Final Surprise Billing Regulations Cut Insurer Control—Sort Of

A ban on surprise billing is one thing. The problem is that the No Surprises Act (Act) legislation that took effect on January 1, 2022, includes a provision giving commercial health insurers an unfair and unjustified advantage in disputes over reimbursement for out-of-network services. The provision was so skewed and out of harmony with the Act that a federal court took the unusual step of striking it down. On Aug. 26, the Biden administration issued a revised final rule. But it remains far from clear whether the new rule goes far enough to fix the problem.

The Problem with the Original Regulations

The Act bans providers from billing commercially insured patients for more than the in-network cost-sharing due under the patient’s insurance. It also creates an independent dispute resolution (IDR) process that insurers and providers can use to resolve price disputes by “final offer” arbitration. The way it works: Each side submits its final payment offer and the arbitrator decides which of the two is more “reasonable.”

While the concept of “final offer” arbitration is acceptable to all sides, the government’s interim rules telling arbitrators how to determine which offer is more reasonable have become a source of significant controversy. While the rules list multiple factors, they also instruct arbitrators not to take them into account unless and until they consider which of the offers is closest to the “qualifying payment amount” (QPA), i.e., the insurer’s median in-network rate for similar services in the geographic region as of 2019, indexed for inflation by the Consumer Price Index for All Urban Consumers (CPI-U).

Of course, it’s the insurer that dictates the QPA for particular services. So, making QPA the primary factor of reasonableness essentially makes the insurer judge, jury, and executioner of the IDR process. It also gives insurers an incentive to chop reimbursement rates in future negotiations.

Providers Cry Foul

In February 2022, a federal judge sided with the Texas Medical Association in its lawsuit relating to the IDR process, finding that the IDR rules are unfair and in conflict with the intent of the Act. Nothing in the law “instructs arbitrators to weigh any one factor or circumstance more heavily than the others,” wrote Judge Jeremy Kernodle, who criticized the rule for “placing the thumb on the scale” and establishing the presumption that providers would have the burden of rebutting that the QPA is the reasonable price for a particular service. He also found that the Department of Health and Human Services (HHS) evaded the vital public notice and comment rules in promulgating the interim regulations [Texas Medical Association v. United States Department of Health and Human Services, et al., 2022 WL 542879 (E.D. Tex. Feb. 23, 2022)].

Buoyed by the Texas ruling, in April, the American Medical Association (AMA) and American Hospital Association (AHA), which had filed their own lawsuit in December 2021 challenging the legality of the QPA rule in the US District Court for the District of Columbia, urged that court to make a quick decision.

“The [US government] Departments have neither acquiesced to the decision of the Eastern District of Texas vacating portions of the September Rule, nor suggested any intent to abandon their interpretation of the No Surprises Act in any final rule,” the two associations said in a brief filed with the court in April and quoted in an AHA press release. “A decision from this Court can put an end to the government’s illegal interpretation once and for all. As such, Plaintiffs respectfully ask the Court to act as soon as practicable.”

Earlier, on November 9, 2021, a bipartisan group of 152 House members also urged the secretaries of Health and Human Services, Treasury, and Labor to revise the IDR regulations “to align with the law as written by specifying that the certified IDR entity should not default to the median in-network rate and should instead consider all of the factors outlined in the statute without disproportionately weighting one factor.”

The Final Rule Pulls Back on the QPA Factor—Somewhat

The final rule acknowledges the Texas Medical Association case and purports to address the concerns it raises. However, the changes are less than overwhelming. The QPA is still listed as the first factor in determining reasonableness since it’s a quantitative figure based on price data. But the new preamble to the final rule says that once arbitrators consider the QPA, it’s “reasonable” for them to “then” look at “the additional, likely-qualitative factors, when determining the out-of-network rate.”

Section 2590-716(iii) of the final rule lists those additional factors, including:

1. The level of training, experience, and quality and outcomes measurements of the provider or facility that furnished the qualified IDR item or service (which we’ll refer to as “service”);
2. The market share held by the provider or facility or that of the plan or issuer in the geographic region in which the service was provided;
3. The acuity of the patient receiving the service, or the complexity of furnishing the service to the patient;
4. The teaching status, case mix, and scope of services of the facility that furnished the service; and
5. Demonstration of good faith efforts (or lack thereof) made by the provider or facility or the plan or issuer to enter into network agreements with each other, and, if applicable, contracted rates between the provider or facility, as applicable, and the plan or issuer, as applicable, during the previous four plan years.

The Practical Impact

The new final rule does go some way toward alleviating providers’ concerns. But it’s far from a total victory. Although the QPA instructions have been watered down, QPA remains the primary factor. As of publication date, the AMA and AHA have been conspicuously silent on whether they’re satisfied with the new rules or intentions with regard to the lawsuit.  In addition, there are other problems. The new rule doesn’t tell arbitrators how to weigh the QPA against the additional “qualitative” factors. As a result, arbitration decisions in out-of-network price disputes are likely to be not only totally unpredictable but inconsistent from case to case. All of this casts significant uncertainty over the IDR process and whether it will generate fair decisions.