A Florida district court dismissed claims brought by out-of-network air ambulance services providers to challenge an arbitrator's decisions under the No Surprises Act's (NSA's) federal independent dispute resolution (IDR) process. The court noted that the providers faced an "uphill battle" in challenging the NSA/IDR payment determinations, though it allowed the providers to amend their complaints.
In a case of first impression, a Florida district court dismissed claims by out-of-network air ambulance services providers to challenge an arbitrator's reimbursement decisions under the No Surprises Act's (NSA's) independent dispute resolution (IDR) process (Med-Trans Corp. v. Capital Health Plan, Inc., (M.D. Fla. Nov. 1, 2023)). Although the court allowed the providers to amend their complaints, it noted that the providers faced an "uphill battle" in challenging the NSA/IDR payment determinations.
For more information on the NSA and federal IDR process, see:
Air Ambulance Services Providers Challenge Insurer Reimbursements
The plaintiffs in this litigation were air ambulance services providers that furnished emergency transports in early 2022 to two health plan participants—one in Florida and the other in California. The providers were out-of-network under both of the plans at issue.
In the Florida dispute, the provider received an explanation of benefits (EOB) from the plan's insurer listing the allowed payment for the transport. However, the EOB did not:
Inform the provider of the NSA's open negotiation or IDR processes (as implemented).
Include the insurer's qualifying payment amount (QPA) (the QPA generally represents the plan's equivalent median in-network reimbursement and is instrumental in determining the out-of-network reimbursement rate under the federal IDR process).
The provider initiated open negotiations and requested that the insurer provide its QPA and related information on how the QPA was calculated. After the insurer failed to provide this information, the parties invoked the federal IDR process. The insurer submitted its QPA (just over $27,500) to the IDR arbitrator—but not to the provider. The provider, meanwhile, submitted a QPA of more than $47,000. Under the "baseball style" federal IDR process, the IDR arbitrator chose the insurer's offer, which the arbitrator identified as the insurer's QPA.
Regarding the California provider, the insurer issued a payment for the participant's transport, and indicated that the payment amount (nearly $25,000) was also the QPA. After the provider initiated open negotiations, the insurer failed to provide requested information related to calculating its QPA. The parties entered the IDR process and were assigned the same IDR arbitrator that decided the Florida provider's dispute. The insurer submitted a new QPA to the IDR arbitrator of roughly $17,000, which was significantly less than the initial QPA given to the provider. Noting that the insurer's offer—which was the amount of the initial payment to the provider—exceeded the QPA, the IDR arbitrator chose the insurer's offer.
The providers sued the insurers and IDR arbitrator, arguing that the insurer failed to disclose QPA information and incorrectly calculated its QPA IDR awards. In the Florida dispute, the provider alleged that:
The insurer failed to disclose QPA information and incorrectly calculated its QPA.
The IDR arbitrator, in reaching its payment determination, overemphasized an amount identified as the QPA.
In the California dispute, the provider argued that the insurer's QPA was misleading. In particular, the provider claimed that by submitting a smaller QPA during IDR, the insurer made the arbitrator think it was offering more than the QPA. The provider also asserted that the arbitrator gave too much weight to the QPA in its determination.
The insurers and IDR arbitrator asked the court to dismiss the claims.
Standards for Challenging IDR Arbitrator Payment Determinations
The parties disagreed as to the correct method for challenging an IDR arbitrator's decision. The providers asserted that losing parties under the federal IDR process must challenge the arbitrator's decision by bringing suit in federal court. The insurers, on the other hand, argued that the NSA's federal IDR process, as a form of arbitration, required that challenges to IDR arbitrator decisions be timely brought—under the Federal Arbitration Act (FAA)—as motions for vacatur under the Federal Rules of Civil Procedure (FRCP). For more information on challenging arbitration awards under the FAA, see Practice Note, Vacating, Modifying, or Correcting an Arbitration Award in Federal Court.
