Court Ruling May Increase Employer Surprise Billing Costs

A federal judge struck several key provisions in the Biden administration’s surprise billing rule that were designed to protect employer health plans and employees from higher health care costs, but allowed the provisions outlining the process for resolving surprise bills to remain in place.

Background: Under the rule implementing the No Surprises Act’s independent dispute resolution (IDR) process, the arbitrator was instructed to presume the qualifying payment amount (median in-network rate) is the appropriate out-of-network reimbursement rate before considering other factors in the statute such as the provider’s level of training and acuity of the patient who was treated.

Impact on employers: For now, the remaining provisions of the rule and the statute provide a sufficient framework for providers and employers to resolve surprise billing payment disputes. However, arbitrators will have greater latitude to select more costly rates submitted by out-of-network providers.

Rule conflicts with statutory text: Rather than instructing arbitrators to consider all the factors pursuant to the act, the judge said the rule “places its thumb on the scale” by requiring arbitrators to presume the correctness of the qualifying payment amount and then imposing a heightened burden on the remaining statutory factors to overcome that presumption.”

Government erred in how it implemented the rule: The judge also ruled the Biden administration “improperly bypassed notice and comment required by the APA, and thus the rule must be set aside for this additional reason.”

Outlook: It is unclear if the Biden administration will appeal this decision, as three other legal challenges to the rule remain in other courts. The administration could also modify its regulation and IDR guidance to address the court ruling.