A recent blog post in Health Affairs details the current state of play regarding six provider-driven lawsuits over the No Surprises Act. These lawsuits aim to weaken or even halt new protections that safeguard patients from unreasonable out-of-network charges.
Just last month, protections to shield patients from surprise out-of-network bills were implemented as part of the No Surprises Act. Despite the broad bipartisan support in Washington that put these safeguards into place, certain health care providers, including those backed by private-equity firms, have since filed six lawsuits intended to water down patient protections and increase their own financial interests.
These lawsuits challenge the independent dispute resolution process, attempt to weaken the standards for determining fair out-of-network payment rates, and even go so far as to call the No Surprises Act unconstitutional. As the blog post notes, “If the lawsuits succeed, parts of the IDR rule could be set aside. Without the guardrails put in place by the Biden administration, providers could be more likely to use the federal IDR process to obtain higher out-of-network payments when doing so is not warranted. This could make the IDR process more likely to become inflationary, leading to higher health care costs and premiums for consumers, employers, and taxpayers. If the constitutional challenge succeeds in the New York lawsuit, the effects would be even more severe. The NSA’s hard-fought, bipartisan protections would be undone, and millions of patients might no longer be protected from surprise out-of-network bills as Congress intended.”
Read the full blog post below:
By Katie Keith
The No Surprises Act (NSA) was signed into law by President Trump in December 2020 and went into effect on January 1, 2022. The new law protects patients from the most pervasive types of surprise out-of-network bills and creates a new federal independent dispute resolution (IDR) process to resolve payment disputes between payers and out-of-network providers.
Most providers and facilities do not send surprise out-of-network bills to patients. However, the NSA’s protections and the IDR process are highly relevant for the types of specialty providers that patients do not choose and where surprise billing is the most common (such as emergency providers and anesthesiologists). Many of these types of providers, including those backed by private equity firms, have set very high charges leading to higher premiums and out-of-pocket costs.
With much money at stake, NSA implementation has been closely watched by industry stakeholders. To implement the key provisions of the NSA, the Biden administration has issued several interim final rules, one proposed rule, and several rounds of guidance. Displeased with implementation of the federal IDR process, health care providers—doctors, hospitals, and air ambulance companies—have sued the Biden administration over the two interim final rules.
When I first discussed NSA litigation in early December 2021, two lawsuits had been filed. The first was filed in late October by the Texas Medical Association (TMA) and a Texas-based emergency room physician in the eastern district of Texas. The second was filed in mid-November by the Association of Air Medical Services (AAMS) in the District of Columbia.
Since then, four additional lawsuits have been filed. Three of these lawsuits—filed in the District of Columbia, Georgia, and Illinois—raise similar complaints made by TMA. The fourth lawsuit, filed in New York, echoes those same challenges to the IDR rule but additionally argues that major provisions of the NSA—both the IDR process and the ban on balance bills—are unconstitutional.
While litigation over major health care rules is common, providers have been aggressive about challenging the NSA in court. By filing six lawsuits in five different jurisdictions, providers are trying to maximize their chances that at least one lawsuit succeeds. They also may be trying to pressure the Biden administration into altering the current interpretation in a way that they perceive is more friendly to their financial interests. We may learn soon enough whether this latter strategy has been successful: federal officials are expected to issue a final IDR rule by May 2022.
If the lawsuits succeed, parts of the IDR rule could be set aside. Without the guardrails put in place by the Biden administration, providers could be more likely to use the federal IDR process to obtain higher out-of-network payments when doing so is not warranted. This could make the IDR process more likely to become inflationary, leading to higher health care costs and premiums for consumers, employers, and taxpayers. If the constitutional challenge succeeds in the New York lawsuit, the effects would be even more severe. The NSA’s hard-fought, bipartisan protections would be undone, and millions of patients might no longer be protected from surprise out-of-network bills as Congress intended.
The NSA uses “baseball-style” arbitration to resolve payment disputes between payers and out-of-network providers. Under this approach, each party offers a payment amount, and the IDR entity selects one amount or the other. In choosing between competing offers, IDR entities must consider certain factors: 1) the qualifying payment amount (QPA) (i.e., the insurer or plan’s median in-network rate); 2) information on certain “additional circumstances”; and 3) any additional information that the parties provide or that the IDR entity requests. The “additional circumstances” (e.g., a provider or facility’s level of training or experience) are listed in the statute. Congress also barred IDR entities from considering a provider or facility’s usual and customary charge (i.e., the billed charge) or reimbursement rates paid by public payers (e.g., Medicare or Medicaid).
Congress explicitly directed federal officials to establish the federal IDR process. In particular, Congress directed the Departments of Health and Human Services, Labor, and the Treasury to “establish by regulation one independent dispute resolution process” and to do so within one year of the NSA’s enactment. The Biden administration met this and other statutory NSA deadlines to help ensure that the law’s new consumer protections and processes would be in place on January 1. To date, federal officials have issued three interim final rules, one proposed rule, and several rounds of guidance documents for patients and stakeholders.
