The No Surprises Act (NSA) was enacted in December 2020 to protect consumers from surprise out-of-network medical bills and take a step toward slowing the growth of health care costs in the U.S. A key way that the NSA achieves that goal is by creating an arbitration process designed to keep patients out of the fray and ensure the quick resolution of payment disputes between providers and health insurers. Largely driven by concerns over reimbursement rates, the enactment of the NSA has resulted in a slew of litigation by providers challenging the statute and its implementing regulations and guidance.
The core of these disputes largely revolves around the role of the qualifying payment amount (QPA) under the law, which is the basis for determining individual cost sharing for items and services covered by the law’s balance-billing protections and central to the arbitration process. Providers have also been pursuing various challenges to the arbitration process itself — including the factors arbitration entities can consider, how multiple claims can be bundled in disputes, the fees charged to insurers and providers, and even arbitration decisions themselves. These lawsuits have resulted in various pauses to the arbitration process in tandem with greater than expected use of the arbitration process, creating further obstacles to the successful implementation of the NSA and frustrating the congressional intent of the legislation.
Air ambulance providers have brought challenges seeking to overturn specific arbitration decisions in various courts across the country, suing insurers and sometimes arbitration entities directly. In a November 1, 2023, decision concerning certain lawsuits brought in Florida, an order by U.S. District Judge Timothy Corrigan rejected one such attempt. This Expert Column will discuss additional background on these lawsuits, analyze Judge Corrigan’s decision in more detail, and consider what it could mean along with other continued litigation under the NSA for the law’s successful implementation.
Surprise billing occurs when a patient unexpectedly receives a bill from an out-of-network provider after receiving services from the provider, during medical emergencies or the delivery of care in facilities. The NSA protects patients from surprise bills, requiring that patients pay no more than in-network cost sharing fees to out-of-network providers for emergency care. The law already protects as many as 1 million patients per month against surprise medical bills.
Under the NSA, health insurers must make an initial payment or send notice of a denial of payment within 30 days of the date services were rendered. Then, in the absence of applicable state law, the provider or health insurer may notify the other party that they intend to negotiate the payment amount within 30 days of the payment or notice of denial. This launches a 30-day negotiation period in which both parties attempt to agree on an alternative payment amount.
If both parties are unable to reach an agreement, the NSA provides a federal arbitration process where arbitration entities review payment offers from both entities, and other allowable factors under the statute, before choosing a final payment award. Unlike concerns raised about mandatory arbitration provisions that bind consumers, here, the arbitration solely involves private entities.
As previously discussed, the arbitration process was intended to serve as a quick, cost-efficient, and binding tool to resolve payment disputes and avoid costly litigation. Congress had designed it as such to reduce consumer premiums and ultimately, the federal deficit. Accordingly, the law provides for judicial review in very limited circumstances, providing only four narrow instances in which a party may challenge a decision in court: 1) if the award was procured by corruption, fraud, or undue means; 2) if there was evident partiality or corruption in the arbitrators; 3) if the arbitrators were guilty of misconduct; or 4) the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final, and definite award was not made.
The Biden administration has released multiple rounds of implementing regulations and guidelines for the arbitration process, much of which has been invalidated by U.S. District Court Judge Jeremy Kernodle in lawsuits filed by the Texas Medical Association and air ambulance providers. Judge Kernodle’s decision concerning how arbitration entities must consider certain factors and information related to the nature of the health care service under dispute is currently pending appeal in the Fifth Circuit. His separate decision to vacate certain aspects of QPA calculation methodology rules is also pending appeal – though that case has already resulted in broad ramifications, necessitating the administration to exercise enforcement discretion for the time-being.
Implementation of the arbitration process has come with challenges. As with any new law or program, both providers and health insurers seem to have struggled to understand and comply with new requirements under the NSA. These compliance issues are likely exacerbated by the various twists and turns resulting from the number of lawsuits that have required changes to existing regulations and guidance. At the same time, some provider groups have highlighted apparent actions by some insurers who are failing to comply with the NSA’s statutory and regulatory requirements leading up to and following the arbitration process.
