Congressional Democrats are joining Republicans in a last-ditch effort to undermine the newly implemented No Surprises Act, which bans surprise medical bills. A key provision in the law could become a first step toward allowing the federal government to standardize rates for medical procedures covered under private insurance plans, an objective the private health care industry has fought for decades. Late last year, in the months leading up to the bill’s enactment, opponents filed a flurry of lawsuits claiming that by enforcing the rule in a manner widely viewed as consistent with the text of the legislation, the Biden administration had overstepped Congress’s intentions.
The leading opponents of the provision, which mandates that insurers and health care providers settle billing disputes based primarily on the median in-network rate for a procedure, are organizations representing the private health care industry, like the American Hospital Association and the American Medical Association. Along with a number of health care providers, the groups have filed lawsuits that federal courts are expected to decide in the coming months, before the first round of disputes under the new law reaches the arbitration stage.
The No Surprises Act has the potential to drive down the high prices U.S. providers charge, stoking fears in the health care industry that it would lead to standardized rates.
The legal arguments rely on murky case law about congressional intent, but nonpartisan experts familiar with the No Surprises Act told The Intercept that the rule is consistent with the law’s text. Instead, they point to the law’s possible consequences to explain why providers are fighting so hard to undermine its implementation. The move has the potential to drive down the high prices U.S. providers charge compared to other countries, stoking fears in the health care industry that it would lead to standardized rates. The drop in prices would at least partially be returned to Americans in the form of lower health insurance premiums.
A series of letters and statements by members of Congress from both parties, including Sen. Bill Cassidy, R-La.; Sen. Maggie Hassan, D-N.H.; and Rep. Richard Neal, D-Mass., has nonetheless sought to support filers’ claims. Their apparent aim is to bolster providers’ legal arguments that the Biden administration went beyond Congress’s intent in crafting the rule that governs the resolution of unpaid medical bills. But the law’s author, Rep. Frank Pallone, D-N.J., has decried attempts to undermine its implementation. On Twitter last month, he called one of the lawsuits “an outrageous attempt to block the most significant patient protection enacted since the Affordable Care Act.”
This lawsuit is an outrageous attempt to block the most significant patient protection enacted since the Affordable Care Act.— Rep. Frank Pallone (@FrankPallone) December 10, 2021
As the author of the #NoSurprises Act, I strongly support the Biden Admin’s implementation of the ban on surprise billing. https://t.co/GzyqQQgJdz
Prior to implementation of the No Surprises Act, providers regularly billed patients covered by out-of-network insurers directly for the difference between their rate for a treatment and the insurer’s allowed amount. These bills were often substantially higher than the true cost of the procedure or the price a provider would charge an in-network patient. That practice, known as “balance billing,” will remain banned regardless of the outcome of litigation.
Instead, providers and insurers will enter forced baseball-style arbitration if they cannot agree on the price for treatment. Each side will send the arbiter a payment offer, and the arbiter will pick the offer they think is most fair. At issue in the lawsuits is the administration’s interpretation of this process. Under the Biden administration’s proposed rules, arbiters must prioritize the median in-network rate when deciding disputes, forcing providers to justify any departure from their typical rates. The rule effectively stops them from price-gouging consumers who are out-of-network.
Providers claim the text of the No Surprises Act requires the administration to weigh a number of other potentially extenuating factors, such as the physician’s level of experience, equally to the median in-network rate. But nonpartisan experts like Jack Hoadley, a professor emeritus at Georgetown University’s McCourt School of Public Policy who has followed the act’s implementation closely, told The Intercept that the administration’s rule matched up with his expectations and his own read of the statute. Analysts for the Brookings Institution wrote last year, before the law’s implementation, that while median rates are “only one of several factors that arbitrators are supposed to consider, so there remains some risk that arbitrators will ultimately place substantial weight on other factors,” it is “reassuring that median in-network rates are the first, and most concrete, point of guidance to arbitrators.”
In other countries, price controls for medical treatments are common. And in the United States, Medicaid and Medicare have been able to negotiate prices for some time. But U.S. legislators have historically been averse to regulations aimed at standardizing the rates private insurers pay. As a result, the majority of the excessive cost Americans pay for health care can be attributed to the steep, unregulated prices charged by providers.
The providers’ investors in particular stand to lose if the new rule is enacted.
Any move toward standardizing these rates poses a threat to providers that rely on inflating patients’ bills and forcing them to cover massive surcharges far above the actual cost of the procedure. The providers’ investors in particular stand to lose if the new rule is enacted. According to Karen Pollitz of the Kaiser Family Foundation, there is substantial evidence that “venture capital investors were strategically investing in practices that are prone to surprise, out-of-network billing,” because “they knew they could charge whatever they want.”