Overview Of The Lawsuits
I am aware of six current lawsuits against rules to implement the NSA or the NSA itself. These lawsuits are tracked here and have been filed by the:
- TMA and Dr. Adam Corley in the eastern district of Texas before Judge Jeremy D. Kernodle;
- AAMS in the District of Columbia before Judge Richard J. Leon;
- American Medical Association (AMA), the American Hospital Association, Renown Health, UMass Memorial Health, Dr. Stuart Squires, and Dr. Victor Kubit in the District of Columbia before Judge Leon;
- American Society of Anesthesiologists (ASA), American College of Emergency Physicians, American College of Radiology in the northern district of Illinois before Judge Marvin E. Aspen;
- Georgia College of Emergency Physicians (GACEP) and Dr. Brett Cannon in the northern district of Georgia before Judge Mark H. Cohen; and
- Dr. Daniel Haller (Haller) and Long Island Surgical PLLC in the eastern district of New York before Judge Ann M. Donnelly.
What do these lawsuits argue? The plaintiffs in all six lawsuits challenge parts of an interim final rule to implement the IDR process. They challenge the rule’s requirement that IDR entities presume that the QPA is the appropriate out-of-network payment amount unless a party submits credible information that clearly demonstrates that the QPA is materially different from the appropriate out-of-network rate. This part of the rule, they argue, violates the Administrative Procedure Act and is beyond the scope of the agencies’ legal authority, inconsistent with the NSA, or arbitrary and capricious.
Plaintiffs in four of the lawsuits—by the TMA, the AMA, the ASA, and the GACEP—additionally argue that the interim final rule is improper because there was no opportunity for advance public notice and comment. And AAMS also challenges parts of a separate interim final rule on the methodology used to calculate the QPA for air ambulance services.
In each case, the plaintiffs ask the court to set aside the challenged provisions because they are unlawful. They also ask that federal officials be enjoined from enforcing these provisions or adopting replacement provisions without first providing an opportunity for notice and comment. The plaintiffs’ main arguments are consistent with those summarized in a prior article on the TMA and AAMS lawsuits.
The Haller lawsuit—filed in New York—also challenges the IDR rule, making the same arguments as the other plaintiffs. But this lawsuit is broader. The plaintiffs argue that major parts of the NSA are unconstitutional, pointing to the provisions that establish the federal IDR process (42 U.S.C. § 300gg-111(c)) and that bar providers from sending balance bills to patients for emergency services (42 U.S.C. § 300gg-131) and non-emergency services (42 U.S.C. § 300gg-132). They argue (without merit, in my opinion) that Congress does not have the authority to protect patients from balance bills or establish a federal IDR process and that these provisions violate the Seventh Amendment, due process under the Fifth and Fourteenth Amendments, and the Takings Clause. They filed on December 31, 2021, the day before the NSA’s historic protections took effect, and are asking the court to vacate these provisions.
The lawsuits are moving swiftly with plaintiffs in several of the cases requesting expedited review ahead of anticipated use of the federal IDR process, which is expected to begin in March 2022. As of this writing, briefing is now complete (or nearly complete) in three of the six lawsuits. Briefing in the TMA challenge was completed in early February, and Judge Kernodle held a hearing on February 4. During the hearing, Judge Kernodle—who represented health care providers in private practice before being appointed to the federal bench—engaged with attorneys on both sides but asked several questions that appeared sympathetic to the plaintiffs’ arguments, suggesting he may rule in favor of TMA. From here, we await his decision.
Given the similarities between the lawsuits filed by AAMS and the AMA in the District of Columbia, Judge Leon ordered the two cases to be consolidated. For that reason, briefing in both cases will be completed by February 18 with a single hearing expected after that. The lawsuit brought by GACEP will be up next, with briefing throughout the spring. In the Illinois challenge led by the ASA, briefing will be completed in late April with a hearing set for August 4. The Haller lawsuit in New York looks to be on an even longer timeframe since it does not appear that the plaintiffs have served the federal government yet.
A wide range of amici have also been engaged in the three most active cases. While it is unusual to see so many amicus briefs at the district court level, the activity is perhaps unsurprising given the stakes and amount of money at issue. This section briefly summarizes the amicus briefs filed in the three most active cases (although not every amicus filed a brief in all three lawsuits); all briefs can be found here.
Provider groups and coalitions filed amicus briefs in support of the plaintiffs in the three most active cases. Briefs were filed by groups that include the Physicians Advocacy Institute and state medical associations or societies, the Federation of American Hospitals and other hospital associations, the Emergency Department Practice Management Association and state emergency physician associations, Georgia-based providers (including GACEP), Action for Health, and the College of American Pathologists., Several members of Congress, all of whom are health care providers, also filed amicus briefs supporting the plaintiffs’ arguments. No briefs were filed in support of AAMS.
