Piece of Arbitration Process in No Surprises Act Struck Down in Federal Court

A federal judge sided with the Texas Medical Association in a decision regarding the independent dispute resolution process of the No Surprises Act.

Organizations have filed several lawsuits challenging how the Department of Health and Human Services (HHS) created an arbitration process for hospitals, doctors, and insurers to settle disputes over out-of-network medical bills under the No Surprises Act.

Yesterday, a federal court in Texas ruled in favor of one of these organizations: the Texas Medical Association. The court decided that HHS was mistaken in its decision to instruct mediators to give past contracted rates between insurers and providers extra weight compared to other factors during the independent dispute resolution (IDR) process.

"This decision is a major victory for patients and physicians. It is also a reminder that federal agencies must adopt regulations in accordance with the law," Diana Fite, MD, immediate past President of the Texas Medical Association said in a statement.

"This decision is an important step towards restoring the fair and balanced process that Congress enacted to resolve surprise billing disputes between health insurers and physicians," Fite said. "The decision will promote patient access to quality care when they need it most and will guard against health insurer business practices that give patients fewer choices of affordable in-network physicians and threaten the sustainability of physician practices."

The American Medical Association (AMA) also celebrated the ruling as Gerald Harmon, MD, President of the American Medical Association said "The AMA supports the court’s proper reading of the statute and remedy to the rule’s flawed interpretation of the independent dispute resolution process passed by Congress as a confirmation of the goals of the No Surprise Act and the patient protections it contains. The judge’s ruling does not impact the patient protections included in the No Surprises Act, which the AMA supports."

Matt Eyles, President and CEO of AHIP, a national association whose members provide healthcare coverage and services, also weighed in on the ruling.

"It is unconscionable for providers to fight to weaken protections for patients who deserve to be protected from surprise medical bills, and to exploit the arbitration process to pad their bottom lines," Eyles said.

According to AHIP, it will continue to fully support the Biden Administration in its defense of the No Surprises Act and the interim final rule and will continue to support HHS' defense of the rules in other courts.

In addition, Sean Robbins, Executive Vice President of External Affairs for the Blue Cross Blue Shield Association, also issued a statement on the verdict.

“The No Surprises Act protects patients from costly and unanticipated surprise medical bills. This lawsuit could have real implications, and the Texas court’s decision risks the affordability and accessibility of health care for everyone,” Robbins said.

“The American people want affordability in the health care system, and they support Congress’ actions in passing the No Surprises Act. We disagree with this lawsuit and will continue to support the administration’s approach in the interim final rule.”

During the IDR process, an arbiter is directed to consider all information submitted by the physician and insurer, including the median in-network rate, complexity of the case, previously contracted rates, and market power of the physician and insurance company, among other things.

The law states that the qualified payment amount (QPA) could be one of many equally weighted factors considered in payment disputes.

However, until now, the rule made the QPA the primary factor in the IDR process. Organizations have said that since the QPA is "an unverified rate set by insurers," using it to settle disputes "sets an artificially low benchmark payment, for all care—whether in network or not, which may not support wider access to care—particularly in underserved areas."

This lawsuit does not impact No Surprises Act protections to hold patients harmless during insurer-provider out-of-network payment disputes and will not increase patient out-of-pocket costs.