Payers, Employers Support the No Surprises Act IDR Process in Court

The provisions of the No Surprises Act rule that detail the independent dispute resolution (IDR) process for out-of-network claims have been making waves in the healthcare space.

The No Surprises Act which passed in December 2020 aims to prevent surprise billing. In instances when surprise bills occur, the legislation included an IDR process to determine payment rates when payers and providers cannot agree.

Specifically, payers, employers, and providers have been vocal about the weight placed on the qualifying payment amount (QPA) when IDR entities determine a payment rate for an out-of-network service. The QPA represents a payer’s median in-network rate for the service.

Texas Medical Association lawsuit

Texas Medical Association (TMA)—a nonprofit organization representing over 55,000 physicians, residents, and medical students—brought legal action against the Department of Health and Human Services (HHS) in October 2021.

The No Surprises Act states that IDR entities should consider multiple factors when determining a payment rate, including the QPA, the provider’s level of training and experience, the difficulty of the service, and if the provider or payer attempted to enter into a network agreement.

In September 2021, the Biden-Harris Administration released an interim final rule implementing the IDR provisions included in the No Surprises Act. This prompted TMA to file a lawsuit against HHS, alleging that IDR entities should weigh the QPA more than other factors, according to the interim final rule. 

TMA expressed concerns that prioritizing the QPA led to lower provider reimbursement rates. Additionally, the organization said the IDR process could incentivize payers to reduce their provider networks if they could offer out-of-network physicians the same rates as in-network providers.

In February 2022, US District Court Judge Jeremy Kernodle sided with TMA in the lawsuit and declared that the interim final rule conflicted with the text of the No Surprises Act.

In August 2022, the Biden-Harris Administration released final surprise billing rules that directed IDR entities to consider the QPA in addition to other factors. Specifically, the rules stated that entities “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.”

However, TMA filed a second lawsuit a month later, maintaining that the IDR process favored payers. Judge Kernodle ruled in favor of TMA again in February 2023 and stated that the revised process “places its thumb on the scale for the QPA, requiring arbitrators to presume the correctness of the QPA and then imposing a heightened burden on the remaining statutory factors to overcome that presumption.”

Payer perspectives

Payers and employers feel differently about the rule than providers. AHIP, the Blue Cross Blue Shield Association (BCBSA), and a cohort of employers filed amicus briefs supporting HHS. Payers generally favor using the QPA to determine out-of-network payment rates in surprise billing disputes.

According to AHIP, the provisions in the interim final rule that were vacated better served congressional intent because they anchored the IDR process to the QPA. Tying payment decisions to the QPA helps to maximize voluntary dispute resolution.

AHIP said the final rule “falls far short of delivering the predictability, stability, and efficiency of IDR that Congress intended.”

“Even without a constraining IDR rule, because the QPA represents a credible, market-driven rate, more than 90% of out-of-network payments are resolved by the providers accepting QPA-based payments or settling disputes through negotiation, reserving IDR for rare cases,” AHIP wrote in its amicus brief.

Although AHIP was not entirely on board with the final rule, the organization said the procedural guidelines would better serve Congress’ goal of reducing arbitrations compared to eliminating the weight placed on the QPA.

AHIP defended the QPA as a deciding factor for out-of-network payment rates, saying that the calculation is transparent, governed by exhaustive rules, and subject to audit. The organization also refuted the claim that the process would make payers reduce their provider networks. It noted that networks are designed to provide affordable access to quality care and are not just organized around cost.

BCBSA expressed similar views in its amicus brief. The payer pointed out that health plans do not unilaterally dictate contracted rates. These rates for facilities and physicians vary significantly across and within geographic markets and medical specialties.

BCBSA said requiring IDR entities to consider the QPA will help limit future market distortions by reducing inflated costs and minimizing the growth of premiums. Thus, the final rule directing arbitrators to start with the QPA will benefit consumers.

The payer also indicated that several competitive and market forces incentivize health plans to maintain sufficiently broad networks, shooting down concerns that the IDR process would alter network decisions. In addition, state and federal network adequacy standards would prevent payers from offering narrow provider networks.

A group of employers filed their own amicus brief, including the Business Group on Health, the National Alliance of Health Care Purchaser Coalitions, and the Self-Insurance Institute of America.

While the employers strongly supported the interim final rule, they said the final rule is preferable to “an IDR system without clear guidelines, open to abuse and overuse, and leading to increased health care costs for plans and participants.”

The cohort believed the final rule complies with the text in the No Surprises Act and helps further Congress’ intended policy outcomes.

Policy Implications

Stakeholders are facing the consequences of ongoing lawsuits challenging the IDR process.

Following the second ruling against HHS, CMS instructed IDR entities to pause payment determinations under the No Surprises Act. On March 17, 2023, entities could resume payment determinations for items or services furnished on or after October 25, 2022.

The legal challenges highlight the difficulties of prioritizing affordable healthcare for consumers. With payers and providers holding opposing views, federal policymakers must reach a conclusion that benefits both sides and improves costs for consumers.

If federal agencies cannot establish reasonable guidelines for the IDR process, Americans may face an inflationary federal IDR process that results in higher premiums and healthcare costs, according to Georgetown University’s O’Neill Institute.

There is a strong urgency to determine concrete guidelines, given the high amount of disputes that payers and providers have submitted through September 2022, a CMS report indicated.