These briefs generally echoed the plaintiffs’ legal arguments. Amici assert that the IDR rule reflects an improper interpretation and adopts an approach to IDR that Congress rejected, and that the agencies should have used notice and comment rulemaking procedures. Some briefs suggest that the IDR rule will have severe consequences and that patients will be harmed. Lower payments to providers, the argument goes, will cause providers to close their doors and lead to narrower plan networks.
These arguments were rebutted in amicus briefs filed in support of the government in the three most active cases. Briefs were filed by groups that include 12 patient and consumer advocates led by the Leukemia & Lymphoma Society, 10 employer groups led by the American Benefits Council, more than 20 ideologically diverse health policy experts and scholars, Sen. Patty Murray (D-WA) and Rep. Frank Pallone (D-NJ), America’s Health Insurance Plans (AHIP), the Blue Cross Blue Shield Association (BCBSA), and the Association of Critical Care Transport (ACCT).
These amicus briefs explained the market failures that Congress aimed to address in enacting the NSA. As briefs from health policy experts laid out, the NSA addressed a breakdown of market dynamics for providers that patients do not choose, such as emergency providers and anesthesiologists. For those providers, patient volume is largely insensitive to whether specialists are in their plan’s network and has led certain specialty providers to leverage surprise billing as a business model by setting very high charges. For instance, 2018 charges for the specialties in which surprise billing is most common averaged 505 percent of what Medicare would pay for the same services compared to an average of 270 percent of Medicare’s prices for other specialties.
The briefs also described the law and rules’ positive impact on patients and employers and why the IDR rule is consistent with the text and structure of the NSA as well as congressional intent. Many of these briefs emphasized that Congress always intended for the NSA to protect patients from surprise out-of-network bills and reduce premiums, pointing to analysis from the Congressional Budget Office on the NSA and precursor committee bills. Each of these bills, the briefs argue, would have reduced premiums and saved money for the federal government because payment rates for care were expected to move towards the in-network rate.
Briefs from AHIP and BCBSA underscored the need for federal officials to issue the IDR rule well in advance of the law’s effective date. These briefs explained that health insurers could not have complied with the law’s requirements in a timely manner, negotiated with providers, set premiums, hired staff, built new infrastructure, or taken other important steps for 2022 coverage without these rules far in advance of January 1. A full 60-day comment period, they argue, would have made these steps impossible; therefore there was good cause to waive notice and comment rulemaking requirements.
Other briefs rebutted concerns about harms to patients, asserting that the IDR rule would likely promote more in-network care and would not make it more difficult for patients to access care. These briefs cited data from states, and federal and state network adequacy standards (as well as market incentives) that prevent or discourage insurers from narrowing networks or limiting patient access.
Finally, the ACCT brief supported the government in part in the AAMS challenge. ACCT, a separate air ambulance trade association, explained that the AAMS litigation “is not supported, in every respect, by all participants in the air-ambulance industry” and argued that one of AAMS’s proposed policies could harm ACCT members. As noted above, no amicus briefs were filed in support of AAMS.
From here, we await a decision in the TMA case and further hearings and briefing in the remaining five cases. If providers’ aggressive litigation strategy pays off in at least one jurisdiction, a court could set aside the rule as it applies to certain plaintiffs—or vacate it nationwide. A court could also remand the rule back to the agencies for additional consideration without vacating it; this is what the Department of Justice has requested if a court finds a flaw with the rules. Remand without vacatur would leave the rule intact while giving the agencies an opportunity to address concerns from the court.
Vacating the challenged parts of the IDR rule would eliminate guardrails the Biden administration put in place. Without these guardrails, providers could be more likely to use the federal IDR process to obtain higher out-of-network payments when doing so is not warranted. This, in turn, could maintain current incentives for providers to remain out of network with health plans and lead to higher premiums for consumers and an IDR process that is more likely to become inflationary.
Vacating the challenged parts of the QPA rule, as AAMS requests, could also have significant implications. As discussed more here, AAMS argues that the QPA methodology fails to include single case agreements, fails to distinguish between hospital-based and independent air ambulance services, and relies on overly broad geographic areas. If these interpretations were set aside, the QPA for air ambulance services (and thus rates for those companyes) would rise. Importantly, patient cost sharing would also rise because cost sharing is determined by the QPA for millions of consumers.
The implications of the AAMS case could extend to other types of providers as well, depending on the scope of Judge Leon’s ruling. While two of the three issues with the QPA methodology are specific to air ambulances, one—the exclusion of single case agreements from the QPA—applies to all types of providers. Setting this part of the QPA methodology aside could thus increase the QPA for all providers (not just air ambulances); this too, would increase cost sharing for millions of patients.
Patient costs would also rise if the constitutional challenge brought by Haller succeeds. Though weak, this challenge could render the NSA’s patient protections and the federal IDR process unenforceable. Millions of patients—especially those in self-funded plans—might no longer be protected from surprise out-of-network bills as Congress intended, and Congress would likely have to step in to take further action to protect patients.
The author’s research and analysis on which this post is based was supported by the Robert Wood Johnson Foundation.