By: HUB’s EB Compliance Team
Late last month, a Texas District Court struck down Part II of the Requirements Related to Surprise Billing, issued under the No Surprises Act, which we first discussed here. Part II of the rules deals with the federal independent dispute resolution (IDR) process, used to resolve disputes between group health plans or issuers and out-of-network providers. This decision will apply nationwide.
Importantly, Part I of the rules, which deal with the actual protection against surprise medical bills, and the statute remain intact.
The Part II Rules
The Part II rules mostly dealt with the arbitration process and how entities got approved to serve as No Surprises Act arbitrators. In particular, the rules generally required the arbitrator to pick the amount that was closest to the qualifying payment amount or QPA absent unusual circumstances. The QPA is generally the health plan or carrier’s median contracted rate for the same or similar service in the specific geographic area. Had the rule survived, this would have meant that the plan’s in-network contracts would have been important for determining the amount paid under the arbitration process.
However, the court held that the No Surprises Act statutory language does not require that the arbitrator pick the offer closest to the QPA. The court said that, under the statute, the QPA is just one factor to consider. Therefore, the regulations (which cannot override the statute) could not mandate that the arbitrator pick the offer closest to the QPA. Notably, this does not change the rule (required in the statute) that the arbitrator choose between the plan’s and provider’s offer. In other words, the arbitrator still cannot split the difference.
Procedure Penalty
Additionally, the Part II rules were issued as “Interim Final Rules”. This is basically a rule that is final, and effective when it is issued, but subject to further comment and revision. This contrasts with the usual “notice and comment” rulemaking process which requires a proposed rule to be issued, subject to comments from the public, before a final rule can be issued.
This “notice and comment” approach is required by a federal law called the “Administrative Procedures Act.” However, there are exceptions where agencies can issue interim final rules. One is if the statute expressly authorizes interim final rules. Another is if the agency has good cause because of some extenuating circumstances.
The court found no express language in the statute, so the agency was left to try and use a good cause exception. Even though Congress only gave the agencies a year to issue rules and have them become effective, the court said this short timeframe for regulations was not sufficient for a lack of notice and a comment period.
What Happens Now?
As a result of both failures described above, the court struck down the interim final rules. In short, the effects are two-fold:
- Arbitrators are no longer bound to pick the offer closest to the QPA.
- The other Surprise Billing Rules (which were issued as Part I) are currently unaffected.
Importantly, this does not mean the No Surprises Act is invalidated or that surprise billing is now alive and well again. The rules prohibiting surprise billing are part of the statute and were not struck down. This is more of a ruling about technical issues related to the arbitration process.
Wasting little time after the decision was released, the agencies issued a memorandum addressing the case. In the memo, the agencies indicated their next steps will be to immediately withdraw the affected portions of the Part II regulations and other guidance that was invalidated, reissue those documents with appropriate changes, provide training, and open the IDR process for submissions. Importantly, the protections against surprise billing continue.
While the agencies that issued the rules could appeal this case, they could also issue updated regulations (likely in proposed form subject to notice and comment) in the future.
The Effect on Plans
The likely effect of this for plans is that this will increase the costs of arbitrations. Since arbitrators will now have to weigh additional factors more holistically, this will likely require the providers and plans/insurance carriers participating in the arbitration to submit more information for the arbitrator’s consideration. It may also increase what plans/insurance carriers pay in arbitration cases, but that remains to be seen.
Plan sponsors should be aware of these developments and the potential effect on their plans. While unlikely, if plan sponsors went into significant detail about the arbitration process in their plan communications, they may want to review those to see if changes are necessary. However, a general description that simply notes that these claims are arbitrated will not require any changes.
If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.
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