Another victory for the Texas Medical Association.
While the Court upheld the Departments’ existing rules on QPA disclosures and auditing, TMA won a resounding victory with the vacatur of four provisions of the QPA calculation methodology (see Issue #1 below).
Before we dive in, let’s recap the three prior lawsuits.
[Note: This analysis will ignore air-ambulance related issues]
Quick Refresher
TMA 1 - The Departments’ guidance for arbiters unlawfully emphasized the QPA as the ‘primary’ or ‘most important’ factor.
TMA 2 - The Departments’ guidance for the arbitration process “improperly restricted arbitrators’ discretion and unlawfully tilted the arbitration process in favor of the qualifying payment amount.” As a result, arbiters were instructed to equally consider additional factors alongside the QPA.
TMA 4 - The Departments failed to follow proper notice-and-comment before establishing rules on administrative fees and batching criteria. The 2023 $350 administrative fee was vacated and returned to $50 and we still await new guidance on batching criteria.
TMA 3 Overview
There were two primary issues at the core of TMA III:
“Plaintiffs argue that the regulations permit insurers to artificially depress the QPA in conflict with the Act, again tilting the arbitration process in insurers’ favor and resulting in unacceptably low payments to providers…
Plaintiffs also claim that the Departments’ disclosure requirements are insufficient and prevent effective review of insurers’ calculations.”
Issue #1: How should the QPA be calculated?
The No Surprise Act’s definition of the QPA:
the median of the contracted rates recognized by the plan or issuer, respectively (determined with respect to all such plans of such sponsor or all such coverage offered by such insurer that are offered within the same insurance market . . . ) as the total maximum payment (including the cost-sharing amount imposed for such item or service and the amount to be paid by the plan or issuer, respectively) under such plans or coverage, respectively, on January 31, 2019, for the same or a similar item or service that is provided by a provider in the same or similar specialty and provided in the same geographic region in which the item or service is furnished . . . .
A few relevant takeaways from this definition:
It references the total maximum payment
The QPA is calculated one time per item/service and then inflation-adjusted
Specifies that the item/service is provided by a provider in the same or similar specialty
At issue in this lawsuit: the Departments’ “July Rule” from July 2021. The Texas Medical Association argued that the July Rule directly contradicted the No Surprise Act’s QPA definition in four ways.
Issue 1A - The July Rule allows insurers to include contracted rates for services that ‘providers that do not provide’ in calculating the QPA
This is commonly referred to as “ghost rates” since they exist but are irrelevant since they are not used. The Court agreed with TMA that this directly contradicts the NSA, which clearly refers to an “item or service that is provided by a provider”. Even the Departments’ legal team acknowledged “those artificially low out-of-specialty rates do sometimes appear in contracts.”
Note: The Court included the dictionary definition of “provided” for extra measure.
Winner: TMA
Issue 1B - The July Rule allows insurers to include contracted rates from providers in different specialties for their QPA calculation
The Court agreed with TMA that this directly violates the Act’s “in the same or similar specialty” instruction. In addition, the Court dismissed the Departments’ counter-argument about the error being “harmless” - the Court “finds standing based on Plaintiff’s procedural injury and concrete economic harm” because the QPA is an essential component of the arbitration process.
Another great quote from the Court: “the Departments may not ignore the plain requirements of the Act merely because insurers may be inconvenienced.”
That may be the greatest summation of the need for all four TMA lawsuits…
Winner: TMA
Issue 1C - The July Rule requires insurers to exclude “risk sharing, bonus, penalty, or other incentive-based or retrospective payments or payment adjustments”
The TMA successfully argued that excluding bonus and incentive payments from the QPA violates the Act’s definition of “total maximum payment.” Once again, the Court includes dictionary definitions of “total” and “maximum” to make their point clear.
This may be the most interesting piece of the TMA 3 decision: TMA did not challenge the exclusion of “penalty” in the QPA and the Departments argue that by only calculating based on the “total maximum payment,” the QPA will be too high due to this “one-way ratchet.”
The Court doesn’t necessarily disagree with the Departments - however, both parties are “bound by the text of the statute.”
Winner: TMA
Issue 1D - The July Rule permits self-insured group health plans to use their third-party administrator’s QPA calculation, which would include all plans governed by the administrator
The Court agreed with TMA that this unlawfully allows self-insured plans to use either their own contracted rates or their third-party administrator’s contracted rates. This would allow them to choose the lower of either QPA calculation.
In this instance, the Departments tried to argue that the July Rule was simpler, would lower administrative costs, reduce the burden on self-funded groups, be more practical, and lower reliance on third-party databases. The Court firmly responded that “none of these potential benefits permits the Departments to draft a rule that conflicts with the plain text of the governing statute.”
Winner: TMA
Issue #2: What information should insurers disclose about their QPA calculations?
TMA argued that the July Rule “requires insurers to reveal nothing of substance about their QPAs.” The Court’s main response is that “Congress gave the Secretaries of the Departments wide discretion in the disclosure and auditing process surrounding the QPA,” in contrast to more specific instructions on the arbitration process and QPA calculations.
For example, the Departments “may audit” any insurer they receive a complaint about, but they are not required to.
The Court determined that the Departments appropriately balanced “transparency for providers” and “administrability for insurers”. While TMA may have valid concerns, they are not addressed in the No Surprises Act and, therefore, are not up to the Court to rule on.
To summarize, the Departments were found to have followed the No Surprise Act and are not required to make any changes to the disclosure or auditing process.
Winner: Departments
Court orders
The Court ruled that vacatur was appropriate for the QPA calculation methodology rules issued by the Department (Issue #1).
The Court upheld the Departments’ rules on QPA calculation disclosures and auditing (Issue #2).
Now what?
A lot more unknowns. Sound familiar?
Existing QPA calculations will likely be used in the short-term for patient cost-sharing purposes. Previous guidance from the Departments allowed for “90 days to adjust to new guidance,” so perhaps this will be used for insurers to adapt to new QPA calculation rules once published.
The Court failed to see why arbitration could not '“continue in the absence of properly calculated QPAs or why a temporary pause in the proceedings would be more disruptive than continuing with unlawfully calculated QPAs.”
Admittedly, I’m unclear on this aspect. Does this mean the current “unlawfully calculated QPA” calculations are valid for arbitration in the short term?
If they’re not valid, are these QPAs simply ignored for arbitration purposes? That seems unlikely.
And as for any pause to a) issue new QPA calculation guidance, b) allow insurers to implement the new QPA calculation methodology, and c) begin processing claims with that QPA… that’s a very long time to pause arbitration.
Stay tuned
More questions will emerge in the coming days. And with the Departments already reeling from TMA IV and Sen. Cassidy’s letter, we could be waiting a while for new guidance.
Thanks for reading.