Explaining Legal Challenges to No Surprises Act

Court challenges on the independent dispute resolution process. A district court judge has vacated that part of the law nationwide.

The No Surprises Act limited surprise medical bills enjoyed bipartisan support when it was passed by Congress in late 2020.

But now it is bogged down in the courts because those familiar partisans in U.S. healthcare, providers and payers, have lined up on opposites of a key provision of the law that will influence how much health plans have to pay out-of-network providers. So far, the provisions of the law designed to protect consumers have not been affected.

Six lawsuits have been filed to block the No Surprises Act. The law and the complexities of the ligation surrounding were the topics of a session at the AHIP 2022 National Conference on Health Policy and Government Health Programs last week.

Katy Johnson, senior counsel, health policy, of the American Benefits Council, said her organization was “strongly supportive” of the regulations under legal challenge that set out an arbitration process, dubbed independent dispute resolution (IDR), “because they set out a consistent, predictable, reasonable, fair IDR process.” The American Benefits Council is employer’s group that lobbies on health, pension and other issues.

Johnson also said that the IDR process as mapped out in the current set of Biden administration regulations would also “incentivize these out-of-network providers to come in network and remove the leverage to demand inflated rates.”

Katie Keith, an associate research professor at Georgetown University’s Center on Health Insurance Reform and a featured Health Affairs blogger, largely agreed with Johnson. Keith said IDR was supposed serve as a backstop but that it was being used in some states as “mechanisms for certain provider types to stay out of network and go to IDR to get the payments levels they would like.”

The No Surprises Act went into effect at the beginning of this year. According to research by the Kaiser Family Foundation and others, about 1 in 5 emergency department visits result in a “surprise bill” because the doctors or other providers were not in the contracted network of the patient’s health plan. Nonemergency patients also receive surprise bills when they receive care from in-network facility or set of providers but don’t know that some specialists — anesthesiologists or radiologists, for example — are not in their health plan’s network.

As described by Johnson during the AHIP session, the No Surprises Act protects patients against surprise bills by basing any cost sharing charges by out-of-network providers on a“qualifying payment amount,” which is the median in-network rate for that service in that geographic area.

“Once the consumer has paid their cost sharing based on this qualifying payment amount, they are out of it. They are done,” Johnson said.

That part is not stirring up legal controversial, although there are still problems with the law from the patients’ point of view. For example, it applies only to hospitals, so people can still be hit by surprise bills stemming from a visit to a doctor’s visit or urgent care center. In addition, some out-of-network providers can ask patients to sign forms that waive their No Surprise Act protections.

Five of the six lawsuits concern the independent dispute resolution process, or IDR. The sixth lawsuit, , according to Keith, is broader and raises constitutional questions as well.

According to Johnson and Keith, the central issue in the lawsuit is the presumption set out in the Biden administration regulation that the IDR use the qualifying payment amount — which is he median in-network rate — as the starting point for the IDR process, which under the No Surprises Act is a baseball-like arbitration process whereby arbitrator is restricted to picking one of the two proposed amounts from the parties that have entered the arbitration process. The IDR cannot steer down the middle and pick an amount between the two proposed amounts. Other factors can be considered under the regulations put out by the Biden administration.

Keith said the four of the lawsuits are targeting the regulatory procedure the Biden administration that bypassed the normal draft and comment period.

The Texas Medical Association is the plaintiff in one of the cases. Judge Jeremy Daniel Kernodle, a judge on the United States District Court for the Eastern District of Texas, ruled in favor of the association in late February. The judge’s decision had the effect of vacating, or invalidating, the IDR process nationwide, although the rest of the law was left intact. In court filings, the association’s lawyers said the Biden regulations give the qualifying payment amount“controlling weight” in the IDR process and that was not what Congress intended when it passed the No Surprises Act.

Other groups that have sued to block the No Surprises and the arbritration process it maps out include the American Medication Association, the American Society of Anesthesiologists, American College of Emergency Physicians and American College of Radiology.