November 07, 2024

The Fifth Circuit Court of Appeals recently issued an opinion in Texas Medical Association et al. v. U.S. Department of Health and Human Services et al. (TMA III), affirming parts of the district court's decision that impact key No Surprises Act (NSA) provisions related to the calculation of the Qualifying Payment Amount (QPA). This decision adds a new layer of complexity to compliance efforts, especially as the Departments evaluate their regulatory approach under this appellate ruling.

Background

Enacted in December 2020, the NSA prohibits surprise billing for out-of-network (OON) emergency care, air ambulance services, and facility-based nonemergency services, while also prohibiting balance billing in circumstances in which surprise bills frequently occur. The NSA established a federal independent dispute resolution (IDR) arbitration process that group health plans and health insurance issuers and OON providers and facilities could use to resolve certain disputes regarding OON payment rates. The Departments issued interim final rules (IFRs) in July 2021 and October 2021 implementing the NSA’s surprise billing protections beginning January 1, 2022, which apply to group health plans and health insurance issuers.

Under the NSA and the rules, participant and beneficiary cost-sharing for applicable OON services are calculated using a formula with various factors, and once calculated they are protected from any balanced bills. Any remaining dispute from an OON provider over a payment amount would be handled between the plan and the provider through the IDR process. The IDR process has several steps including an initial bill to the plan, an initial payment or denial by the plan to the provider, an open negotiation period, and if still unresolved – ultimately selection of an arbitrator and submission for an arbitration decision. In the IDR process, there are several factors, including the QPA, that can be considered at various steps and for the arbitrator’s determination of the payment amount.

The QPA is a determined amount that is generally the median of the contracted rates recognized by the plan or health insurance issuer (issuer) for the same or similar item or service provided by a provider in the same or similar specialty or facility and provided in same geographic region in which the item or service is furnished. The July 2021 IFR defined the different elements for QPA determination, including the methodology for calculating the QPA and the methodology to apply when a plan or issuer lacks sufficient information to calculate a median contracted rate.

Since its enactment, there have been more than 20 different legal challenges to various aspects of the NSA and its implementing regulations, including related to the federal IDR process. Multiple of these challenges have been brought by the same set of plaintiffs, the Texas Medical Association and several air ambulance providers, in the federal district court for the Eastern District of Texas. In one of these cases, TMA III, the plaintiffs challenged the QPA methodology and other administrative practices established in the July 2021 IFR and other No Surprise Act implementing guidance.

On August 24, 2023, the judge in the TMA III case issued an opinion and order vacating certain provisions of the July 2021 IFR and other No Surprise Act implementing regulations and guidance. In particular, the court vacated provisions relating to the QPA methodology. Specifically, the court vacated key elements of the QPA methodology, citing issues with how contracted rates were included and calculated across various provider settings and payment models. Additionally, certain provisions regarding air ambulance services were vacated, such as timing requirements for initial payment or denial notices. However, the court upheld other challenged aspects, including rules on QPA disclosure requirements and the use of defined geographic regions for calculating QPA for air ambulance services.

Following the August 2023 decision, HHS filed an appeal, leading to this week’s ruling from the Fifth Circuit Court of Appeals.

Latest Decision Highlights

The Fifth Circuit’s recent opinion provided a mixed result for the parties. It reversed the lower court and upheld the Departments’ rules on the QPA calculation method but affirmed the lower court decision on other provisions impacting payment timelines and transparency requirements.

Regarding the QPA, the Fifth Circuit held the Departments were within their authority and acting appropriately in their IFR guidance. This means that plans should determine the QPA by following the IFR’s on what amounts must or may be included or excluded from the QPA – such as ad hoc “single-case” payment agreements, incentive or performance based bonuses or other non-fee-for-service amounts, and the inclusion of negotiated rates in the QPA calculation regardless of the number of claims paid at those rates.

Outside of the QPA, the Fifth Circuit affirmed that the Departments overstepped in interpreting the NSA’s provision on the 30-day initial payment or denial deadline. Under the NSA, health plans are required to issue an initial payment or denial of payment within 30 calendar days after receiving a bill from an out-of-network provider. However, the July 2021 IFR modified this timeline by stating that the 30-day clock would start only once the insurer received a “clean claim” – that is, a claim that includes all information necessary for processing. However, the Fifth Circuit here agreed with the lower court that the statute was clear that the 30-day deadline must begin as soon as the provider transmits the bill, rather than when the insurer or plan sponsor verifies that the claim is “clean.”

For employer plans, while this decision will result in clarity about the start of the 30-day initial payment or denial period, it may cause complications if claims are submitted without full information. Given the firm 30-day period, it may cause plans to initially deny claims if they do not reasonably believe they have sufficient information upon which to make a payment under other plan administration requirements and guidance. This may ultimately lead to more IDR negotiations or other steps that could be costly to plans. The Departments’ IFR seemed aimed at minimizing this possibility by ensuring plans had sufficient information – but the court specifying that the statutory language is clear and requires 30-days from the bill, despite having potentially unintended detrimental consequences will need to be followed by plans.

With respect to disclosure and transparency, the Fifth Circuit also affirmed that more limited disclosure requirements set forth in the Departments’ IFR are appropriate to be made from plans to providers about the underlying QPA calculations. The plaintiffs asserted that plans should have to essentially reveal significantly greater information about the QPA calculation. But the lower court and the appellate court, here, support the Departments’ rule providing general information on how the QPA is calculated without requiring extensive details. The court determined that the existing level of disclosure sufficiently balances transparency for providers with practical administrative burdens on health plans and noted that the statute specifically provides for the Departments to audit the QPA calculations versus having them reviewed by a provider-claimant in IDR.

What's Next

As the Departments evaluate next steps in light of the Fifth Circuit’s decision, forthcoming guidance on QPA calculations and disclosure practices is likely. The Departments may issue clarifications or revised instructions on implementing these requirements, particularly around adhering to the fixed 30-day billing response timeframe. Regarding the future of TMA III, there is a possibility that the Texas Medical Association and other plaintiffs may seek to have the U.S. Supreme Court review the case.

Business Group on Health will continue to keep members informed of regulatory developments as well as future litigation.

We provide this material for informational purposes only; it is not a substitute for legal advice.

 

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