Seyfarth Synopsis: Last summer and fall, the Departments of Treasury, Labor, and Health and Human Services issued Interim Final Rules (IFRs) [here] and [here], implementing the sweeping changes that applied to out-of-network health care providers and health plans under the No Surprises Act. While much of the IFR content was welcome relief for health plans and participants, not all providers were content with the new rules, leading to the filing of several lawsuits. One such lawsuit was recently decided by the federal court in the Eastern District of Texas, which has struck down portions of the IFRs related to determining disputed payment levels.

If a health plan and an out-of-network provider cannot agree on a payment amount, the No Surprises Act requires that the appropriate amount be determined by an independent arbitrator, referred to as an “IDR entity.” When choosing between the provider’s requested payment rate and the plan’s offer, the IDR entity is directed to consider the plan’s “qualifying payment amount” or “QPA.” As we described in our Legal Update, the QPA is the lesser of the provider’s billed charge or the plan’s median contracted rate for the same or similar service in the geographic region where the service is performed. The IDR entity is to consider the QPA, the training and experience of the provider, the market share of the plan and provider, any contract history, and the services provided. The Court said that the IFRs require the IDR entity to presume the plan’s QPA is correct, and consider other factors listed in the Act only if credible and demonstrate the appropriate rate is materially different from the QPA, which imposes a heightened burden to overcome the QPA presumption.

The Court found that the agencies did not follow proper notice and comment, and failed to follow the text of the No Surprises Act itself when it set forth its guidance as to how IDR entities were to give deference to the QPA when arriving at a provider’s payment amount. As a result, the Court vacated the portion of the IFRs at issue. The Court’s decision indicated that the No Surprises Act contained sufficient detail on the IDR process to allow arbitrations to proceed in the absence of the regulatory presumption in favor of the QPA as the appropriate payment level.

What’s Next?

While the administration may appeal the ruling, the decision has nationwide impact immediately. Similar cases filed in other Federal districts may be put on hold pending any appeal, or revision of the IFRs in final rules.

Implications for Plan Sponsors

Most plan sponsors have delegated the IDR process to their third-party administrators (or insurance carriers, in the case of fully-insured plans), so it is likely that no immediate action is required for most plans. Plan sponsors should be aware, however, that in the absence of the regulatory presumption in favor of the QPA, there is a greater risk that an arbitrator would side with the provider rather than the plan, resulting in potentially greater payment obligations from the plan sponsor.