The No Surprises Act (“NSA”) took patients out of the middle of many out-of-network reimbursement disputes between providers and insurers by authorizing neutrals known as independent dispute resolution entities (“IDREs”) to determine the reimbursement rate for services subject to the NSA’s balance billing protections. Congress left it up to three federal agencies to draft and issue rules on how the IDREs would apply the new law. On Monday, February 6, 2023, a federal court in Texas struck down the agencies’ second attempt at rulemaking addressing how the arbitrators would make their decisions, holding that the most recent rule “conflicts with the unambiguous terms” of the NSA and places a “thumb on the scale” by unfairly favoring insurers and lowering payments to providers.

The NSA requires IDREs to consider a number of factors when determining appropriate out-of-network rates for services subject to the NSA and does not give any weight or preference to any of those factors. However, in October 2021, three federal agencies issued their first round of regulations addressing the NSA’s arbitration process—through an Interim Final Rule—that required IDREs to begin their analysis by presuming that one of the statutory factors would ultimately dictate the rates: the insurer’s unilaterally calculated median contracted rates (known as the “qualifying payment amount” or “QPA”). In other words, the interim rule imposed a “QPA presumption.” Last year, a federal court in Texas struck down the QPA presumption on a nationwide basis in two cases, one brought by provider associations and another by an air ambulance provider, holding that the agencies improperly re-wrote the NSA’s clear statutory terms that require IDREs to consider all of the statutory factors.

In August 2022, the agencies returned to the drawing board. They issued a second round of regulations—this time through a Final Rule—to “make changes” to the arbitration process “in light of” the federal court’s ruling. Under the Final Rule, IDREs were instructed to consider the QPA first, without questioning its credibility, then consider the other statutory factors only when the QPA did not already “account” for those factors. In other words, the Final Rule imposed a “no double-counting of information rule.”

The same plaintiffs from the previous case filed a second lawsuit, in the same federal court in Texas before the same judge, asserting that portions of the Final Rule should be vacated because they departed from the NSA’s statutory text and still inappropriately and unfairly favored insurers. The court agreed, finding that the agencies “have not relinquished their goal of privileging the QPA, tilting arbitrations in favor of insurers, and thereby lowering payments to providers” by issuing a Final Rule that conflicted with the NSA’s statutory text in an attempt to achieve that goal. The court further concluded the Final Rule improperly restricted the IDREs’ discretion by placing an improper de facto presumption in favor of the QPA. The court explained for a second time that nothing in the NSA instructs the IDREs to weigh any one factor more heavily than the others.

The court vacated the challenged portions of the Final Rule on a nationwide basis and remanded rulemaking back to the agencies for “further consideration in light of the court’s opinion” with the reminder that “[they] may not promulgate a rule that conflicts with the [NSA] or attempt to fill in nonexistent gaps” in the NSA’s statutory language.