October 04, 2023

Below we provide a brief overview of the federal IDR administrative fees, ongoing litigation, and next steps. If you missed it, Business Group on Health covered the latest developments in litigation challenging the No Surprises Act during our September 2023 Regulatory & Compliance Update webinar.

Background

Enacted in December 2020, the No Surprises Act (NSA) prohibits surprise billing for out-of-network (OON) emergency care, air ambulance services, and facility-based nonemergency services, while also prohibiting balance billing in circumstances in which surprise bills frequently occur. The NSA established a federal independent dispute resolution (IDR) process that group health plans and health insurance issuers and OON providers and facilities could use to resolve certain disputes regarding OON payment rates. The Departments issued interim final rules (IFRs) in July 2021 and October 2021 implementing the NSA’s surprise billing protections beginning January 1, 2022, which apply to group health plans and health insurance issuers.

The October 2021 interim final rules implemented the federal IDR process, establishing that each party must pay an administrative fee for participating in the federal IDR process. The administrative fee would be established by guidance so that the total administrative fees paid for a year would be estimated to equal the amount of expenditures made by the Departments to carry out the federal IDR process for that year. Contemporaneous to the October 2021 IFR, the Departments released sub-regulatory guidance setting the administrative fee for both parties to a dispute at $50 per party, along with establishing other payment ranges for determinations made by certified IDR entities, for calendar year 2022. The administrative fee and certified IDR fee ranges were affirmed in sub-regulatory guidance issued in October 2022 for calendar year 2023. Shortly thereafter, the Departments issued amended guidance in December 2022 that increasing the federal IDR administrative fee from $50/party to $350/party for calendar year 2023; no changes were made to the certified IDR entity fee ranges. The Departments explained that the increases reflected the additional administrative costs to the Departments to the carry out the federal IDR process (since the fees are, by statute, supposed to cover the cost of administering the IDR process).

Recent Litigation and Proposed Rule

Since its enactment, there have been more than 20 different legal challenges to various aspects of the NSA and its implementing regulations, including related to the federal IDR process. Multiple of these challenges have been brought by the same set of plaintiffs, the Texas Medical Association, and several air ambulance providers, in the federal district court for the Eastern District of Texas. In one of these cases, TMA IV, the plaintiffs challenged the federal IDR administrative fee.

On August 3, 2023, the judge in the TMA IV case issued an opinion and order, holding that the process by which the Departments amended the 2023 administrative fee guidance to increase the federal IDR administrative fee from $50/party to $350/party (i.e., the amended guidance from December 2022) violated the Departments’ obligations under the Administrative Procedure Act. Specifically, the court cited the Departments’ failure to provide notice of the administrative fee change an opportunity for affected parties to comment on the fee increase. The Court vacated the December 2022 guidance, reestablishing the $50/party administrative fee as stated in the October 2021 guidance. Shortly after the district court’s ruling, the Departments issued FAQs on August 11, 2023 that described how the Departments would comply with the order.

On September 26, 2023, the Departments published proposed rules amending the federal IDR administrative fee in response to the district court’s order. The proposed rules would:

• Provide that the amount of the administrative fee the federal government can charge parties to participate in the federal IDR process would be established through notice and comment rulemaking;
• Establish the methodology the federal government uses to calculate the IDR administrative fee and the considerations the government uses to develop the certified IDR entity fee ranges;
• Set the amount of the administrative fee at $150 per party for disputes initiated on or after the later of the effective date of the final rules or January 1, 2024, which would remain in effect until changed by subsequent – though not necessarily annual – rulemaking; and
• Propose the certified IDR entity fee ranges for disputes initiated on or after the later of the effective date of these rules or January 1, 2024.

What’s Next?

The Departments are requesting public comments on the proposed rules for 30-days following date of publication (through October 26, 2023). Employer plan sponsors should review the proposed rules amending the federal IDR administrative fee and certified IDR entity fee ranges and determine whether to submit comments.

Various lawsuits challenging the constitutionality of the NSA and different aspects of the federal IDR process remain ongoing, including other lawsuits by the same plaintiffs who filed the TMA IV case. This has resulted in a disjointed implementation of the federal IDR process that remains overburdened by an unexpectedly high volume of disputes. As the Departments note in the proposed rules, they are projecting approximately 225,000 disputes to be closed annually, based on the most-recent data from February 2023 – July 2023. This volume is a significant increase from the volume of annual disputes the Departments initially estimated.

Business Group on Health continues to advocate with the Departments and to Congress on behalf of employer plan sponsors. The Business Group recently met with the Office of Management and Budget (OMB) to share the employer perspective on the federal IDR process as OMB completes final regulatory review of new rulemaking regarding federal IDR process operations. The Business Group and other coalition partners are also engaging key Congressional committees, such as the House Ways and Means Committee, as Congress considers legislation related to surprise billing protections.

In case you missed it, we covered the latest developments in litigation challenging the No Surprises Act implementation during our September 2023 Regulatory & Compliance Update webinar. Business Group on Health will continue to keep members informed of regulatory developments.

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Policy & Advocacy Surprise Billing