Court Declares Illegal Arbitration under Law’s No Surprises Final Rule

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The federal court overturned the provisions of the final rule on arbitration under the No Surprises Act and remanded it for further consideration.

On Monday, U.S. District Court Judge Jeremy Kernodle upheld the Texas Medical Association’s argument that the final rule unlawfully contradicts the NSA by limiting the arbitrators’ discretion and unfairly tilting the arbitration process in favor of the Compliant Payment Amount set by the insurers.

The court concluded that the contested portions of the final rule were illegal and should be repealed under the Administrative Procedures Act.

WHY IS IT IMPORTANT

The Texas Medical Association has challenged parts of a final rule issued by the Department of Health and Human Services governing the arbitration process to resolve payment disputes between certain out-of-network providers and insurers. The fact that insurers, rather than providers, choose the amount of payments was seen as a step towards lower health care costs.

The service providers challenged the interim final rule issued on September 30, 2021 by the Department of Health and Human Services, the Department of Labor and the Department of Treasury. The court then overturned certain provisions, including the presumption in favor of the QPA.

The departments returned to the drawing board. In August 2022, a final rule was released with new requirements for arbitrators, taking into account legislative factors.

Dr. Gary W. Floyd, President of the Texas Medical Association, said, “This decision is a major win for patients and clinicians. It is also a reminder that federal agencies must make regulations in accordance with the law.”

BIG TREND

This lawsuit is one of numerous cases filed by the Texas Medical Association against the implementation of the No Surprises Act.

The TMA appealed the case in December, pending the second of four TMA lawsuits against federal rule-making agencies.

In the previous two cases, the court revised the interim final rule and held that the NSA explicitly requires arbitrators to consider multiple factors when choosing the appropriate amount of payment and does not instruct arbitrators to give more weight to any one factor or circumstance than others.

The Texas Medical Association is also challenging a 600% increase in administrative fees for resolving federal disputes in situations involving the No Surprises Act. TMA is seeking assistance in filing a fourth lawsuit in the US District Court for the Eastern District of Texas.

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