Providers notched another win in the legal battle over the No Surprises Act, forcing regulators to rework how the law is implemented.
The U.S. Court of Appeals for the 5th Circuit on Friday upheld a lower court ruling and voided parts of the law related to settling out-of-network reimbursement disputes, since the process skewed negotiations in insurers’ favor.
Related: CMS pauses surprise billing arbitration after court ruling
The ruling represents the latest in a series of successful provider-led legal challenges as health systems and physicians allege insurers haven’t paid them enough for certain services.
Here’s what to know about the latest ruling and the No Surprises Act.
What is the No Surprises Act?
The law, which went into effect in 2022, prevents providers from billing privately insured patients more than typical in-network, out-of-pocket costs for most emergency services, as well as post-stabilization care, some non-emergency services and air ambulance care.
The No Surprises Act is designed to eliminate situations where a patient goes to an in-network hospital and receives an unexpected medical bill from an out-of-network physician. If providers and insurers don’t agree on the payment amount, they can enter the independent dispute resolution process. Under that process, each side submits an offer, and an arbitrator must choose one as the out-of-network rate.
The law instructs arbitrators to consider what’s known as the qualifying payment amount, which is a health plan’s median contracted pay rate for providers in a region.
What did the 5th Circuit Court decide?
The court reviewed a ruling on the arbitration process from last February by U.S. District Court for the Eastern District of Texas Judge Jeremy Kernodle.
Providers have long argued there is too much emphasis on the qualifying payment amount — which insurers set — during the arbitration process. That artificially depresses reimbursement, providers allege.
Kernodle ruled federal regulations favored health plans in the independent dispute resolution process, and the government exceeded its statutory authority by influencing the outcome. The 5th Circuit affirmed that decision Friday.
What was the response to the ruling?
In response to past court decisions, federal agencies have paused dispute resolutions to revise the process. However, the Health and Human Services, Labor and Treasury departments haven't said whether they would do so following last week's 5th Circuit opinion.
The Texas Medical Association, which filed the lawsuit against HHS, said it was pleased with the ruling.
“We have long held that the federal departments lack authority to tell arbitrators how to weigh the factors during surprise billing arbitration,” Dr. Ray Callas, Texas Medical Association president, said in a statement. “We hope this resolves the issue once and for all: Congress intended the NSA to be a fair means of protecting patients from surprise bills.”
What are other No Surprises Act cases?
The Texas Medical Association’s first lawsuit challenging the No Surprises Act was filed in 2021. A federal court sided with the association, concluding the federal agencies unlawfully required arbitrators to presume the offer closest to the qualifying payment amount was the appropriate out-of-network rate. As a result, the agencies amended the No Surprises Act regulations, spurring the association's second lawsuit and ultimately the 5th Circuit's Aug. 2 ruling.
The Texas Medical Association's third lawsuit, filed in November 2022, alleges the qualifying payment amount calculations are flawed and include so-called “ghost rates,” or contracted rates for specialized services that clinicians rarely or never provide. The case is pending before the 5th Circuit.
The association’s fourth lawsuit, filed in January 2023, challenged an administrative fee hike related to the dispute resolution process, as well as the regulatory guidance for combining more than two claims in a single dispute. A federal district court ruled the agencies violated the Administrative Procedure Act of 1946 in the fee change and the batching regulations.
In addition, there are several ongoing lawsuits between air ambulance providers and insurers, as well as a pending lawsuit filed by Dr. Daniel Haller, a general surgeon in Rockville Centre, New York, challenging the constitutionality of the No Surprises Act.
