Skip to Main Content
Our Commitment to Diversity

Litigation Minute: When the Federal No Surprises Act's Dispute Resolution Process Does Not Apply: Exempt Payors or State Law

Payor-Provider Series: Part Four of Four

Date: 23 August 2022

WHAT YOU NEED TO KNOW IN A MINUTE OR LESS

For health care providers offering items and services to out-of-network (OON) patients1 in certain emergency and nonemergency settings, the federal No Surprises Act (NSA) establishes a new federal independent dispute resolution (IDR) process designed to resolve applicable payment disputes. 

Which OON payment disputes do not fall under federal IDR process? In our previous issue of Litigation Minute, we covered circumstances in which the federal NSA does not apply because no “surprise bill” occurs, even for OON patients. In this issue, we will cover circumstances in which the federal IDR process does not apply because either: (1) the payor is exempt; or (2) state laws with equivalent protections (state NSAs) apply. 

In a minute or less, here is what you need to know.

Care Settings Where Disputes Fall Under the Federal IDR Process

As a reminder, not all OON claims are adjudicated under the federal IDR process. The federal IDR process applies to determine the OON rate for “qualified IDR items or services,” which include:

  1. Emergency services (including post-stabilization services) at qualifying facilities;
  2. Nonemergency items and services furnished by OON providers at certain in-network health care facilities; and
  3. OON air ambulance services.
Payors and State NSAs That Trigger the Federal IDR Process

The care settings above are necessary conditions for the application of the federal IDR process. However, the federal IDR process does not apply to all situations involving such care settings. Whether the federal IDR process will apply in such care settings also depends on: 

  1. Who the payor is; 
  2. Whether the state in which the service occurs has a state NSA; and 
  3. Where a state NSA exists, whether that state NSA is preempted by the federal NSA.

On the payor side of the care settings above, the federal IDR process applies to all types of comprehensive health insurance products, including fully insured individual and group plans, fully insured group health plans, and Federal Employees Health (FEHB) Carriers.

This is true except where either: (1) a state NSA applies; or (2) a federal program is exempt. 

Exempt Federal Programs

Certain federal payors fall outside of the federal IDR process. That process does not apply to items and services payable by Medicare, Medicare Advantage, Medicaid (including Medicaid Managed Care), the Children’s Health Insurance Program, or TRICARE. 

State Programs Precluding Federal NSA Applicability

In general, federal law preempts state law. However, in enacting the federal NSA, Congress recognized that many states had already passed (or will pass) state NSAs for fully insured plans over which states have insurance regulatory authority. Congress thus deferred, and limited the degree to which the federal NSA preempts state NSAs. 

In this regard, it is important to recall that: (1) the federal NSA was codified as part of ERISA, among other laws; and (2) traditional ERISA preemption analysis tells us that states may not normally regulate self-funded ERISA group health plans. Therefore – even given the federal NSA’s deference to state NSAs – state NSAs may only regulate: (1) fully insured plans that are subject to state insurance laws; and (2) self-funded plans that have opted into being administered by state law.

For such plans, the federal IDR process will not apply where a state NSA or All-Payer Model Agreement under Section 1115A of the Social Security Act provides a method for determining the total amount payable under such a plan. Additionally, when the plan or issuer and the provider or facility are in different states, the federal IDR process will apply.

Background about the federal NSA, federal IDR process, and related case law can be found in prior alerts available herehere, and here, as well as a recent episode of the K&L Gates Triage podcast.

An “OON patient” is a patient whose health insurance plan does not have a contract with the facility or provider in question for payment rates.

Where self-funded plans do not opt into being administered by state law, the Federal NSA applies if its terms otherwise apply.

  • See prior edition of Litigation Minute regarding the Federal NSA’s inapplicability where no surprise bill occurs.
Gary S. Qualls
Gary S. Qualls
Research Triangle Park

This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer. Any views expressed herein are those of the author(s) and not necessarily those of the law firm's clients.

Return to top of page

Email Disclaimer

We welcome your email, but please understand that if you are not already a client of K&L Gates LLP, we cannot represent you until we confirm that doing so would not create a conflict of interest and is otherwise consistent with the policies of our firm. Accordingly, please do not include any confidential information until we verify that the firm is in a position to represent you and our engagement is confirmed in a letter. Prior to that time, there is no assurance that information you send us will be maintained as confidential. Thank you for your consideration.

Accept Cancel