Surprise, Surprise! No Surprise Billing Regulations Upheld

A string of losses for government regulators ended recently when the Fifth Circuit Court of Appeals upheld governmental regulations on how to determine the qualifying payment amount (QPA) under the No Surprise Billing Rules in the Consolidated Appropriations Act, 2021. Following a district court decision that struck down these regulations and a number of decisions invalidating other No Surprise Billing Rule guidance, this decision provides regulators with a victory that may help restrain costs for group health plans and insurers.

The QPA. The No Surprise Billing Rules protect individuals from potentially large bills when they receive medical care from an out-of-network provider in situations where individuals do not have a choice as to the provider. The Rules apply, for example, when an individual requires emergency room care. In those situations, the cost for an individual would be limited to the usual in-network deductible, copay, or coinsurance based on the QPA. The provider may not charge individuals more than that amount, even if the provider usually charges more than the QPA. 

The QPA is defined as the median amount payable under a plan (or across an insurer’s products in the same market) for the same or similar services furnished by providers in the same or similar specialty in the same geographic area.

The QPA also factors significantly into how much group health plans and insurers must pay for medical care in those circumstances. How significantly has been the subject of litigation that has overturned various rules issued by the Departments.

The plaintiffs in this case argued that the Departments of the Treasury, Labor, and Health and Human Services failed to account for certain factors that would generally increase the amount of the QPA. The court found that the Departments acted reasonably within the scope of authority given to them under the statute in not accounting for those factors.

The Court’s Reasoning. The court applied the review standards established in the Supreme Court’s recent Loper Bright decision. That decision reserved for the courts the authority to exercise “independent judgment in determining the meaning of statutory provisions,” affording less deference to the interpretations of administrative agencies. However, Loper Bright recognized that a statute may itself provide some discretion to an agency. In this case, the statute specifically directed the Departments of the Treasury, Labor, and Health and Human Services to establish rules for the determination of the QPA.

The court nevertheless examined the plaintiffs’ arguments carefully to evaluate whether the Departments had exceeded their authority under the statute by acting arbitrarily or capriciously. For example, the court considered whether one-off payment arrangements with providers not participating in a plan’s network need to be taken into account in calculating the QPA and concluded that the Department could reasonably exclude them as outside the realm of regular contractual relationships.

The court further upheld regulatory provisions on the information that plans and insurers are required to disclose to providers about the calculation of the QPA. Again, the court found that the statute specifically accorded the Departments considerable discretion in this area and found that the limits on disclosure reasonably lay within the bounds of that discretion.

An Incomplete Victory. The court did invalidate one challenged provision of the regulations. That provision would have allowed an insurer or claims administrator to make an initial payment or provide a notice of denial within 30 days after receiving a clean claim – that is, a claim that includes all the information necessary to render a determination. The court agreed with the lower court that this interpretation conflicted with the statutory provision that starts the 30-day clock on the date a bill is transmitted by the provider. The court found that the statute intended for there to be a fixed 30-day deadline and that the regulations turned this “efficient process into an indefinite delay at the mercy of the insurer.” It saw this interpretation as a wholesale revision to unambiguous statutory language that lay outside the scope of the limited agency discretion afforded by the statute. It may be noted that, in this case, the delegation to the Departments was based only on a general provision in the statute that authorized the Departments to issue regulations necessary or appropriate to carry out the No Surprise Rules.

The Take-Aways. The court’s decision has certain practical implications for health plan insurers and claim administrators. It offers relief from the need to recalculate the QPAs applicable to services or disclose additional information to providers about the methodology used in determining QPAs. That recalculation would likely have resulted in an increase in the QPA for many services and an increase in the amounts paid by group health plans. However, under the ruling, many claims administrators and insurers will need to vary their practice of pending claims for a period while seeking needed information. When the NSA rules apply, they will need to process a claim within 30 days of receiving a bill. This may cause some plans to change their practice of seeking more information before deciding a claim and instead deny a claim with an explanation of what is needed to perfect it.

The decision may also signal how courts will apply the Supreme Court’s standard that limits the discretion of regulating agencies. The ruling gives little weight to the statute’s provision that generally grants rule-making authority to regulatory agencies. It provides deference to those agencies only when the delegation is specific and, even then, examines the agencies’ interpretive regulations carefully against the plaintiffs’ arguments that they should be overturned.

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