Democrats have led investigations in the House of Representatives focused on the role that private equity and venture capital firms have played in incentivizing practices like balance billing. Pollitz told The Intercept this particular practice will be curtailed, even if the lawsuits disputing the new rule succeed. Should the administration prevail in court, though, providers will be pushed much harder to fix the root problem of surprise medical bills: unregulated and wildly varying treatment prices.
Despite plaintiffs’ questionable legal reasoning, members of Congress from both parties have joined the fray on behalf of providers in hopes of bolstering the argument that the Biden administration snubbed congressional intent with its aggressive new rules.
In a May letter addressed to Health and Human Services Secretary Xavier Becerra, Treasury Secretary Janet Yellen, and Labor Secretary Marty Walsh, Sens. Hassan and Cassidy — two legislators who played major roles in crafting the No Surprises Act — warned the administration against implementing the act’s dispute resolution process in a way that favored the median in-network rate. The letter makes an explicit argument for the provider’s preferred interpretation of the text, claiming that legislators “wrote this law with the intent that arbiters give each arbitration factor equal weight and consideration.” Cassidy released a similar follow-up letter in late December, but Hassan, whose office did not respond to a request from The Intercept to clarify her position on the administration’s interpretation of the rule, did not sign.
After the Biden administration issued the arbitration rule at the end of September, House Ways and Means Committee Chair Neal and ranking member Kevin Brady, R-Texas, sent the administration another letter mirroring the language used by Hassan and Cassidy. Their letter argues that “Congress deliberately crafted the law to avoid any one factor” — like the median in-network rate — “tipping the scales” during arbitration. As leaders of the Ways and Means Committee, which played a substantial role in crafting the bill, they carry increased authority in litigation over congressional intent.
Neal, who has taken hundreds of thousands of dollars from the American Hospital Association over his more than three decades in Congress, played a uniquely critical role in the act’s passage as part of coronavirus relief legislation in December 2020. At the time, he threatened to sink the bill if it did not contain a provision forcing insurers and providers to go straight to arbitration in disputed cases. The chair, whose office did not respond to a request for comment, is now siding with providers who say the process he demanded does not adequately favor them.
In November 2021, a large, bipartisan group of House members also sided with providers in the dispute. Reps. Tom Suozzi, D-N.Y.; Brad Wenstrup, R-Ohio; Raul Ruiz, D-Calif.; and Larry Bucshon, R-Ind., led 150 of their colleagues in a letter that claimed to lay out, in starkly legalistic terms, the congressional intent behind the No Surprises Act. While the letter’s signatories — 79 Republicans and 73 Democrats — were disproportionately conservative, a few committed progressives, like Barbara Lee, D-Calif., and Rashida Tlaib, D-Mich., also signed.
“Congresswoman Tlaib has been a strong leader in fighting for comprehensive health care coverage, Medicare for All, lowering prescription drug costs, and eliminating medical debt. She supports completely ending surprise medical billing, and supports the efforts of Congress and the Biden Administration to work together to stop surprise billing that hurts so many residents,” a spokesperson for Tlaib wrote to The Intercept. “She had no intention of undermining meaningful action to bring relief to families across the country, and will continue to fight for bold action on this issue.” Lee’s office did not respond to The Intercept’s request to clarify her position.
But the bill’s author, House Energy and Commerce Chair Pallone, and Senate Health Education, Labor, and Pensions Chair Patty Murray, D-Wash., have pushed back. In an October letter of their own, the two applaud the administration in similarly legalistic writing. They write that the arbitration rule “is consistent with our intent and our determination that the QPA,” or payment amount, “represents a reasonable rate for services in a vast majority of cases.”
In the past, courts have typically deferred to executive agencies when faced with ambiguous statutes, but the Trump-stacked federal courts and the conservative Supreme Court are likely to be hostile to any regulation that appears to open the door for federal rate-setting.
For their part, health care analysts have largely been dismissive of the providers’ reasoning. Pollitz, who authored a thorough guide on how the No Surprises Act will be rolled out this year, suggested that industry experts expected the administration to enact the dispute resolution resolution provisions similarly to how they ultimately implemented the rule. In her view, the administration’s guidance is consistent with the statute.
“I guess courts will hear arguments otherwise and decide, but the administration did not just pull this out of thin air by any means,” she told The Intercept.