November 02, 2023
On October 6, 2023, the Departments of Labor/Employee Benefits Security Administration (DOL/EBSA), Health and Human Services/Centers for Medicare and Medicaid Services (HHS/CMS) and Treasury/Internal Revenue Service (Treasury/IRS) (collectively, the Departments), in conjunction with the Office of Personnel Management (OPM), published FAQs About the Consolidated Appropriations Act, 2021 Implementation Part 62 (FAQs Part 62). The Departments issued FAQs Part 62 in response to the latest court ruling in one of the many ongoing legal challenges to the No Surprises Act – Texas Medical Association v. United States Department of Health and Human Services, also known as TMA III – in which the federal district court vacated portions of prior guidance for calculating the qualifying payment amount (QPA) under the No Surprises Act. The Departments also issued separate FAQ guidance announcing a partial reopening of the federal independent dispute resolution (IDR) portal following a period of suspension of the IDR process in the wake of the TMA III ruling and another district court decision involving the same parties (TMA IV).
Review the FAQs modifying No Surprises Act QPA calculation methodology.
Below we provide a brief overview of the QPA, ongoing litigation, and next steps. For additional context and insight, please listen to the replays of our September 2023 and October 2023 Regulatory & Compliance Updates webinars, where we covered the latest developments in litigation challenging the No Surprises Act.
Enacted in December 2020, the No Surprises Act (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) 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 July 2021 IFR, cost-sharing requirements for OON emergency services and applicable non-emergency items and services cannot be greater than the applicable cost-sharing if the services were provided by an in-network provider or emergency facility. Plans must base the participant cost-sharing for items and services subject to the surprise billing rules on the “recognized amount,” which is separate and distinct from the amount the plan pays to the provider. The recognized amount is determined in one of three ways:
- 1 | An amount determined by an applicable All-Payer Model Agreement under Section 115A of the Social Security Act;
- 2 | If there is no such All-Payer Model Agreement, an amount determined by applicable state law; or
- 3 | If not established by the first two options, it is the less of the “qualified payment amount” (QPA) or the billed amount (not applicable to air ambulances, however).
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.
Recent Litigation and FAQs Part 62
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 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, including:
- The inclusion of contracted rates for items and services regardless of the number of claims paid at the contracted rate;
- The use of contracted rates for all self-insured group health plans administered by the same entity;
- Rules governing the calculation of the QPA for providers in the same or similar specialty; and
- The exclusion of bonus, incentive, and risk-sharing payments, and the exclusion of single-case agreement.
The court also vacated specific provisions relating to air ambulance providers, such as the 30-calendar-day timeframe for a plan or issuer to send an initial payment or notice of denial of payment when the plan or issuer receives the information necessary to decide a claim.
The court upheld other provisions challenged by the TMA III plaintiffs including the required disclosure of information about the QPA and the definition of geographic regions for purposes of calculating the QPA for air ambulance services.
On October 6, 2023, the Departments and OPM published FAQs Part 62 in response to the court’s TMA III ruling vacating QPA provisions. The FAQs topics including:
- How plans and issuers should calculate the QPA for purposes of patient cost-sharing;
- The Departments’ and OPM’s approach to the QPA methodology, which will have an emphasis on assisting (rather than imposing penalties on) regulated entities that work in good faith to recalculate QPAs and comply with the applicable statutes and regulations that remain in effect after the TMA III ruling;
- How plans and issuers must continue to make QPA disclosures to nonparticipating providers, facilities, and air ambulance providers;
- Confirmation that plans and issuers must continue to make coverage determinations and send initial payment or notice of payment denials for air ambulance services within 30 days after receiving a bill from an OON provider; and
- Confirmation that the TMA III ruling does not change the NSA’s prohibition on balance billing by OON air ambulance providers.
In conjunction with FAQs Part 62, the Departments issued additional FAQ guidance on October 6, 2023 announcing a partial reopening of the federal IDR process. The Departments had temporarily suspended the process following the district court’s rulings in TMA III (related to the QPA) and in TMA IV (related to the federal IDR administrative fees), but the Departments announced that certain new single disputes, including those involving bundled payment arrangements, could proceed as of October 6, 2023. However, the processing and initiation of batched disputes and initiation of air ambulance disputes remains suspended, pending additional from the Departments and system updates.
The guidance conveyed in FAQs Part 62 regarding the QPA calculation methodology and No Surprises Act implementation is effective immediately. The federal government filed notice of appeal the district court’s ruling on October 20, 2023, and the Departments state in FAQs Part 62 that no additional interim guidance is planned in response to the latest TMA III decision. Employer plan sponsors should review the FAQs to understand the modifications to previous QPA guidance and look for additional updates on the Departments’ implementation of the No Surprises Act on CMS’ No Surprises Act website.
Business Group on Health continues to advocate with the Departments and to Congress on behalf of employer plan sponsors. The Business Group recently met with the Office of Management and Budget (OMB) to share the employer perspective on the federal IDR process as OMB completed its final regulatory review of new rulemaking regarding federal IDR process operations. The Business Group and other coalition partners are also engaging key Congressional committees as Congress holds hearings related to surprise billing protections.
Business Group on Health will continue to keep members informed of regulatory developments as well as future litigation.
- FAQs About Consolidated Appropriations Act, 2021 Implementation Part 62
- Tri-Departments: Federal Independent Dispute Resolution (IDR) Process Partial Reopening of Dispute Initiation Guidance, October 2023
- HHS/CMS: No Surprises Act – Overview of Rules and Fact Sheets
- DOL/EBSA: No Surprises Act – Resources
- Business Group on Health: Regulatory & Compliance Update, October 2023
- Business Group on Health: Regulatory & Compliance Update, September 2023
If you have questions, comments, or concerns about these or other regulatory and compliance issues, please contact us.
We provide this material for informational purposes only; it is not a substitute for legal advice.