A year after the Biden administration implemented Congress’ law to ban surprise medical bills, the policy particulars are still caught up in litigation, and lawsuits are preventing insurers and hospitals from settling out-of-network disputes.
A 2021 law banned out-of-network surprise medical bills as of the beginning of last year. While patients are now protected from unexpected bills, providers and payers continue to duke it out over how out-of-network payment disputes are handled once they go to arbitration.
Since the law’s passage, providers have brought nearly 20 cases challenging the Biden administration’s interpretation of the rule, bringing some of the biggest players in the health care industry into the courtroom.
The most contentious issue revolves around how third-party arbiters decide the final payment amount when insurers and providers disagree.
The Department of Health and Human Services based the payment amount around an amount dictated by insurers — the median-in-network rate, also known as the Qualified Payment Amount.
But health care providers say Congress intended the third-party arbiter to consider a wider range of factors.
A U.S. District Court in Texas agreed with providers and ruled earlier this month that the administration’s surprise billing rule deviates from Congress’ intent.
The case, Texas Medical Association v. HHS, garnered supporting briefs from the American Hospital Association and the American Medical Association, along with other provider groups.
America’s Health Insurance Plans filed in support of the Centers for Medicare and Medicaid Services and HHS.
The February ruling was the second court case HHS lost involving the agency’s interpretation of how the arbitration process should play out. Both cases have been decided by the same Texas judge, Jeremy Kernodle of the U.S. District Court for the Eastern District of Texas, who has both times sided with the provider industry.
In August 2022, HHS issued a new surprise-billing final rule, updating the arbitration rules after Kernodle ruled parts of the first rule went against Congress’ intent.
Now that federal courts have twice ruled that the Biden administration’s interpretation of the law banning surprise medical bills deviates from lawmakers’ intent, regulators are under increasing pressure to update and clarify the rules or risk more lawsuits.
Two other cases challenging the law’s interpretation are currently pending in Kernodle’s courtroom — one around the methodology for determining the median-in-network rate and another about the fee for moving to arbitration.
“I really do think [the administration is] just going to keep getting struck down as long as they keep trying to . . . come back in and rewrite the statute to make the Qualified Payment Amount more important in some fashion,” said Gary Qualls, a partner at K&L Gates who focuses on health care.
HHS did not respond to requests for comment about whether it plans to appeal the February ruling or write a new rule. But the court allowed the administration 60 days after the Feb. 6 ruling to file a notice of appeal.
Option to appeal
If the administration were to appeal the ruling, its next stop would be the U.S. Court of Appeals for the 5th Circuit — a court that has not historically been considered friendly to the Biden administration.
“On matters of statutory interpretation and agency authority, the 5th Circuit does tend to take a fairly strict view,” said Zachary Baron, associate director of the Health Policy and the Law Initiative at Georgetown University’s O’Neill Institute. “That goes into the calculations that the administration has to make.”
Still, the surprise billing law had bipartisan support, and the policy issues surrounding it are less contentious than other high-profile cases the 5th Circuit has ruled on, such as abortion access or the validity of the 2010 health care law.
Policy and legal experts anticipate the administration will appeal this ruling and issue interim guidance, and the case could work its way through the judicial system.
“You knew the lawsuit was going to happen here and this judge [Kernodle] would side with the providers on literally anything they ask for. So it would be odd not to appeal in this situation,” said Loren Adler, the associate director of the University of Southern California-Brookings Schaeffer Initiative for Health Policy.
Backlog builds as pressure grows
Soon after the February ruling from Kernodle, the Biden administration said surprise-billing arbiters should not issue new payment determinations until they receive more guidance. It’s unclear when HHS will issue that guidance, and in the meantime, a backlog of surprise-billing disputes is growing.
Arbitration was supposed to be a backstop for surprise medical bill disputes, according to the law, but that’s not how insurers and providers are using it. The law gives both parties a 30-day cooling-off period to settle their disputes before moving to arbitration. HHS tried to encourage early settlement by slapping a $350 fee on arbitration.
By September 2022, there was already a significant surprise-billing arbitration backlog, according to an initial report from HHS that examines the use of the process in its first year. The administration said parties have been “submitting significantly more disputes than the Departments initially projected,” with just 3,576 of 90,078 disputes initiated in 2022 ending in payment.
As HHS and the health care industry continue to battle it out over setting out-of-network payments, patients still remain shielded from any unexpected bills.
But it’s unclear what the administration will do next.
“I think there is some degree of inherent bias toward the payers in this. I don’t know exactly what that comes from,” said Patrick Velliky, the vice president of government affairs for the physician staffing company Envision.
Envision, which previously has been accused of relying on surprise billing as a business practice, has reached out to both CMS and congressional offices to encourage audits of the process for determining Qualified Payment Amounts.
On Capitol Hill, Senate Health, Education, Labor and Pensions Committee ranking member Bill Cassidy, R-La., who has historically been sympathetic to providers’ point of view on surprise billing, said he plans to push for oversight hearings on the implementation of the surprise billing law.
“Hopefully, they’ll be influenced both by a bipartisan and bicameral bipartisan sense of outrage in terms of how they’ve implemented the law,” Cassidy said.
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