In response to recent litigation involving surprise medical billing requirements under the No Surprises Act (NSA), the DOL, HHS, and Treasury (collectively, Departments) have issued proposed regulations that would amend existing regulations governing the NSA's independent dispute resolution (IDR) process (88 Fed. Reg. 65888 (Sept. 26, 2023)). The proposals would set the administrative fee amount imposed by the Departments for participating in the IDR process, along with the IDR arbitrator fee ranges for single and batched disputes, through notice-and-comment rulemaking under the Administrative Procedure Act (APA) (rather than through annually published guidance). The proposed regulations would also include:

The proposals would set the administrative fee amount and IDR arbitrator fee ranges for disputes initiated on or after the later of the regulations' effective date (as finalized) or January 1, 2024.

For more information on the NSA and federal IDR process, including prior litigation challenging the Departments' regulations, see:

The NSA's federal IDR process is for use by group health plans, health insurers, and providers in determining out-of-network (OON) rates for:

The federal IDR process can be invoked after:

However, participation in the federal IDR process is not free. Disputing parties must pay an administrative fee reflecting the cost to the Departments for carrying out the IDR process. IDR arbitrators also impose a fee, paid by the party whose arbitration payment offer is not selected, to participate in the process. These fees are the topic of the Departments' proposed regulations.

Under the NSA's surprise billing regulations, each party to a payment determination under the federal IDR process must pay an administrative fee that is charged by the Departments to participate in the process (see Practice Note, Surprise Medical Billing for Group Health Plans: Independent Dispute Resolution (IDR) Process (Part II): Administrative Fees). The total amount of administrative fees paid by all parties should roughly equal the Departments' estimated expenses for a year in carrying out the federal IDR process. For 2022, the Departments set this fee at $50 per party. Initially, the $50 per party fee also applied for 2023, though the Departments later increased this amount to $350 per party for 2023 (a 600% increase). According to the Departments, the increased fee reflected the Departments' expanded role in making pre-eligibility reviews for the IDR process (among other factors).

In 2023, health providers successfully argued that the Departments imposed the increased administrative fee through guidance that failed to satisfy the APA's notice-and-comment rulemaking requirements. A Texas district court therefore vacated the portion of the Departments' guidance that increased the administrative fee (Tex. Med. Ass'n v. HHS, (E.D. Tex. Aug. 3, 2023); see Legal Update, Texas District Court Vacates Surprise Billing Rules on Application Fees and Batched Items). (The court also vacated portions of the regulations establishing batching criteria under which multiple IDR items or services were regarded as related to "treatment of a similar condition.") The Departments later concluded that a $50 per party administrative fee (rather than the vacated $350 amount) would apply for 2023.

Issued in response to the Texas ruling, the proposed regulations would require the Departments to set the IDR process fee amounts using notice-and-comment rulemaking. For disputes initiated or after the later of the regulations' effective date (as finalized) or January 1, 2024, the administrative fee would be $150 per party per dispute. This amount would remain in effect until the Departments change it through subsequent rulemaking. In their discretion, the Departments could update the administrative fee more (or less) often than annually (for example, if the volume of initiated and closed IDR disputes grows, thereby increasing the Departments' operational costs).

The Departments generally would set the administrative fee amount by:

For example, in arriving at the proposed administrative fee amount of $150 per party per dispute, the Departments estimated that 450,000 administrative fees would be paid by the parties (that is, 225,000 closed disputes, with two parties each because both parties pay the full fee). The Departments observed that the volume of closed disputes may decline due to the Texas district court's vacatur of regulations addressing the batching of claims, which would likely cause batched disputes to include more line items and take longer to close.

The Departments also estimated that their costs in carrying out the IDR process in 2024 would be $70 million. The $70 million amount reflects contract costs related to:

In proposing their regulations, the Departments also sought comments on the proposed method (for example, the possible effects on parties from increasing the administrative fee from $50 to $150). The Departments also sought comments on (among other topics) whether they should include an inflationary adjustment in future years (for example, based on the consumer price index for all urban consumers (CPI-U)).

Under the NSA's implementing regulations, the party to an IDR process payment determination whose offer is not selected must pay the fee charged by the IDR arbitrator. The IDR arbitrator's fee is limited to:

Under the Departments' implementing regulations, each of the fee amounts charged by an IDR arbitrator generally must fall within a range set by the Departments. The permitted range for:

However, an IDR arbitrator may request the Departments' permission to charge a fee outside the defined ranges.

The guidance for 2023 also permitted greater fees—on a tiered basis—for batched determinations containing specified numbers of line items (for example, 120% of the approved batched determination fee for a batch with 51-80 line items or more).

Under the proposed regulations, the ranges for IDR arbitrator fees also would be set by the Departments in notice-and-comment rulemaking (rather than in guidance). These IDR arbitrator fee ranges would remain in effect until new fee ranges are established—also through notice-and-comment rulemaking. The Departments could update the fee ranges more (or less) often than annually. An IDR arbitrator could request advance written approval from the Departments to update its fees more often than once a year.

The proposed regulations would include a severability rule under which if any portion of the proposals (as finalized) is invalidated, the remaining provisions would be severable. For example, if the regulations regarding IDR arbitrator fees are later struck down, the regulations regarding administrative fees would continue to stand.

The projections used to calculate the $150 per party per dispute could change by the time the Departments finalize these proposed regulations, based on more recent data available at that point. The final administrative fee would reflect the updated data. The Departments also intend to issue additional guidance concerning administrative fees, including rules that would: