Fifth Circuit Surprises with Ruling Reversing Vacatur of Several No Surprises Act Rules

Several Administrative Procedure Act (APA) challenges to the No Surprises Act (NSA) have reached the U.S. Court of Appeals for the Fifth Circuit. We previously discussed Texas Medical Association v. U.S. Department of Health and Human Services, 110 F.4th 762 (5th Cir. 2024) (TMA II), which affirmed the district court's vacatur of regulations setting forth a process for Independent Dispute Resolution (IDR) entities to follow when deciding out-of-network payment rates in arbitration pursuant to the NSA. 

The NSA aims to limit a patient's cost-sharing for out-of-network health services by tying it to the cost-sharing amount for in-network services and eliminating balance-billing. See 42 U.S.C. § 300gg-111 (Public Health Services Act); I.R.C. § 9816(c) (Internal Revenue Code); 29 U.S.C. § 1185e (ERISA). The qualifying payment amount (QPA) helps determine what issuers and health plans must pay to out-of-network medical providers for covered services. The methodology for issuers and health plans to calculate the QPA was determined through rulemaking following passage of the NSA. See 42 U.S.C. § 300gg-111(a)(2)(B); Requirements Related to Surprise Billing; Part I, 86 Fed. Reg. 36,872 (July 13, 2021) (2021 Rule); Requirements Related to Surprise Billing; Part II, 86 Fed. Reg. 55,980 (Oct. 7, 2021); Requirements Related to Surprise Billing 87 Fed. Reg. 52,618 (Aug. 26, 2022). 

On October 30, 2024, the Fifth Circuit unexpectedly reversed the district court's vacatur of several provisions of the 2021 Rule concerning the QPA calculations. See Tex. Med. Ass'n v. HHS, No. 23-40605 (5th Cir. 2024) (TMA III). In this case, the plaintiffs-appellees/cross-appellants brought three separate challenges to the 2021 Rule as inconsistent with the NSA and arbitrary and capricious: those relating to (1) inclusion of "ghost rates" and exclusion of case-specific agreements and bonus and incentive payments in QPA calculations; (2) the "clean-claim" deadline provision; and (3) disclosure requirements. 

Of note, the Fifth Circuit relied on Loper Bright's overturning of Chevron, citing and applying the "best reading" principal to find the QPA calculation provisions to be lawful. See Slip Op. at 8-9 (quoting Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244, 2262, 2263 (2024)). The court held that the NSA "contains no requirement that a service must previously have been performed by a provider for that rate to be included in the QPA calculation." The court also rejected arguments made by the plaintiffs challenging the exclusion of case-specific agreements and incentive and bonus payments from the QPA calculation. Case-specific agreements are "special agreements with providers and facilities that generally are not otherwise contracted to participate in any of the networks of the plan or issuer." 86 Fed. Reg. at 36,889. The plaintiffs asserted that "case-specific agreements are necessarily made 'under' an insurer's plan because if the plan did not authorize such agreements, the insurers would be violating ERISA," given that ERISA payments can only be made in accordance with the plan documents. The court instead reasoned that "even assuming arguendo that case-specific agreement constitute 'contracted rates,'" "whether a plan permits case-specific agreements is a separate question from whether a 'contracted rate[]' was 'recognized by the plan or issuer... under such plan or coverage... on January 31, 2019,' such that it should be included in the QPA calculation." It also found that the NSA granted the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Departments) discretion as to whether to include incentive and bonus payments in the QPA. As a result, the Fifth Circuit upheld the regulatory exclusions from QPA calculations.
 
The court also rejected the plaintiffs' challenges to various rules setting forth disclosure requirements under the NSA regarding the QPA, upholding the district court's decision in this regard.

However, the court affirmed the district court's vacatur of a rule requiring plans and issuers to send providers an initial payment or notice of denial of payment when a plan or issuer "receives the information necessary to decide a claim for payment" – a "clean claim" – because it conflicted with the 30-day deadline under the NSA, triggered instead by transmittal of the provider's bill. See 86 Fed. Reg. at 36,900. The court relied again on Loper Bright, asserting that the NSA "does not expressly delegate to the [the Departments] rulemaking authority over the Act's deadlines, unlike it does for setting the methods of calculating the QPA" (emphasis added). Practically speaking, this vacatur gives plans and issuers a tighter deadline to render a claims decision and issue initial payment, opening up questions as to what happens when a plan or issuer does not have some or all of the information it needs to make a determination within 30 days of the transmittal of the provider's bill. 

The Departments and the Office of Personnel Management (OPM) jointly issued informal guidance on October 6, 2023, which addressed complying with the 30-day deadline in the wake of the district court decision. The guidance states that "the ERISA claims procedure regulation and Affordable Care Act [(ACA)] internal claims and appeals regulations require plans and issuers to communicate with claimants and their authorized representatives (which may include a provider of air ambulance services), so as to facilitate full and fair review of benefit claims and provide a reasonable claims procedure." The guidance also states that "before denying a claim that may be subject to the [NSA] because the provider did not submit sufficient information, plans and issuers should communicate with providers to obtain the information the plan or issuer needs to provide a full and fair review within the 30-calendar day timeframe to determine whether the services are covered services..." and if so, "send an initial payment or notice of denial of payment." The guidance further states that "[i]f a plan or issuer cannot determine coverage in that timeframe, the plan or issuer should issue a notice of benefit denial due to an adverse benefit determination, as defined in 29 CFR 2560.503-1, and should communicate the basis for the denial in a manner that does not incorrectly suggest that the furnished service has been determined not to be a covered service." 

We wait to see if an appeal of this decision to the Supreme Court will be sought, which could undoubtedly impact future rulemaking and informal guidance from the Departments.

CRS Issues New Pension and IRA Report

On November 4, 2024, the Congressional Research Service (CRS) issued a new report providing an overview of pension investment issues across state and local pensions, federal pensions (focusing on the Thrift Savings Plan (TSP)), private sector pension plans, and individual retirement arrangements (IRAs). The report highlights key legislative issues in this congressional term to include environmental, social, and governance (ESG) investment issues, diverse asset managers, investments based on non-pecuniary factors, exercise of shareholder rights, alternative investments, investments fees, qualified professional asset managers, collective investment trusts in 403(b) plans, investment restrictions, and prohibited transactions. 

Upcoming Speaking Engagements and Events

Joanne will speak at the American Bar Association 18th Annual Labor and Employment Law Conference on November 16.

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