Legal Alert

The Element of Surprise - The No Surprises Rules Become a Little Less Predictable

by Edward I. Leeds
February 28, 2022

In a Memorandum Opinion and Order issued last week, a federal judge in the Eastern District of Texas vacated significant provisions in the regulations under the No Surprises Act.

The order addresses the independent dispute resolution (IDR) process that health plans or providers may initiate to resolve differences about how much a health plan should pay for out-of-network services in situations involving certain medical emergencies and services performed by out-of-network providers at an in-network hospital. In this IDR process, each party is required to submit a proposed payment amount to a reviewing entity. Absent a clear demonstration to the contrary, the reviewer must select the amount closer to the qualifying payment amount. The “qualifying payment amount” is the median of the rates paid to in-network providers under the plan (or, if the plan elects, to providers participating in the network of the vendor processing the claim) for the same services in the same geographic area. 

The court found that the presumption in favor of proposals that approximate the qualifying payment amount conflicts with the terms of the statute. It vacated those portions of the regulations and applied its order on a nationwide basis. Following the court’s order, a reviewer will look at all of the relevant factors presented, including the qualifying payment amount, without any obligation to weigh one factor more heavily than others. It will still be required to choose one of the proposals, but there is now far less certainty as to the proposals that will be submitted, the evidence that the parties (and health plans, in particular) will present, and the outcome of the review.

The court also found that issuance of the regulations in interim final form did not properly allow for proper public notice and comment. However, the court did not vacate the regulations entirely.

The court’s order is almost certain to be appealed. Meanwhile, similar cases have been brought in other districts, and it is possible that other courts will reach different conclusions, adding even more uncertainty to the current situation.

Consolidated Appropriations Act (CAA) and Transparency Regulations

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