Departments Issue Memo re: TX Court Invalidation of IRD Rule: Updated Guidance Pending

The Departments of Health and Human Services, Labor, and the Treasury (the “Departments”) issued a Memorandum in response to the recent decision of a Texas court invalidating certain portions of the independent dispute resolution (IDR) rule promulgated by the Departments under the No Surprises Act (NSA).

NSA’s IDR Process in a Nutshell

• The NSA requires disputes regarding the payment amounts due for certain out-of-network services to be resolved between the patient’s heath plan and the out-of-network provider.
• These are to be settled without any liability to the patient beyond the plan’s normal cost sharing requirements.
• The NSA obligates the plan and provider to negotiate in good faith; if no agreement can be reached, the parties may submit the dispute to arbitration through the IDR process.
• The IDR rule requires each party to submit an offer to the arbitrator, and the arbitrator is ordinarily required to select the offer that is closest to the qualifying payment amount (QPA).
• The QPA is the average amount the plan would pay to its in-network providers for the same service.
• The out-of-network provider bears the burden of demonstrating why the presumption in favor of the QPA should not apply.

The Texas Challenge

Providers in Texas challenged the presumption that the QPA should be the baseline for IDR decisions, and the court agreed with their arguments.  It vacated five specified sections of the IDR rule that would have accorded more weight to the QPA in the IDR process.  It did not invalidate any other section of the rule.

• For example, patients are still protected from surprise medical bills to the same extent prior to the court’s action.
• The IDR process will continue to function.
• The court did not prohibit the IDR arbitrator from taking the QPA into account.
• The most immediate effect on health plans is the likelihood that the IDR process will result in higher awards to providers.

The Memorandum issued by the Departments acknowledges the impact of the court’s decision on the IDR rule.  It states that the Departments are immediately withdrawing and updating guidance documents that rely on the portions of the rule invalidated by the court.

The Departments noted that they are considering additional steps.  Presumably, these include an appeal of the Texas court’s decisions.  It is worth noting that several similar challenges are pending in courts in other areas of the country, indicating a possibility of conflicting results (and eventually a possible appeal the Supreme Court).