (IFR) issued in October 2021 and effective in January of this year, the qualifying payment amount (QPA)— the benchmark rate for an out-of-network charge in a geographic area and a figure established by payors—was given priority in arbitrated payment disputes.

Medical societies across the nation united in their opposition to the rule, with the American Medical Association (AMA) the first of over 100 signatories to a letter asserting that the IFR placed “a thumb on the scale in favor of health insurers in contract negotiations.”

The Texas Medical Association filed the first suit to block the implementation of the NSA, naming the United States Department of Health and Human Services, the Department of Labor, the Department of The Treasury, and the Office of Personnel Management as defendants and claiming that specification of the QPA as the presumptive factor in the IDR process was a violation of the Administrative Procedure Act.

By the beginning of August 2022, no less than six lawsuits had been filed against the implementation of the NSA, with the AMA, the American Hospital Association, and the Association of Air Medical Services among the plaintiffs.

Opponents of the rule for the implementation of the NSA have enjoyed important legal successes. The Texas Medical Society scored a key victory in February when the U.S. District Court for the Eastern District of Texas held that there was nothing in the NSA that “instructs arbitrators to weigh any one factor or circumstance more heavily than the others. … [H]ere, the Act nowhere states that the QPA is the ‘primary’ or ‘most important’ factor.”

The District Court for the Eastern District of Texas handed QPA opponents a second victory in July when it granted a summary judgment for LifeNet Inc, an air ambulance provider, in its suit against HHS, the Department of Labor, and the Treasury.

Claims submissions surpass expectations

HHS didn’t merely underestimate the dissatisfaction with the arbitration process. It also vastly underestimated the number of claims that would be submitted for arbitration through the federal IDR portal. A total of 44,000 were submitted between April 15 and mid-August, a number HHS described as “substantially more” than it had been anticipated. In fact, it was more than the department had anticipated receiving in a year’s time.

On September 7, HHS posted a notice that “in order to accommodate the high volume of disputes currently being initiated in the Federal IDR portal,” certified IDR entities were being allowed “additional time to collect information and evaluate the eligibility of disputes.”

Rule changes

A final rule issued by the Department of Labor on August 19 makes it clear that federal agencies have been swayed by the providers’ arguments and the Texas court decisions. The rule specifies that IRBs “should select the offer that best represents the value of the item or service under dispute after considering the QPA and all permissible information submitted by the parties.”

Annette Guarisco Fildes, CEO, of the ERISA Industry Committee expressed disappointment with the most recent final rule, saying it “falls short” and will ultimately position plan sponsors and enrollees to “line the pockets of medical providers that choose to remain out-of-network.”

But the American Society of Anesthesiologists was also unsatisfied, characterizing the rule as enabling “insurers to inflate profits at patient and provider expense.”

As this article goes to press, neither the AMA nor the AHA has issued an official statement on the newest rule.