Nov. 30 2022

AUSTIN — Amid concerns about threats to patients’ access to physicians’ care, the Texas Medical Association (TMA) has filed a new lawsuit in the U.S. District Court for the Eastern District of Texas, challenging certain portions of the July 2021 interim final rules implementing the federal No Surprises Act (NSA).

This is the third lawsuit TMA has filed against federal agencies related to rulemaking under the law.

In its latest lawsuit, TMA is challenging certain parts of the rules that artificially deflate the “qualifying payment amount” or “QPA.” The QPA is an insurer-calculated amount that arbitrators are required to consider, among other factors, when deciding between the physician’s and the health insurer’s offer as the appropriate out-of-network rate in federal arbitrations. Under the law, the QPA is generally supposed to be the median in-network rate for the service provided by a physician in the same or similar specialty in the relevant geographic area. The challenged parts of the rule set forth a methodology for calculating QPAs that conflicts with how the NSA requires insurers to calculate QPAs. The lawsuit also challenges the lack of transparency around QPA calculations.

“TMA is concerned that these provisions unfairly disadvantage physicians in payment disputes with health insurers and will ultimately rob patients of access to physicians’ care,” said TMA President Gary W. Floyd, MD. “Calculating QPAs the way the agencies have required means that physicians have the scales tipped against them from the outset of negotiations. Shrouding these calculations in secrecy further disadvantages physicians, by preventing them from raising errors in QPA calculations to the agencies.” 

TMA contends the challenged provisions of the rule skew negotiations in favor of health insurers so strongly that health insurers will force physicians out of insurance networks and physicians will face significant practice viability challenges, struggling to keep their doors open in the wake of the pandemic.

TMA’s lawsuit focuses on four ways in which the rule unfairly deflates the QPA. Those are that the rule: 

• Permits insurers to include “ghost rates” in their QPA calculations, which are contract rates with physicians and providers who don’t actually provide the health service in question. This unfairly lowers QPAs as there is little motivation for physicians or providers to negotiate rates for services they do not actually provide. For example, some of these “ghost rates” are $1, which clearly would not be reflective of market rates or the cost of providing care. 
• Permits insurers to include rates of physicians who are not in the same or similar specialty as the physicians involved in the payment dispute.  
• Requires insurers to use an amount other than the total payment in calculating a QPA when a contracted rate includes “risk sharing, bonus, or penalty, and other incentive-based and retrospective payments or payment adjustments.”  
• Permits self-insured group health plans to allow their third-party administrators to determine the QPA for the plan sponsor by calculating the median contracted rate using the contracted rates recognized by all self-insured group health plans administered by the third-party administrator. This allows self-insured plans to essentially opt in to a lower QPA for payment disputes with physicians.

Physicians argue this unfair process is compounded by the opaque nature of QPA calculations and the heavy weighting of the QPA provided by the federal agencies’ final rules, the latter of which is the subject of a separate legal challenge by TMA.

“This all adds up to rigging the arbitrations against doctors in favor of health insurance companies, and to patients’ detriment,” said Dr. Floyd. “It’s setting up a race to the bottom, which will leave patients scrambling to get the care they need.”

 TMA filed its second lawsuit in September challenging the law’s Aug. 26, 2022, final rules published by the U.S. departments of Health and Human Services, Labor, and the Treasury. In the September lawsuit, TMA alleges the final rules unfairly advantage health insurers by requiring arbitrators to give outsized weight or consideration to the QPA. The hearing on that lawsuit is scheduled for Dec. 20 in Tyler, Texas.

TMA’s first lawsuit – filed in 2021 – alleged that in the interim final rules governing arbitrations between insurers and physicians, the agencies unlawfully required arbitrators to “rebuttably presume” the offer closest to the QPA was the appropriate out-of-network rate. TMA won at the district court level, arguing that requiring arbitrators to heavily weight figures created by insurance plans conflicted with the law and provided health insurers with an unfair advantage not intended by Congress. The federal government declined to pursue its appeal of this court loss.

TMA is the largest state medical society in the nation, representing more than 56,000 physician and medical student members. It is located in Austin and has 110 component county medical societies around the state. TMA’s key objective since 1853 is to improve the health of all Texans.

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Contact: Brent Annear (512) 370-1381; brent.annear@texmed.org

Swathi Narayanan (512) 370-1382; swathi.narayanan@texmed.org

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