Appeals Court Strikes Down No Surprises Act Qualified Payment Amount Formula

The U.S. Court of Appeals for the Fifth Circuit issued a ruling on Aug. 11 striking down a provision of the No Surprises Act (NSA) concerning the qualifying payment amount (QPA).

The NSA, which became effective in 2022, imposes federal requirements to protect consumers from large, unexpected medical bills for out-of-network care. Insurers and health care providers are directed to negotiate reimbursement rates through an independent dispute resolution process.

Of central concern to these parties during negotiations is the QPA, or the median of the total maximum rates in an insurer’s contract for an item or service, sorted by specialty and geographic region. The NSA authorized the Departments of Health and Human Services, Labor, and Treasury to set and refine methods for calculating the QPA through rulemaking.

The plaintiffs in this case challenged three aspects of the agencies’ rulemaking, claiming that their rules violated the NSA and were “arbitrary and capricious.” The district court ruled in their favor, effectively striking down a formula set by agency-level rulemaking used to calculate the QPA. The plaintiffs argued that the formula set artificially low QPAs by enabling insurers to include “ghost rates” that were not negotiated and exclude bonus and incentive payments.

The court defines ghost rates as an nonnegotiated rate for services that a provider either does not provide or does not plan to provide. These line items on form contracts provided by insurance companies are often left without an identified rate by the provider and are therefore often marked with very low rates by the insurer (sometimes as low as $0).

In August 2022, enforcement discretion from the agencies directed insurers to exclude $0 ghost rates from QPA calculations. However, the agencies continued to allow non-$0 ghost rates in QPA calculations, thus resulting in artificially low QPAs.

The case has been remanded for further proceedings consistent with the court’s opinion.

Source:

https://www.ca5.uscourts.gov/opinions/pub/23/23-40605-CV1.pdf