Air Ambulance Provider Lawsuits in Florida
The latest decision by Judge Corrigan stems from multiple lawsuits that air ambulance providers brought in federal court, suing both a health insurer and arbitration entity to challenge their specific arbitration awards under the NSA. The providers argued that the award calculations were erroneous and involved misrepresentation. At the root of these cases, the providers alleged that the arbitration entities applied a presumption that the health insurer’s QPA was the appropriate out-of-network rate — a presumption that a federal district court judge expressly disallowed in a previous case. They also alleged further improper conduct by the health insurer regarding the disclosure and calculation of the QPA.
In response to such litigation, while not a party to the cases, the U.S. Department of Justice (DOJ) filed a statement of interest highlighting significant concerns with the fact that arbitration entities were named defendants. The administration explained that the law does not provide a cause of action for providers or insurers to sue an arbitration entity merely doing its job under the law, warning that if arbitrators were required to repeatedly defend against lawsuits, “the viability of the [NSA arbitration] process would be placed at risk, jeopardizing a cornerstone of the congressional design.” Further, DOJ argued that the unexpectedly high volume of cases in the arbitration system coupled with the low number of available arbitration entities have already strained the ability for disputes between providers and health insurers to be resolved quickly. Thus, the threat of costly litigation could steer arbitrators away from participating in the process.
Another amicus brief filed by a leading insurer trade association highlighted that judicial review directing QPA recalculations by arbitration entities or judges would undermine the NSA, particularly because QPA calculations are already subject to audits and other enforcement mechanisms by the administration. The brief also warned that unlimited judicial review of payment disputes would render the arbitration process “nothing more than a way station on the way to court.”
On November 3, 2023, a district court in Florida issued an order dismissing the complaints and outlining the standards for challenging arbitration awards in court. In the order, Judge Corrigan first discussed the Federal Arbitration Act (FAA), as the parties disputed the extent to which different procedural and substantive requirements under the statute applied under the NSA. The judge found that the FAA’s rules about the time and form in which parties must seek to vacate arbitration awards did not apply to challenges to NSA arbitrations. Then, he reiterated that judicial review under the NSA is limited to only the four scenarios from the FAA that are explicitly incorporated into the NSA statute and opined that a misrepresentation of facts would not expand the scope of review. Agreeing with the amicus brief summarized above, he noted that “the NSA gives the implementing executive agencies—not federal courts—the power and responsibility to audit QPAs and investigate complaints.”
After establishing the framework for review of challenges under the NSA, Judge Corrigan found that the air ambulance companies failed to state a claim against the insurers and the arbitration entity. He granted the arbitration entity’s motion to dismiss, pointing approvingly to the government’s statement of interest and briefly elaborating that there is no cause of action to sue the arbitration entity itself.
Though Judge Corrigan permitted the air ambulance providers to file an amended complaint consistent with the reasoning of his decision, the plaintiffs promptly informed the court that they wish to receive a final judgment based on the existing complaint, indicating that they may wish to appeal once the court order is finalized.
Judge Corrigan’s order represents a single non-binding decision from a district court judge, and similar lawsuits pending in Texas and elsewhere could further disrupt implementation of the NSA’s arbitration process.
The order comes on the heels of a new proposed rule by the Biden administration, which intends to address certain technical shortcomings raised by various stakeholders affected by the NSA’s arbitration process. The rule aims to strengthen communication between health insurers and providers, encourages disputing parties to engage in meaningful open negotiations prior to initiating arbitration, and outlines an eligibility review process and administrative fee structure for participating in arbitration. If finalized, the rule may help address the backlog in processing arbitration disputes. However, the rule may also be subject to further litigation.
There are still several ongoing, high-stakes cases challenging other provisions of the NSA, which could chill efforts to implement the statute and contain health care costs. For example, there are several appeals to lower court decisions that vacate major regulatory provisions concerning the arbitration process and the QPA methodology, which will continue to wind through the judicial process. Early next year, the Second Circuit will hear oral argument in a constitutional challenge brought by New York providers that seeks to block major consumer protections under the NSA.
Ultimately, Judge Corrigan’s order — if adopted by other courts uniformly — indicates that the federal judiciary may not be the appropriate venue to drag arbitration entities to court when seeking to overturn particular arbitration awards. This would reflect a significant step to ensuring arbitrators remain engaged as participants in the system and towards promoting a more efficient arbitration process that furthers the congressional design of the NSA.