TMA Sues Feds Over Arbitration Rule for Surprise Billing Law
By Amy Lynn Sorrel

The Texas Medical Association has sued federal authorities over rulemaking for the federal surprise billing law, saying it failed to follow clear direction from Congress about how to implement the dispute resolution process meant to determine fair payments for out-of-network care.   

The No Surprises Act, passed in late 2020, established an independent dispute resolution (IDR) process to resolve disagreements between physicians and health plans over payments for certain out-of-network care, achieving the goal of removing patients from the middle of those disputes. The federal law goes beyond Texas’ IDR law governing state-regulated health plans to include ERISA-regulated insurers, among other groups and individual plans. In both systems, an arbitrator ultimately picks either a physician’s proposed amount or a health plan's.  

“TMA supports the patient protection intent of the No Surprises Act,” TMA President E. Linda Villarreal, MD, said. “However, TMA’s lawsuit challenges one component of the administration’s rule that ignores congressional intent and unfairly gives health plans the upper hand in establishing payment rates when a patient receives care from an out-of-network physician, oftentimes in an emergency.”   

The suit, filed Oct. 28 in U.S. District Court in Tyler, says federal rulemaking ignored Congress’ intent to create a fair and unbiased process to resolve billing disputes between health plans and physicians by ensuring that all relevant factors – not just the rate set by health plans – be considered during the arbitration process. Instead, the recently released rule rewrites the statute by requiring the arbitrator in the independent dispute resolution process to presume that the “qualifying payment amount (QPA)” – or median contracted rate – set by health insurance companies for patient cost-sharing purposes is “the appropriate out-of-network rate.”  

TMA’s lawsuit asks the court to strike this arbitration section of the rule and instead restore the fair, balanced dispute resolution process that Congress created. Dr. Villarreal adds that the suit ensures that the protections for patients against balance bills will go into effect on Jan. 1, 2022, and only seeks to stop the imminent harm to physicians and hospitals created by an unfair arbitration process. 

“Nowhere did Congress specify that the QPA, or any other factor for that matter, should be given primacy over the other enumerated factors,” states the complaint filed against the U.S. Department of Health and Human Services, Department of the Treasury, Department of Labor, and others. Instead, the flawed rule “will skew IDR results in favor of payers and undermine [physicians'] ability to obtain adequate compensation for their services.”  

As a result, the rule incentivizes health plans to shrink their networks and cut physician payment, while placing a massive burden on physicians in their attempt to receive a fair payment, the lawsuit states. Physicians “will often receive lower reimbursement that does not reflect the fair market value of their services, and some patients will lose access to their in-network physicians.”  

When physicians and hospitals are paid less than what it costs to deliver care, it strains the entire health care system and threatens patients’ access to care, Dr. Villarreal says.  

TMA also is concerned that the formal notice and comment period for rulemaking – which is supposed to give stakeholders a chance to give input on a rule that affects them – was ignored. The lawsuit alleges the federal agencies failed to formally solicit and incorporate comments in violation of the Administrative Procedure Act.   

“We wholeheartedly agree with U.S. Reps. Richard Neal’s (D-Mass.) and Kevin Brady’s (R-Texas) concern that the rule tips the scale in favor of insurance companies and will leave patients vulnerable,” Dr. Villarreal said. Representative Neal is chair of the U.S. House Ways and Means Committee, and Representative Brady is the past chair of the committee and current ranking Republican member.  

“We are disappointed the Biden administration ignored congressional intent and essentially set up the arbitration system to operate like a casino, with health insurers playing the role of the house,” Dr. Villarreal said. “Everyone knows the house always wins. With the current rule, patients, physicians, and our country lose.”