Texas Court Overrules Qualified Payment Amount Assumption for Non-Contracting Claims

In December 2020, Congress passed the No Surprises Act, which, among other things, aims to end balance billing for services provided by non-contracting providers at contracting facilities and by providers of emergency services. Providers can only receive payment for these services from the Plan. Under the No Surprises Act, if a provider that does not have a contract to provide services to Plan Participants (non-contracting provider) disagrees with an amount paid on a claim, it can initiate an arbitration before an Independent Dispute Resolution entity (IDR entity). The non-contracting provider and the Plan would each produce an amount they believe should be paid for the claim, and the IDR entity would be required to pick one of the two offers.

Originally, the Departments issued guidance stating that the IDR entity would be under the presumption that the qualifying payment amount (QPA) is the appropriate out-of-network rate for the item or service unless exceptional circumstances exist.  The qualifying payment amount is defined to mean the lesser of (1) the plan’s median contracted rate, or (2) the amount billed.  The IDR entity would then select the offer that is closest to the QPA unless the IDR entity determined that the QPA is materially different from what an appropriate rate should be.

However, on February 23, 2022, a judge for the United States District Court for the Eastern District of Texas held in a case titled Texas Medical Association v. Department of Health and Human Services that requiring the IDR entity to choose the offer closest to the QPA is unconstitutional. The court reasoned that the statute does not assign weights to any of the factors an IDR entity may consider, and the IDR entity should consider all factors from the statute equally. Those factors include (1) training, experience, and quality of outcomes of the provider/facility; (2) the market share held by the provider; (3) acuity of the individual receiving treatment; (4) teaching status of a non-contracting facility; and (5) good faith efforts of the provider to enter into a contract with the issuer. The Court issued a vacatur, which means that its ruling applies nationwide. The Departments issued a memo on February 28, 2022 stating that they are withdrawing their initial regulation and updating to conform to the court’s order.

By striking down the presumption that the Qualified Payment Amount is the proper cost for the out-of-network claim, it is likely that non-contracting claims will be more costly under the Texas ruling. As noted above, the original guidance required an IDR entity to select the offer closest to the QPA unless exceptional circumstances existed. Now, arbitrators are free to consider all the factors listed in the statute and can assign to each factor whatever weight it feels is proper given the underlying facts and circumstances. To date, the Department of Health and Human Services has not indicated whether it will appeal the decision. Until further guidance is issued, IDR entities will now consider other factors that will allow them to potentially choose higher amounts for non-network claims.