Breaking Down the New No Surprises Act FAQs Post-TMA III

BACKGROUND: THE LONG HISTORY OF THE NSA

The NSA was enacted under the first Trump administration as part of the Consolidated Appropriations Act, 2021 (Public Law No: 116-260). The Departments and OPM jointly implemented provisions of the NSA through the issuance of two interim final rules (IFRs) in July 2021 and October 2021.

The NSA prohibits out-of-network (OON) providers from balance billing patients for certain services furnished at an OON facility (in the case of emergency services) or in-network facility (in the case of non-emergency services provided by OON providers). The NSA protects patients from receiving these “surprise” bills, effectively limiting patient responsibility for some services to no more than the patients’ in-network cost-sharing amounts. (The NSA includes separate considerations related to air ambulance providers, which we do not address in this article.)

Per the NSA and as further implemented in the October 2021 IFR, plans and issuers are required to determine whether claims for items or services submitted by an OON provider or facility and subject to the NSA are covered under the plan or coverage and must send an initial payment or notice of denial of payment to the OON provider or facility no later than 30 calendar days after the provider or facility submitted the claim to the plan or issuer.

To the extent the claim is covered, the NSA also sets forth a methodology by which plans or issuers must calculate the OON rate for OON providers or facilities that rendered items or services subject to the NSA. Plans and issuers must pay the provider or facility an amount determined by an applicable All-Payer Model Agreement, and if none exists, an amount determined by applicable state law. If state law does not set forth a mechanism by which the OON rate should be determined, the plan or issuer may negotiate the rate with the provider or facility through an “open negotiation” process, which lasts 30 days.

If the parties are unable to agree to an OON rate by the expiration of the open negotiation period, either party may initiate a dispute under the federal independent dispute resolution (IDR) process established by the NSA. The IDR process involves several steps:

• The disputing parties must agree on and select a third-party entity (referred to as a certified IDR entity) to oversee the process.
• Each party must then submit payment offers to the IDR entity.
• The IDR entity evaluates the payment offers and determines each party’s payment responsibility. The NSA requires that the IDR entity consider, among other factors, the QPA, defined as the median of the contracted rates that a plan or issuer recognizes for the same or similar service by a provider in the same or similar specialty in the same geographic area as the service at issue.
• Once the IDR entity makes a payment determination, the plan or issuer must make the payment to the OON provider or facility within 30 calendar days.

In August 2022, the Departments issued final rules implementing provisions regarding certain disclosure requirements for plans and issuers (discussed further below) and modifying certain requirements pertaining to how IDR entities can take into account the QPA in determining the OON rate through the IDR process.

In theory, the IDR process is straightforward. However, the NSA and the IDR process, including the significance of the QPA in determining the OON rate, have been the subject of consistent litigation and operational issues, suggesting that in practice, providers and health plans continue to encounter implementation challenges.

HISTORY OF TMA LITIGATION

A string of litigation continues to shape the NSA and the related IDR process, which originated with a suit filed by the Texas Medical Association (TMA) against HHS in October 2021. In Texas Medical Association v. United States Department of Health and Human Services, et al. (TMA I), the district court vacated the Departments’ IFR requiring IDR entities to use a rebuttable presumption in favor of the QPA. The court held that the presumption conflicted with the NSA’s plain meaning, which lists a set of factors for consideration when determining the appropriate OON rate, only one of which is the QPA.

After the TMA I decision, the Departments issued the August 2022 final rules, which specified elements that IDR entities must consider in resolving OON payment disputes, including the extent to which the QPA should be taken into account. The August 2022 rules required that IDR entities:

• First consider the QPA for the same or similar service.
• Limit factors to information provided by the disputing party.
• Document non-QPA factors relied upon in making a payment determination.

However, TMA challenged this rule in Texas Medical Association v. United States Department of Health and Human Services, et al. (TMA II), which the Fifth Circuit eventually vacated in TMA III. The Fifth Circuit stated that the Departments exceeded their authority by instructing IDR entities to prioritize one factor over others.

