A judge in Texas again ruled against the federal government over its implementation of the ban on surprise medical bills and said the third party process to resolve payment disputes is unlawful and unfairly favors insurers.
Judge Jeremy Kernodle of Texas vacated portions of the final rule implementing the ban on Monday, and remanded it back to the government.
Kernodle’s ruling raises questions about how this will affect the arbitration process providers and payers are currently using to resolve payment disputes related to out-of-network care.
The federal government has said it has been inundated with requests to enter arbitration since it opened the portal to initiate “baseball-style arbitration,” or when an independent third party picks only one payment offer from either a provider or insurer.
The ruling will disrupt and, unless reversed, change the current arbitration process, said Harvey Rochman, an attorney and partner at Manatt, a professional services firm.
The No Surprises Act set up a process for how payers and providers could resolve these payment disputes, which in turn protects consumers from unexpected medical bills, putting the onus on providers and payers to resolve.
But the final rule from federal regulators that guides arbiters on what they should consider before selecting just one offer has resulted in numerous lawsuits.
The Texas Medical Association argued the case before Kernodle in December, arguing that the final rule unfairly benefits insurers by anchoring pricing decisions to the qualified payment amount, or median in-network rate for healthcare services, which is calculated by insurers.
This is the second time Kernodle has ruled in favor of the Texas Medical Association. The HHS had to nix language issued in a draft rule after Kernodle ruled against the government. In that case, Kernodle said it was unlawful to tell arbiters to start with the presumption that the qualified payment amount, or QPA, is the correct amount.
Although the departments have nixed the presumption language, “they have not relinquished their goal of privileging the QPA, tilting arbitrations in favor of insurers, and thereby lowering payments to providers,” Kernodle said in his Monday opinion.
The Texas Medical Association, which filed the lawsuit, cheered the news on Monday.
“This decision is a major victory for patients and physicians. It also is a reminder that federal agencies must adopt regulations in accordance with the law,” Gary Floyd, president of the medical association, said in a statement.
The American Hospital Association, which filed an amicus brief in the case, also said it is pleased with the judge’s ruling.
“The district court correctly observed that the government’s final rule would have tilted arbitrations in favor of insurers, thereby inappropriately lowering payments to health care providers and threatening patient access to care,” AHA General Counsel Melinda Hatton said in a statement.
