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Surprise Billing Arbitration Rule Risks Higher Health Premiums

Aug. 23, 2022, 9:30 AM

The Biden administration’s final rule governing how arbitrators are instructed to decide payment disputes between health insurers and medical providers over “surprise bills” may result in higher costs for health insurance plans, researchers and employer groups said.

The measure opens the door to higher costs for employers and their workers because it instructs arbitrators to give more consideration to factors beyond median contract rates, they said.

The final rule (RIN 1210-AB99 and 1210-AC00) implements a law aimed at keeping patients from being billed high charges in emergencies and when out-of-network providers furnish services at patients’ network medical facilities. It also seeks to address a ruling by a federal district court in Texas that invalidated parts of an interim final rule issued in September 2021, which was challenged by providers.

“The final rule is certainly watered down compared to the original rule,” Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy, said in an interview. Adler has done research on surprise billing. “You’d certainly expect the final rule to lead to higher premiums,” he said.

The No Surprises Act was passed in 2020 as part of budget legislation (H.R. 133), and took effect Jan. 1, 2022. It bars health-care providers from billing patients for more than they would owe based on in-network rates.

The final rule clarifies what arbitrators must consider in resolving billing disputes for out-of-network emergency care, and for treatment by out-of-network providers such as anesthesiologists during procedures at facilities in a patient’s network. The rule was issued by the Labor Department, Health and Human Services Department, and Internal Revenue Service.

Under the new rule, arbitrators, also called independent dispute resolution (IDR) entities, must consider the so-called qualifying payment amount, which is based on the median contract rate, “and then must consider all additional permissible information submitted by each party to determine which offer best reflects the appropriate out-of-network rate,” according to a fact sheet on the rule.

Employer groups and health insurers have pushed for tying payments to median contract rates, which would likely lower costs.

Hospital and doctor groups, on the other hand, want the payments to be based on a range of factors listed in the No Surprises Act, such as the severity of the patient’s condition, the training and experience of the provider, and the market share held by providers and health insurers. They are betting that could persuade arbitrators to give them higher awards.

Final Rule ‘Falls Short’

The ERISA Industry Committee said it was disappointed with the final rule. “The Final Rule falls short of lowering health care costs for employer plan sponsors, and ultimately patients,” Annette Guarisco Fildes, the group’s CEO, said in a statement. ERIC represents large employers in their capacity as sponsors of employee benefit plans.

“Instead of adhering to Congress’s original intent, the Administration back-tracked on limiting out-of-network payments to reasonable market-driven rates,” Fildes said. “Plan sponsors and the employees they provide health coverage to will continue to be forced to line the pockets of medical providers that choose to remain out-of-network.”

In comparison to the interim final rule, “it’s highly likely that this is going to increase costs,” Benedic Ippolito, a senior fellow at the American Enterprise Institute, said in an interview. “The magnitude is uncertain, though.”

The final rule issued Aug. 19 “stepped away” from requiring payments to be primarily based on a “rebuttable presumption” that they should be close to the qualifying payment amount, Jack Hoadley, research professor emeritus with the Georgetown University Center for Health Insurance Reforms, said in an interview.

“But they still, I think, follow the statute in stating that the QPA should always be considered,” and other factors—when presented by a party—should also be considered, Hoadley said.

In addition, the final rule stipulates that any consideration of additional factors shouldn’t overlap with factors that have already been included in the qualifying payment amount, Hoadley said.

Departments ‘Ignore’ Court Rulings

The American Hospital Association, a party to litigation challenging the interim final rule, didn’t issue a statement on the final rule. Eight cases have been filed against the interim final rule by provider groups.

But Action for Health, a patient advocacy organization, said in a statement that “the departments have chosen to ignore” federal court rulings “by writing new language that continues to favor health plans’ qualifying payment amount.”

Christopher Sheeron, president of Action for Health, said it isn’t clear how independent dispute resolution entities would know whether the qualifying payment amount already includes the additional factors that could be considered.

Congress didn’t intend to give the qualifying payment amount “more weight” than other factors, he said.

46,000 Disputes in Four Months

Katy Johnson, senior counsel for health policy at the American Benefits Council, said there is “some concern” that there may be “overuse or abuse of the IDR process,” which could lead to higher health-care costs. ABC members include about 220 large companies that directly sponsor or administer health and retirement benefits.

Johnson, pointed to a status update the agencies released Aug. 19 that showed 46,000 disputes were filed through the federal independent dispute resolution portal between April 15 and Aug. 11.

The number “dwarfs the agencies’ prior estimate of 17,435 claims annually and shows a high volume of disputes,” according to an article Monday in Health Affairs.

Non-initiating parties have challenged more than 21,000 of the disputes, and more than 7,000 have been found to be ineligible, the status update said.

To contact the reporter on this story: Sara Hansard in Washington at

To contact the editor responsible for this story: Brent Bierman at