Federal Agencies' Final Rule Revises 'Surprise Billing' Arbitration Process

This article has been updated.

The U.S. departments of Labor, Health and Human Services, and the Treasury have issued a final rule on the arbitration process under the No Surprises Act, a bipartisan law to protect consumers against unanticipated and unexpectedly high out-of-network medical bills.

The new final rule, along with a fact sheet and updated frequently asked questions (FAQs) guidance on surprise billing protections, were jointly issued by the agencies on Aug. 19.

The final rule supersedes parts of an interim final rule issued in July 2021 and another interim final rule issued in October 2021. The agencies are continuing to work to implement the No Surprises Act, which began taking effect in January 2022.

The new final rule is intended to "make certain medical claims payment processes more transparent for health care providers and clarify the process for providers and health insurance companies to resolve their disputes," according to a statement by the agencies.

Independent Dispute Resolution Process

"Because patients in some scenarios no longer can be balance-billed for out-of-network care [not paid by their insurance], the health plan and provider must settle on an amount to cover a disputed balance via either a 30-day negotiating period or arbitration," explained the Healthcare Financial Management Association, a trade group.

The new rule finalizes aspects of an arbitration process created under the No Surprises Act and known as the federal Independent Dispute Resolution (IDR) process.

Health care service providers such as doctors and hospitals, along with health plans and insurers, will use the IDR process to determine the total payment amount for out-of-network services over which the patient had not given prior consent, most typically emergency care. Surprise bills have also commonly resulted from out-of-network medical professionals whose services are received at an in-network hospital or clinic, such as an out-of-network anesthesiologist assisting in an operation performed by an in-network surgeon at an in-network facility.

The arbitration process also applies to air ambulance services, whose high-priced surprise bills have long been controversial.

The final rule includes guidance for federally certified IDR arbitrators on how to make payment determinations and instructs the arbitrators that they must provide additional information and rationale in their written decisions.

The new rule also revises certain provisions in light of two recent federal court decisions in lawsuits filed against the interim rules, the agencies said.

Instructions for Arbitrators

The final rule clarifies that IDR arbitrators must select the offer that best represents the value of the item or service under dispute. However, in reaching that decision, the rule gives arbitrators more leeway to assess specific information submitted by either party.

Under the final rule, for instance, arbitrators are instructed to consider the qualifying payment amount (QPA) and then consider additional information submitted by a party (or requested by the arbitrator) to determine which offer best reflects the appropriate out-of-network rate, according to an analysis of the rule published on the Health Affairs Forefront blog.

"The final rule's most significant change is elimination of the 'rebuttable presumption' in favor of the QPA, a part of the interim final rule that has been the subject of eight lawsuits from providers and two court decisions thus far," wrote the bloggers—Katie Keith, director of the Health Policy and the Law Initiative at Georgetown University; Jack Hoadley, a health policy analyst at Georgetown's Health Policy Institute; and Kevin Lucia, a research professor and project director at the institute.

"Under the most recent interim final rule, IDR entities [arbitrators] were directed to select the offer closest to the QPA unless the parties submitted credible information about additional circumstances that clearly demonstrated that the QPA is materially different from the appropriate out-of-network rate," the policy analysts explained. "The final rule, in contrast, does not dictate which offer the IDR entity should select. It instead focuses on the process that IDR entities should use when choosing between two competing offers."

According to the Healthcare Financial Management Association, "it remains to be seen whether consideration of additional factors makes a significant difference in arbitration outcomes." The group noted, for instance, that "examining outcomes in Texas, which in 2020 implemented a law prohibiting surprise billing, a JAMA JAMA study found that arbitrators appear to 'anchor to a median in-network price benchmark' regardless of whether they are directed to do so."

Transparency on Payment Amounts

The final rule states that if a health plan's third-party administrator (for self-insured plans) or an insurance issuer (for fully insured plans) "down code" a billed charge from a health care provider to reduce the amount owed, then, as part of the QPA disclosures that accompany out-of-network payment offers, the plan or insurer must now include additional information to the health care provider on what the QPA would have been had the service code not been down-coded.

The added disclosures "will help providers … engage in more meaningful open negotiations with plans and [insurance] issuers," the agencies said.

The Healthcare Financial Management Association called this change "particularly advantageous for providers."