HHS: Insurers won’t be penalized if they don’t update their No Surprises Act qualifying payment amounts as required

Providers may not immediately benefit from a favorable court ruling that affects the methodology for determining the qualifying payment amount (QPA) under the No Surprises Act.

The U.S. Department of Health and Human Services (HHS) issued guidance Oct. 6 that says the Biden administration will not enforce the court decision until at least May 1. The grace period could extend to Nov. 1, 2024, at the administration’s discretion. In addition, the Department of Justice is planning to appeal the ruling, according to information in the guidance.

Insurers technically will be expected to abide by the court decision in determining QPAs for items and services. However, they will not face disciplinary measures if they retain the QPAs they have calculated using the guidelines that were in place before the court decision.

HHS and the Departments of Labor and Treasury, which together oversee implementation of the No Surprises Act, say requiring insurers to recalculate QPAs “could require significant resources and take many months, if not longer.”

The guidance clarifies that insurers won’t face consequences if they apply current QPAs in any context prescribed by the No Surprises Act. The legislation established QPAs as a benchmark both for determining patient cost-sharing for out-of-network care and for settling out-of-network payment disputes.

“This exercise of enforcement discretion applies to QPAs for purposes of patient cost-sharing, providing required disclosures with an initial payment or notice of denial of payment, and providing required disclosures and submissions under the federal IDR [independent dispute resolution] process,” the guidance states.

Problems with the methodology

The Aug. 24 ruling in the Eastern District of Texas federal court found flaws with several aspects of the regulations that established the protocol for determining the QPA, which the No Surprises Act defines as the median in-network payment rate for a given service in a given market.

The court said the regulations deviated from legislative intent by, among other issues, allowing insurers to incorporate ghost rates in the calculation.

“We don’t really understand how QPAs are calculated, nor do we ever receive calculations of what QPAs are,” Jim Budzinski, CFO of Wellstar Health in Georgia, said during a September hearing of the House Ways and Means Committee.

The IDR (i.e., arbitration) process hasn’t been a salve, provider representatives said during the hearing, because of issues including a large case backlog and an administrative fee that was set at a potentially prohibitive $350 per dispute for much of 2023, before an Aug. 3 court ruling required HHS to lower the toll. The fee is $50 for the remainder of 2023 and is set to increase to $150 for 2024, according to a proposed rule.

Jeanette Thornton, executive vice president for policy and strategy with AHIP, said insurers have acted responsibly in computing QPAs since the No Surprises Act was implemented in 2022.

“[The] legislation had pages and pages of very detailed information that we have to abide by when we calculate those QPAs, which are based on actual contracts between providers and plans,” Thornton said during the hearing. “We are following those regulations when we’re calculating that, and we’re following [them] by the line.”

Ramifications for networks

If QPAs are lower than Congress intended under the No Surprises Act, the consequences can be significant for reasons that go beyond hampering providers financially and encouraging them to take greater numbers of cases to arbitration. The latter issue feeds a backlog of cases estimated to have exceeded 225,000 as of May — a number that no doubt rose considerably while portal operations were interrupted over two months starting in early August, as the departments made changes in response to the court decisions.

In the bigger picture, there’s a question about whether artificially low QPAs give insurers incentives to maintain narrow provider networks.

“The impact of these policies is causing ripple effects through the health insurance market and impacting physicians’ ability to negotiate fair contracts with insurers to be in-network,” Rep. Danny Davis (D-Ill.) said during the hearing, “because all contracts are now being negotiated under the QPA ceiling as plans know that this amount is the most that they will pay whether the physician is in or out of their network.”

Seth Bleier, MD, an emergency physician and vice president of finance with Wake Emergency Physicians PA in North Carolina, said the medical group’s negotiations with insurers took a noticeable turn after the No Surprises Act (NSA).

“Most of those contracts were on evergreen, yearly renewals,” he said. “And [insurers] signed them without question, until the NSA. Then the NSA comes out, and … it’s a 40%-plus reduction in reimbursement if you want to stay in network. And then once we’re out of network, it’s a 70% reduction in the upfront payment.”

AHIP’s Thornton argued that the impetus for health plans is to grow their networks.

“The success of our business model depends on having large networks of high-quality, high-value healthcare providers,” she said.