Court Partially Invalidates No Surprises Act Dispute Resolution Process

On Feb. 23, 2022, the U.S. District Court for the Eastern District of Texas ruled to strike down part of an interim final rule related to the federal independent dispute resolution (IDR) process under the No Surprises Act (NSA), which was enacted as part of the Consolidated Appropriations Act, 2021 (CAA).

Background
The NSA prohibits “surprise billing,” or instances in which an individual receives an unexpected bill after obtaining items and services from an out-of-network provider or facility, when the individual did not have the opportunity to select a facility or provider covered by their health insurance network (such as during a medical emergency). The NSA provides for a federal IDR process to resolve payment disputes after unsuccessful negotiation, where a certified IDR entity will review the specifics of the case and services received and determine the final payment amount.

The Federal IDR Process
On Sept. 30, 2021, an interim final rule implementing the NSA’s IDR process was released. Under the rule, if a provider and a health plan cannot come to an agreement during the IDR process, the certified IDR entity must select the payment offer closest to the qualifying payment amount (QPA) (generally, the health plan’s median contract rate for the item or service in the geographic area), unless the certified IDR entity determines that information submitted warrants a different rate.

A physician advocacy group sued, arguing that the rule’s IDR process conflicted with the NSA’s requirements and that the Department of Health and Human Services (HHS) did not provide an adequate notice and comment period. The court agreed with both arguments, notably finding that the rule’s preference for QPAs created an unfair reimbursement system favoring health plans. As a result, the court invalidated this part of the rule.

The court’s ruling did not affect any other NSA provision. Therefore, the NSA’s protections against surprise bills generally remain in place. Federal agencies are currently reviewing the court’s decision and considering next steps.