In August 2023, the district court issued a decision in TMA III, overturning key parts of the method set forth by the Departments to calculate the QPA. Following this ruling, the Departments have exercised their discretion in enforcing how QPAs are calculated, leading to uncertainty for plans and issuers as well as providers and facilities. The federal government appealed part of this decision, and on October 30, 2024, the Fifth Circuit issued a ruling on the TMA III case, partially reversing the district court’s decision, while upholding other parts.

The district court’s TMA III opinion found that the Departments’ methodology for calculating the QPA did not comply with the NSA. This noncompliance was due to:

• The inclusion of “ghost rates” (i.e., contacted rates for services not actually provided by the contracting provider during the contract period).
• The exclusion of risk-based incentive payments.
• The allowance for self-insured plans administered by a third-party administrator to use other plans administered by the third-party administrator to calculate QPAs.

The district court also found that rules related to the timing and deadline for payment of OON claims subject to the NSA did not comply with the statute, because they started the 30-day payment clock on the date the plan or issuer received sufficient information to determine whether the submitted claim was a “clean claim,” rather than the date the provider or facility transmitted a “claim.”

Reversing the district court’s decision in part, the Fifth Circuit held that single-case arrangements will no longer be included in QPA calculations. The Fifth Circuit also reversed the district court’s decision that non-fee payments, such as quality bonuses and other incentives, must be included in QPA calculations. Regarding the timing of OON payments subject to the NSA, the Fifth Circuit affirmed the district court’s decision that starting the 30-day payment clock upon receipt of a “clean claim” conflicts with the text of the NSA. As decided by the district court, the 30-day prompt payment clock for NSA-eligible claims will begin on the date the provider transmits the bill, not when the plan or issuer receives the information necessary to determine whether the claim is a “clean claim.”

Regarding the QPA calculation, the Fifth Circuit reversed the district court’s decision to exclude from QPA calculations any contracts for items or services that contracting providers did not actually furnish under said contract during the designated plan year. Contracted rates can now be included in QPA calculations regardless of whether the provider actually furnished those services. However, the Fifth Circuit reiterated the statutory requirement that QPAs be calculated using contracts for the “same or similar item or service that is provided in the same or similar specialty.” This implies that “ghost rates” (e.g., anesthesia rates included in a primary care physician’s contract) must be excluded from QPA calculations.[1]

Following the TMA III decisions, the Departments stated on the Centers for Medicare and Medicaid Services’ NSA webpage in October 2024 that they were reviewing the Fifth Circuit’s decision and intended to “issue further enforcement guidance in the near future.”

NEW GUIDANCE ISSUED FOR QPA CALCULATIONS POST-TMA III DECISIONS

In the wake of the TMA III decisions, the Departments issued the FAQs addressing implementation of certain provisions of the NSA and responding to questions from stakeholders. Under the FAQs, the Departments and OPM will require health plans and issuers to calculate QPAs using a “good faith, reasonable interpretation of the applicable statutes and regulations that remain in effect following the decisions of both the Fifth Circuit and the district court in TMA III (the 2024 methodology)” once the Fifth Circuit issues its final order. Under Federal Rule of Appellate Procedure 41, a court of appeals’ mandate usually issues seven days after the deadline for rehearing petitions, unless a petition is filed. In this case, the Fifth Circuit withheld the mandate after the plaintiffs in TMA III filed a petition for rehearing en banc. Until the mandate is issued, the district court’s judgment continues to bind the Departments.

The Departments and OPM acknowledged the challenges of recalculating QPAs because of the Fifth Circuit’s decision and recognized the time and resources required for this task. Therefore, the Departments opted to prolong the existing period of “enforcement discretion” for any health plan or issuer that calculates a QPA using either the 2021 methodology (based on the IFRs and guidance issued in July 2021) or the 2023 methodology (based on the statutes and regulations that remained in effect after the district court’s decision in TMA III). Both methodologies can be used for items and services furnished before August 1, 2025, as long as they are based on a good faith, reasonable interpretation.

Once the mandate is issued, the Departments and OPM will also use their discretion to enforce the NSA for any health plan, issuer, or party involved in a payment dispute that uses a QPA calculated with the 2023 methodology for services provided before August 1, 2025. This enforcement discretion applies to patient cost-sharing, required disclosures with initial payments or notices of denials, and submissions under the IDR process. Similarly, HHS will exercise enforcement discretion for providers and facilities that bill patients based on a QPA calculated with the 2021 or 2023 methodology for services provided before August 1, 2025. Thus, the FAQs clarify that the enforcement discretion extends to providers in addition to health plans.

