Judge invalidates federal regs that allow insurers to artificially deflate payments in surprise-billing disputes

9/6/2023 1:23:26 PM   

On August 24, 2023, the U.S. District Court for the Eastern District of Texas invalidated regulations that establish the methodology insurers use to calculate the qualifying payment amount (QPA) in surprise-billing disputes – part of a series of federal rules being challenged in court by the Texas Medical Association (TMA) because they skew the arbitration process in insurers’ favor. As a result of this decision, federal agencies have temporarily suspended all federal independent dispute resolution (IDR) process operations.   

This marks the fourth victory for TMA in as many lawsuits. This particular lawsuit challenged certain portions of the July 2021 interim final rules implementing the No Surprises Act (NSA), arguing that the rules allow for the artificial deflation of the insurer-calculated QPA, which arbitrators are required to consider when deciding on the appropriate out-of-network rate in the IDR process.

“These provisions unfairly disadvantaged physicians in payment disputes with health insurers, ultimately robbing our patients of access to physicians’ care,” said TMA President Rick Snyder, M.D. “Calculating QPAs the way the agencies required meant physicians had the scales tipped against them from the outset of negotiations. [The Aug. 24] decision regarding the unfair and unlawful portions of the departments’ July 2021 Interim Final Rule is critical to implementing the law as intended by Congress, which is vital to both patient access to care and physician practice viability.”  

Under the NSA, the QPA is intended to be the median contracted rate insurers would pay for the service in question. TMA argued, and the court agreed, that the federal rules unlawfully deflate QPAs by, among other things, (1) permitting insurers to include “ghost rates” in their QPA calculations – contracted rates from physicians who don't actually provide the item or service in question; (2) including contract rates of physicians who do not practice in the same or similar specialty; and (3) failing to include risk sharing, bonus and other incentive-based payments.

Effective August 25, 2023, federal agencies have temporarily suspended all federal IDR process operations in order to make changes necessary to comply with the court ruling in this case. Disputing parties should continue to engage in open negotiation.

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