The Biden administration released Friday a final rule that updates the arbitration process providers and insurers can use to settle out-of-network billing disputes after the federal government suffered several legal setbacks to the No Surprises Act.
The final rules, released by the departments of Health and Human Services (HHS), the Treasury and Labor (DOL), implement the No Surprises Act, which bans surprise medical bills. The rule provides new details for the independent dispute resolution (IDR) process to determine an out-of-network rate for items and services after talks between payers and providers break down.
Pivoting from its initial rule, the Biden administration has eliminated the requirement that arbitrators must give more weight to the out-of-network rate, including what is called the qualified payment amount (QPA), over other permissible factors.
The No Surprises Act, passed by Congress in 2020 to protect uninsured patients from surprise billing, sets up an IDR process by which out-of-network providers and insurers are required to arbitrate payment rates.
Rules finalized under the act have drawn significant ire from providers. They outline an arbitration model to resolve surprise billing disputes, which providers say favors health insurers in the negotiations.
An interim final rule issued in late September 2021 outlined a “baseball-style arbitration” process for determining payments by requiring providers and insurers to each submit a proposed payment amount and explanation to an arbitrator. According to that rule, the arbiter must begin with the presumption that the QPA, which is the insurance plan’s median contracted rate for the same or similar service in an area, is the appropriate out-of-network charge.
The rule went into effect Jan. 1, 2022. But the Texas Medical Association, a state medical society, sued HHS back in October, arguing the regulation on arbitration gives insurers an unfair advantage in establishing payment rates and ignores the original intent of the No Surprises Act.
The American Hospital Association and the American Medical Association also filed a lawsuit against the federal government, challenging the Biden administration’s implementation of the No Surprises Act.
In February, a federal judge struck down portions of the rule relating to the independent dispute resolution. In a win for providers, Judge Jeremy Kernodle of the U.S. District Court for the Eastern District of Texas vacated a portion of the interim final rule that required arbiters to put an emphasis on choosing the amount closest to the qualifying payment amount.
The judge agreed with the association that the rule conflicts with the law that banned surprise medical bills. He wrote that nothing in the law “instructs arbitrators to weigh any one factor or circumstance more heavily than the others.”
On July 26, the U.S. District Court for the Eastern District of Texas again vacated provisions of the IDR process, this time relating to air ambulance payment disputes in a lawsuit brought by LifeNet, an air ambulance service provider, against the federal government.
In a press release, HHS and DOL said the rules finalize some aspects of the arbitration process afforded by the No Surprises Act. Parties or providers, including air ambulance providers, facilities, plans and issuers, may use an arbitration process known as the IDR process—also known as the federal IDR process—to determine the total payment amount for out-of-network healthcare services for which the act prohibits surprise billing.
“These final rules address certain provisions of the July 2021 and October 2021 interim final rules that are relevant to the operation of the federal IDR process and revise certain provisions in light of two recent federal court decisions in challenges filed by the Texas Medical Association and LifeNet Inc.,” the Biden administration said in the press release.
Given the district court rulings in February and July striking down portions of the interim final rule, these final rules specify that certified IDR entities should select “the offer that best represents the value of the item or service under dispute after considering the QPA and all permissible information submitted by the parties,” the agencies said in a fact sheet.
Under these final rules, certified IDR entities must consider the QPA and then must consider all additional permissible information submitted by each party to determine which offer best reflects the appropriate out-of-network rate.
The rules also finalize provisions of the October 2021 interim final rules requiring certified IDR entities to explain their payment determinations and underlying rationale in a written decision submitted to the parties and the departments, the Biden administration said.
“Today’s final rules will make certain medical claims payment processes more transparent for providers and clarify the process for providers and health insurance companies to resolve their disputes,” the Biden administration said in the press release.
In July 2021, HHS, DOL and the Treasury issued interim final rules that included requirements for plans and issuers to furnish providers and facilities with certain information about their billed claims and the payment process. In the event a plan or issuer changes a provider or facility’s service code used for billing purposes to one of lesser value—which would reduce the payment to the provider or facility—the plan or issuer must now provide additional information when submitting an initial payment or a notice of denial of payment for items and services covered by the No Surprises Act, as required in the final rule released Friday.
“The increased transparency required under these final rules will help providers, facilities and air ambulance providers engage in more meaningful open negotiations with plans and issuers and will help inform the offers they submit to certified independent entities to resolve claim disputes,” the federal government said in the press release.