The FAQs encourage states, which primarily enforce the NSA, to adopt a similar approach, including that states will be considered compliant if they follow this approach. The Departments and OPM will reassess whether additional enforcement relief time is needed as health plans and issuers work to comply with the applicable laws and regulations following the TMA III decisions.

The new FAQs essentially preserve the existing circumstances, as the enforcement discretion has been operative since fall 2023 after the district court’s TMA III decision. Alongside the enforcement guidance, the Departments and OPM offer further clarifications regarding the existing QPA disclosure requirements and patient cost-sharing obligations.

DISCLOSURE REQUIREMENTS

In line with previous guidance, which remains unaffected by the TMA III decisions, health plans and issuers must continue to disclose information about the QPA. The QPA is used to determine the “recognized amount” for cost-sharing under the NSA. This recognized amount is calculated using the All-Payer Model Agreement, specified state law, or the lesser of the billed charge or QPA. A health plan or issuer may certify that a QPA was determined in compliance with applicable rules by using a good faith, reasonable interpretation of the statutes and regulations that remain in effect following the TMA III decisions.

The FAQs address questions regarding the 30-day notice and IDR process discussed earlier, and how the timing is affected when a plan sends the initial payment or denial notice electronically but provides the required disclosures in paper form. This can result in the provider receiving the payment or denial notice earlier than the disclosures. The Departments and OPM clarify that a plan must transmit the required disclosures on or near the date that it sends the initial payment or notice of denial of payment, and must ensure that both the initial payment or notice of denial of payment and the required disclosures are sent no later than 30 calendar days after the plan receives the information necessary to decide a claim for payment for the services billed by the provider.

The Departments and OPM also state in the FAQs that they recognize that sometimes providers and facilities receive required disclosures days after receiving the initial payment or denial notice. Since the 30-business-day period to start open negotiation begins when the payment or denial notice is received, this delay can shorten the time available to review the disclosures. If the disclosures are sent in paper form and arrive later than the electronic payment or denial notice, the 30-business-day period to start negotiations will be considered to begin once both the payment or denial notice and the disclosures are received. Providers can still choose to start negotiations after receiving the payment or denial notice but before receiving the disclosures.

PATIENT COST-SHARING

The Departments and OPM reiterate in the FAQs that patient cost-sharing rules under the NSA and the July 2021 IFR for OON emergency services and certain non-emergency services are based on the “recognized amount.” According to the Departments and OPM, some health plans have been found to increase cost-sharing amounts after an IDR payment determination, which is not allowed. Once an IDR entity makes a payment determination, plans cannot recalculate or increase the cost-sharing amount if it exceeds the permitted amount. The rules ensure that disputes between providers and payers do not affect the cost-sharing amount for individuals. Nonparticipating providers cannot bill individuals more than the allowed cost-sharing amount. Any payment owed to nonparticipating providers after an IDR determination must be paid in full without reducing the amount based on prohibited cost-sharing increases.

CONCLUSION/KEY TAKEAWAYS

As stated earlier, Part 69 of the FAQs extends the status quo of enforcement discretion around the calculation of the QPA. Any new regulations related to the QPA calculation will need to be drafted under the Trump administration, although the timing for issuing such regulations is unclear. If the Trump administration decides to draft new QPA regulations, it could make additional changes to the QPA methodology beyond those that have been the subject of litigation. While the courts have provided direction on what is permissible under the NSA and what aspects of previous regulations can and cannot stand, the rulings do not prevent the Trump administration from making other permissible regulatory changes as it deems appropriate, especially as stakeholders have challenged implementation of the law under the previous administration.

Beyond issuing this new set of regulations, the Trump administration also may need to deal with open operational questions and issues, including proposed regulations from the Biden administration that have yet to be finalized and whole provisions of the NSA that are yet to be implemented.[2] All of this means that, if it chooses to act, the Trump administration could decide to make its own imprint on the current NSA operations and policy.

For more information about the NSA, please visit our No Surprises Act Resource Center.

Tyler Barton, a law clerk in the Firm’s New York office, also contributed to this article.