Enacted at the end of 2020, the federal No Surprises Act (NSA) prohibits certain health care providers and facilities that provide their services outside of health plan provider networks from “balance billing.” As a result, those providers and facilities cannot hold patients responsible for the difference between what the provider or facility charges and what health plans or other third-party payers pay for the services.

Recent court decisions have put the rules for determining how much health plans and insurance companies pay those out-of-network providers who are prohibited from balance billing under the new law in flux, further complicating the already complex system for paying health claims. Because providers continue to file lawsuits challenging portions of the federal regulations governing these provider payments, it is unlikely that providers or payers will have a satisfactory or predictable process in place for determining out-of-network payment rates anytime soon.

There are three types of out-of-network health care services covered by the NSA’s balance billing prohibitions: emergency services, air ambulance services, and certain services provided to patients on an out-of-network basis within an in-network facility, such radiology or anesthesiology services from out-of-network providers within an in-network hospital. The NSA directs how payments to out-of-network providers rendering these services will be determined, and the U.S. Departments of Health and Human Services, Labor, and Treasury have issued regulations and related guidance for making those payment determinations.

Those regulations have been challenged in court by multiple health care provider groups claiming the regulations deviate from the payment methodologies contained in the NSA and that the federal agencies did not follow proper procedures and acted arbitrarily when issuing the regulations. According to the providers bringing these lawsuits, these regulations unlawfully deflate the out-of-network payment rates.

Under the NSA, if out-of-network payment rates are not dictated by state law or an all-payer model agreement under the Social Security Act, and if the providers and payers cannot come to an agreement on the payment rate, either party can opt to have the rate determined through an independent dispute resolution (IDR) arbitration process. The provider lawsuits claim that the federal regulations governing this arbitration process put too much weight on what Congress defined as the Qualified Payment Amount (QPA), the median contracted rate for the service in the geographic region for determining the out-of-network payment rate in arbitration, and not enough weight on other factors set forth in the NSA that they contend should be considered alongside the QPA when determining the rate.

These other factors include, for example, the acuity of the patient receiving the services, the level of training, experience, and quality and outcomes measurements of the provider, and the efforts of the provider and payor to enter into network agreements.

A federal district court in Texas agreed with the providers in several of those cases and struck down portions of the regulations, for example, Texas Medical Ass’n v. U.S. Dept. of Health and Human Servs. (TMA I), No. 6:21-cv-00425 (E. D. Tex. Feb. 23, 2022); and LifeNet, Inc. v. U.S. Department of Health and Human Servs., No. 6:22-cv-00162 (E. D. Tex. Jul. 26, 2022).

TMA I objected to the interim final regulations that the federal agencies issued on an expedited basis in October 2021, which told arbitrators to presume that the QPA was the correct out-of-network payment rate absent credible and clear evidence to the contrary. The provider groups bringing the lawsuits claimed that the regulations impermissibly put a thumb on the scale in favor of the QPA, which they contend lowers how much they are paid. Federal agencies claimed that the regulatory framework for determining payment amounts was a reasonable interpretation of the NSA’s mandates.

After those interim final regulations were vacated by the court in February 2022, the agencies went back to the drawing board and issued a final regulation, which providers subsequently successfully challenged on similar grounds in Texas Medical Ass’n v. U.S. Dept. of Health and Human Servs. (TMA II), No. 6:22-cv-00372 (E. D. Tex. Feb. 6, 2023).

Following that February 2023 court decision, the agencies issued guidance to the IDR arbitrators to halt all further payment determinations. Subsequent guidance then told those arbitrators they could proceed with payment determinations, but only for claims for services furnished before October 25, 2022. The arbitrators were directed that, for those claims, “[t]he standards governing a certified IDR entity’s consideration of information when making payment determinations in these disputes are provided in the October 2021 interim final rules, as revised by the opinions and orders of the U.S. District Court for the Eastern District of Texas.” Payment of claims to providers for services furnished on or after October 25, 2022, must await further guidance. As of early February 2023, there was a backlog of approximately 200,000 payment disputes in the IDR process.

These lawsuits are not the only ones brought by providers challenging the government’s regulations implementing the NSA. In Texas Medical Ass’n v. U.S. Dept. of Health and Human Servs. (TMA III), No. 6:22-cv-00450 (E. D. Tex. Nov. 30, 2022), providers filed a lawsuit in the same court in Texas objecting to the methodology in the regulations for calculating the QPA, which they allege artificially deflates the QPA. According to that complaint, the regulations improperly permit payers to count toward the QPA “ghost rates” — rates included in contracts with providers who do not actually provide the specified item or service and thus have no incentive to negotiate a fair and reasonable reimbursement rate.

The lawsuit also objects to portions of the regulations that allow the QPA to be based on rates of providers who are not in the same or similar specialty, that exclude incentive-based and retrospective payments from factoring into the QPA calculation, and that permit self-insured group health plans to use a QPA based on contracted rates of all self-funded plans serviced by their third-party administrators, instead of one calculated on a plan-by-plan basis.

And in Texas Medical Ass’n v. U.S. Dept. of Health and Human Servs. (TMA IV), No. 6:23-cv-00059 (E. D. Tex. Jan. 30, 2023), providers objected to a December 2022 increase from $50 to $350 in the administrative fee that each party must pay, in addition to the arbitrator’s fee, to participate in the IDR process, and to the portion of the regulations that govern when providers can batch similar or related claims together for IDR payment determinations. The court has not yet addressed the merits of either lawsuit.

The current state of complexity and uncertainty surrounding the payment methodologies and IDR process is certainly consuming the time, attention, and resources of health plans, insurance companies, and other payers, the health care providers and facilities covered by the NSA, and the arbitrators involved in the IDR process. Benefits professionals should anticipate further guidance or even additional rulemaking from the federal agencies as they attempt to develop a workable process for determining out-of-network payment rates that limits transaction costs for all involved but sufficiently tracks the text of the NSA to pass judicial scrutiny. But there likely will not be an efficient system in place for some time and future court rulings may complicate the federal agencies’ work implementing the NSA even more.

As a practical matter, the current delays in payments to providers and uncertainties surrounding the criteria to be used in calculating out-of-network payment rates may work to encourage more provider network participation and overall health care cost reductions for plan sponsors and participants. Whether Congress steps in to amend or clarify the NSA, or engage in further oversight of its implementation, also remains a possibility.