Court Vacates Key Portions of No Surprises Act’s IDR Regulations That Determine Out-of-Network Provider Payments; Agencies Respond

Upholding a challenge by health care providers, a federal trial court has vacated key portions of the interim final regulations implementing the independent dispute resolution (IDR) provisions of the No Surprises Act, enacted as part of the Consolidated Appropriations Act, 2021 (CAA). Applicable to plan years beginning on or after January 1, 2022, the CAA is intended to shield individuals from surprise medical bills for emergency services, air ambulance services furnished by a nonparticipating provider (i.e., an out-of-network provider or other provider that does not have a contractual relationship with the plan), and non-emergency services furnished by a nonparticipating provider at an in-network facility in certain circumstances (see our Checkpoint article). The IRS, DOL, and HHS jointly issued interim final regulations in two parts to implement the law. Part I addresses participant cost-sharing for services subject to the CAA, in most situations using the qualifying payment amount (QPA), which is based on the plan’s median in-network rate (see our Checkpoint article). Part I also addresses procedural aspects of plans’ payments of the out-of-network rate to nonparticipating providers, laying the groundwork for the detailed provisions of the IDR process set forth in Part II. Part II explains the role of certified IDR entities, selection of a certified IDR entity, the parties’ submission of proposed payment amounts, fees, timing, and factors certified IDR entities may consider in selecting a party’s payment amount (see our Checkpoint article). The providers challenged the portions of Part II that effectively create the presumption that the QPA is the appropriate out-of-network rate for determining the payment amount.

The court upheld the providers’ challenge. Noting that the CAA requires certified IDR entities to consider—in addition to the QPA—five other circumstances (such as a provider’s training, experience, and outcomes; the provider’s market share; and the patient’s “acuity” or the complexity of providing services to the patient) and other relevant information submitted by either party, the court observed that nothing in the CAA compels certified IDR entities to weigh any factor or circumstance more heavily than the others. Thus, the court concluded, Part II conflicts with the CAA by requiring the certified IDR entity to select the offer closest to the QPA unless the additional information “clearly demonstrates” that the value of the item or service is “materially different” from the QPA. According to the court, the regulations impermissibly favor the QPA by not only requiring certified IDR entities to presume the correctness of the QPA but also imposing a heightened burden on the other statutory considerations to overcome that presumption. As a result, the court invalidated the portions of the regulations that prioritize the QPA over other factors in determining the out-of-network rate. The court also held, as a separate basis for its decision, that the agencies should have adopted Part II through notice-and-comment rulemaking (rather than as an interim final rule), which would have allowed the providers to express their concerns.

The agencies issued a memorandum in response to the court’s ruling, announcing that they are “reviewing the court’s decision and considering next steps.” In the meantime, guidance documents based on, or referring to, portions of the rule invalidated by the court have been withdrawn. The agencies indicated that they will update the guidance documents to conform with the court’s order and will provide training on the updated documents for certified IDR entities and disputing plans and providers through webinars and roundtable discussions. Although not directly related to the court’s decision, the memorandum also announced that the agencies are opening the IDR process for submissions through the IDR Portal. For disputes for which the open negotiation period has expired, the agencies will permit submissions within 15 business days following the opening of the portal.

EBIA Comment: Given the short lead time between passage of the CAA and its effective date, the agencies had to issue guidance quickly, but the court was concerned that the agencies did not adequately weigh out-of-network providers’ concerns that emphasizing the QPA would systematically reduce their reimbursements. Although the court vindicated the providers’ concerns by vacating select Part II provisions, the agency memorandum confirms that the remainder of Part II is unaffected by this decision. Plans should be especially attuned to the short and strict IDR timelines and other aspects of the IDR process recently highlighted in FAQ guidance (see our Checkpoint article). They will also want to watch for the updated documents and training sessions. For more information, see EBIA’s Health Care Reform manual at Section XII.B.3 (“Surprise Medical Billing: Emergency and Non-Emergency Services”). See also EBIA’s Group Health Plan Mandates manual at Section XIII.B (“Patient Protections”) and EBIA’s Self-Insured Health Plans manual at Section XIII.C (“Federally Mandated Benefits”).

Contributing Editors: EBIA Staff.