Surprise Medical Billing Court Win Adds Uncertainty for Agencies

The Biden administration’s rare court victory in a series of legal challenges from a doctors’ group over a law shielding patients from surprise medical costs has brought with it new questions over pending agency rulemaking and the statute’s billing dispute timelines.

The US Court of Appeals for the Fifth Circuit on Oct. 30 upheld major portions of how a key payment factor used in surprise billing negotiations between insurers and medical providers is calculated. The court also rejected a separate provision impacting the timeline on the arbitration process that could apply to other deadlines under the law.

The No Surprises Act protects patients from unexpected medical bills in most instances of emergency care or procedures performed by out-of-network physicians working at in-network facilities. Doctors and insurers have been battling each other and the administration in court over the arbitration process, often homing in on the use of the median in-network rate—also known as the qualifying payment amount—used to calculate what medical providers are owed.

The Texas Medical Association declined to comment on the decision or say whether it plans to appeal. Spokespeople for the Health and Human Services and Labor departments did not respond to requests for comment.

When the administration revises existing regulations and guidance will likely depend on whether TMA plans to appeal. The upcoming presidential election could also affect the timeline for revisions.

The ruling impacts a July 2021 rule and August 2022 guidance from the HHS, DOL, the Treasury Department, and the Office of Personnel Management. The industry is also waiting on a separate delayed rule aimed at improving the arbitration process and incorporating previous court orders.

The Fifth Circuit’s decision allows the administration to include so-called “ghost rates”—or rates for services that a provider has not offered, and that TMA argued reduce payments—in the QPA calculation. The court also upheld provisions excluding provider bonuses and case-specific agreements from QPA rates, as well as the type of information insurers must disclose around the QPA.

The administration will also have to consider pieces of US District Court for the Eastern District of Texas Judge Jeremy Kernodle’s lower court ruling that the agencies did not appeal to the Fifth Circuit, but still need to address.

Those include his rejection of a provision allowing insurance companies to factor in the QPAs of multiple self-insured plans, another requiring air ambulances to undergo two arbitration processes for a single transport in some cases, and including rates of providers of different specialties in the QPA.

Fifth Circuit’s Take

The new ruling in the agencies’ favor stood in contrast to many recent Fifth Circuit decisions that have undermined or killed administration rulemaking.

In August, the Fifth Circuit rejected a key provision of a rule requiring arbitrators make the QPA a primary factor in their decisions.

HHS had revised the rule after Kernodle struck it down in February 2022. Kernodle also overturned an increase in administrative fees and new rules around submitting batches of claims, which the pending final rule on arbitration process improvement is expected to address.

The Fifth Circuit cited the US Supreme Court’s June ruling in Loper Bright Enterprises v. Raimondo in its latest decision, notching a victory for the government under the new paradigm that most see as a threat to agency actions. Loper Bright overturned the Chevron doctrine of courts deferring to agencies’ reasonable interpretations of laws where the statute is ambiguous or silent.

The previous losses stemmed partly from a vague delegation of authority in the No Surprises Act to the administration, said Christine Cooper, who represents insurance companies as CEO of aequum.

“In this case, because there was such a specific delegation of authority, Loper didn’t come into play quite like we anticipate seeing,” she said.

The case indicates that the Loper Bright fallout is more nuanced than some might think, said Zach Baron, a director of the Center for Health Policy and the Law at the Georgetown University’s O’Neill Institute.

“It’s not necessarily going to be this sort of straight line,” he said.

An en banc panel appeal of the decision is less likely given the unanimous decision from the circuit judges, according to Baron. A Supreme Court petition is also possible, but the court is unlikely to take it up since there is no circuit split over the issue, he said.

Timeline Impacts

The ruling could inform other ongoing court cases under the No Surprises Act. A similar lawsuit from air ambulance company PHI Health, LLC in Kentucky, is on hold pending the outcome in the TMA case.

The decision could also impact the timing of the arbitration process more broadly, Cooper said. The Fifth Circuit shot down a provision that started the clock on arbitration proceedings when the insurer received a “clean claim” — free of errors and omissions — rather than the original bill. The “clean claim” definition delayed a clear timeline laid out in statute, the court said.

That could be read into other timeline provisions that aren’t being enforced, she said, like the agencies’ decision to give arbitrators more time to review disputes because of their already enormous workload. It could also impact a provision requiring insurance companies to pay a medical bill within 30 days of an arbitrator’s decision, which providers and insurers are currently battling over in court.

“I think if you read the decision just as is, those timelines are mandatory,” Cooper said.

The administration will likely address the ruling in some way, even if an appeal happens, Baron said.

“In the short term, I would expect to see some type of informal guidance about the decision that agencies are deciding it, monitoring it,” he said.

The case is Texas Med. Ass’n v. HHS, 5th Cir., No. 23-40605, opinion issued 10/30/24