The No Surprises Act has taken the patient out of the middle of payment disputes between insurers and out-of-network providers, shielding more than 9 million people from unexpected bills since the law was enacted in 2022.
But in the background, providers and payers are fighting over how to set appropriate reimbursement rates in a dozen lawsuits or so that could take years to resolve.
Here's what to know about the law and the legal challenges the law faces.
Legal expenses may cost consumers
The No Surprises Act prevents providers from billing privately insured patients more than typical in-network out-of-pocket costs for most emergency services, post-stabilization care, non-emergency services and air ambulance care. The law does not cover ground ambulance services.
While a patchwork of state laws has stopped many surprise bills, most individuals are covered by employer-backed health plans that are beyond the reach of state regulation.
About 1 in 5 emergency room visits and 16% of admissions to in-network hospitals result in surprise bills from out-of-network anesthesiologists, pathologists, radiologists and other clinicians, according to a 2017 analysis Kaiser Family Foundation.
The law, in part, aims to lower healthcare costs by reducing health insurance premiums by up to 1%, the Congressional Budget Office estimated in 2019. But those projected savings could decrease depending on the outcome of litigation, the cost of which may trickle down to consumers. Meanwhile, the protracted legal battles are straining arbitrators and physicians while they wait for more guidance as the Health and Human Services, Labor and Treasury departments rework the heavily litigated independent dispute resolution process.
The federal government is struggling to keep up with a growing backlog of arbitration cases, amassing more than 90,000 disputes from mid-April through September, the latest data show. Providers are missing out on potential revenue as they wait for settlements. Pending lawsuits could upend the entire process.
The litigation has saddled the system with additional administrative costs that will likely get passed on to the consumer, said Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy.
“It is unnecessarily adding bureaucracy and administrative costs to the system,” he said. “These administrative costs will largely flow to consumers in the form of increased premiums.”
Texas lawsuits 1 & 2
The Texas Medical Association, which represents more than 55,000 physicians, has filed four lawsuits challenging the law.
The first two suits focus on how much emphasis a third-party mediator should place on the qualified payment amount, which is the median rate insurers pay for a service in a particular market. A February 2022 ruling in the initial lawsuit—filed in the U.S. District Court for the Eastern District of Texas in October 2021—validated the association's argument that there was too much emphasis on the qualified payment amount, a dynamic that tipped negotiations in insurers’ favor.
In August, the federal government issued a final rule stating that arbiters don’t have to choose the offer closest to a median contracted rate. In a second lawsuit filed in December in the same court, the association argued that the arbitration process still unjustly favors insurers. Judge Jeremy Kernodle again sided with the association, vacating parts of the law related to arbitration.
The ruling means HHS and the Labor and Treasury departments must again rework the dispute resolution process, which is meant to serve as a backstop when providers and insurers can’t agree on appropriate pay for out-of-network care. The agencies have until early April to file an appeal.
On Feb. 27, the Centers for Medicare and Medicaid Services restarted the dispute resolution process for services provided before Oct. 25, 2022. Payment determinations for services provided after Oct. 25 are on hold until the federal agencies offer more guidance.
“How long that is going to be, no one knows," said Dr. Rich Heller, associate chief medical officer for communications and health policy and national director of pediatric radiology at Radiology Partners, a national physician practice based in El Segundo, California. “It is taking an exorbitant amount of time to go through the process, holding up the cash flow for medical practices. Even if (physicians) do prevail, in the end they still lost time.”
After Kernodle’s rulings, the Georgia College of Emergency Physicians, American Medical Association, American Hospital Association and the American Society of Anesthesiologists voluntarily dismissed their lawsuits.
The federal government may choose to issue a new rule and/or additional guidance in place of an appeal. But if nothing is issued or an appeal drags out, the arbitration process will remain complex and take longer, said Harvey Rochman, a partner at the law firm Manatt, Phelps & Phillips.
Texas lawsuits 3 & 4
The Texas Medical Association also filed two lawsuits involving the calculations used to determine the qualified payment amount and the administrative fee hikes related to the independent resolution process. Those cases also will be heard by Kernodle, an appointee of former President Donald Trump.
One suit, filed in November, alleges that the qualified payment amount calculations are flawed and the amounts include so-called “ghost rates,” or contracted rates for specialized services that providers rarely or never provide. The qualified payment amounts also factor in rates of providers who are not in the same or a similar specialty, the association alleges.
In addition, the association alleges that federal agencies instruct insurers to use an amount lower than the total maximum payment when a contracted rate includes incentive-based and retrospective payments, violating the law. It also alleges the qualified payment amount calculations do not determine the amount based on each plan sponsor, instead bundling the rates for all group health plans administered by the same entity.
If the association prevails and federal agencies must vacate the qualified payment amount methodology, it could inflate patients’ out-of-pocket costs, said Zachary Baron, an associate director of the Health Policy and the Law Initiative at Georgetown University’s O'Neill Institute. The higher the agreed rate is, the smaller the savings via reduced premiums, he said.
A fourth lawsuit filed by the association on Jan. 30 challenges the $50 to $350 administrative fee hike related to the dispute resolution process. Providers are encouraged to bundle multiple cases in a single dispute. But the regulatory guidance makes it difficult to combine more than two claims in a single dispute, the association argues.
Hearings on both suits are scheduled for April 19.
Air ambulance lawsuits
Air ambulance provider LifeNet sued the federal government over the No Surprises Act three times. The most recent suit, filed in December, largely mirrors the association's allegations regarding the qualified payment amount’s methodology. The case was consolidated with the association's third lawsuit that’s set for a hearing April 19.
In addition to the similar allegations, the company argues that insurers can manipulate arbitration by delaying an initial payment. The government made the geographic regions for related contracted rates too broad, LifeNet argues.
LifeNet also alleges the regulatory guidance unlawfully excluded case-specific contract agreements between out-of-network providers and insurers. And the company challenges the requirement that air ambulance companies must file two separate dispute resolution processes, one for the initial base rate and one for the per-mile cost.
LifeNet’s lawsuit related to the independent dispute resolution process was consolidated with the association's second case, which providers won. LifeNet also won its first suit, filed in September 2021, that sought to vacate parts of the arbitration process, similar to the Texas Medical Association's initial case.
Several other air ambulance cases are in the mix. The Association of Air Medical Services filed a lawsuit in a Washington, D.C., federal court against the government on Nov. 16 challenging the qualified payment amount methodology. A decision is expected soon.
Air ambulance company Med-Trans Corp. filed a lawsuit against an insurance company in Florida federal court in October after it lost an arbitration case. A hearing is scheduled for May 16.
Air ambulance company PHI Health filed a lawsuit in Kentucky federal court against the federal government in April, seeking to vacate parts of the regulatory guidance related to patient cost-sharing, the qualified payment amount methodology and independent dispute resolution process. The company argues that insurers hold too much power in the arbitration process. The case is pending.
A major exception
One looming lawsuit could upend the entire law.
Dr. Daniel Haller, a general surgeon in Rockville Centre, New York, lost his December 2021 lawsuit challenging the constitutionality of the No Surprises Act. He appealed the decision and initial briefings are due later this month.
“If that lawsuit is successfully, it would be tremendously disruptive to the private insurance market and to patients who have benefited from the law,” Georgetown's Baron said.