Drilling down, the insurers asserted that the FAA governed the disputes by either:
Express incorporation (meaning that Congress intended for NSA/IDR decisions to be reviewed under the FAA because the NSA explicitly incorporates FAA requirements).
Default (meaning that the NSA's IDR process, as a form of arbitration, was governed by the FAA by default).
The court rejected both of these arguments.
NSA Does Not Expressly Incorporate or Presumptively Apply FAA Procedural Rules
Regarding the insurer's express incorporation argument, the court reasoned that the NSA incorporated only one relatively narrow aspect of the FAA. Specifically, the court observed, the NSA provides that IDR arbitrator decisions generally are not subject to judicial review other than for four grounds described by cross-reference to the FAA. These FAA provisions permit courts to vacate an arbitration award due to:
Corruption, fraud, or undue means.
Evident partiality or corruption on an arbitrator's part.
Misconduct by the arbitrator involving certain procedural irregularities (for example, refusing to hear relevant evidence).
The court also rejected the insurers' argument that the FAA as a whole presumptively applied—because the NSA's IDR procedures are a form of arbitration. The court distinguished arbitration in the FAA context, which arises from an agreement to arbitrate, versus IDR arbitration, which is statutorily imposed. The court observed that neither the FAA nor the NSA provides that the FAA governs the NSA (aside from the four expressly referenced provisions).
As a result, the court held that the air ambulance services providers were not required to comply with the FAA's "form and timing requirements" in challenging an IDR arbitrator's determination under the NSA.
Scope of Judicial Review Is Narrow
Regarding the scope of judicial review, the court reasoned that by incorporating the FAA's grounds for challenging an arbitration award, Congress also incorporated the commonly understood meaning of those grounds—which, in the court's view, are "extremely narrow." The court therefore concluded that:
Judicial review of arbitration awards must be deferential and restrained.
Challenges to IDR arbitrator decisions by providers or insurers may rarely be successful.
Finally, the providers argued that the NSA requires that an IDR arbitrator's determination is binding on the parties involved if there is no fraud or evidence of misrepresentation of material facts presented to the IDR arbitrator. According to the providers, this provision offered an additional ground for judicial review. Rejecting this argument, the court reasoned that the NSA provision at issue:
Did not include information about challenging an arbitration award based only on factual misrepresentations to the IDR arbitrator.
Explicitly limited the scope of judicial review to the four grounds under the FAA.
Providers Failed to State a Claim
Addressing the providers' claims, the court concluded that the providers' allegations that the insurers failed to provide required disclosures and submitted incorrect information regarding their QPAs (and the IDR arbitrator's alleged reliance on an improper QPA presumption) failed to state a claim. However, the court permitted the providers to amend their complaints.
IDR Entities as Defendants
The court also concluded that the IDR entity in this case (which, as noted, was the same entity in both the Florida and California disputes) was not a proper party to a suit under the NSA. The court reasoned that although the NSA established a limited right to judicial review, it did not create a cause of action to sue IDR entities. Having so held, the court did not reach the entity's argument that arbitrators and sponsoring arbitration organizations have absolute immunity for conduct in connection with an arbitration.
Potential parties to the NSA's federal IDR process will be interested in this court's analysis and conclusions regarding the relatively limited avenues for FAA review of NSA/IDR arbitration determinations. But given the high volume of IDR arbitration disputes under the NSA, we wouldn't be surprised if other courts are also eventually asked to rule on the FAA's applicability.
In another development involving ambulance services under the NSA, the Departments of Labor, Health and Human Services, and Treasury confirmed in proposed regulations issued earlier this month that they do not interpret the NSA's surprise billing rules as governing emergency or non-emergency ground ambulance services (see Practice Note, Surprise Medical Billing for Group Health Plans: Overview: Applicability to Air Ambulance Services). According to the Departments, this includes ground ambulance transports for participants and beneficiaries who have been stabilized but require transfer to another facility.