The Legal Battle Over “Surprise” Medical Billing (No Surprises Act Implementation)

Authored By: NWACHUKWU ESTHER ONYINYECHI

UNIVERSITY OF NIGERIA NSUKKA, ENUGU CAMPUS.

This Article is an overview of the phenomenon of ‘surprise’ or ‘balance’ medical billing—where insured patients receive unexpected, often exorbitant, bills for out-of-network care during emergencies or at in-network facilities—has long represented a critical failure in the American healthcare system. These bills typically arose when patients, through no fault of their own, received services from ancillary providers (e.g., emergency physicians, anesthesiologists, radiologists) who were not contracted with the patient’s insurer, despite the facility itself being in-network. For years, attempts to resolve this issue at the federal level stalled due to intense lobbying battles between insurer and provider groups over the appropriate payment rate for disputed claims. This legislative impasse ended with the passage of the No Surprises Act (NSA) as part of the Consolidated Appropriations Act, 2021.

Introduction: The Problem of Surprise Billing

The practice of “surprise medical billing”—where a patient receives an unexpected and often exorbitant bill from an out-of-network provider, even after receiving care at an in-network facility—has long been a contentious issue in the American healthcare system. In an effort to shield consumers from this financial peril, the United States Congress enacted the No Surprises Act (NSA) as part of the Consolidated Appropriations Act, 2021 (CAA 2021), with most provisions taking effect on 1 January 2022. This legislation prohibits balance billing for most emergency and certain non-emergency services, placing the onus of resolving payment disputes onto insurers and providers through a process called Independent Dispute Resolution (IDR).

However, the implementation of the NSA by the relevant federal agencies—the Departments of Health and Human Services (HHS), Treasury, and Labor (collectively, ‘the Departments’)—immediately triggered a significant wave of litigation, primarily from provider groups. The core of these disputes centres on the regulatory interpretation of the IDR process, specifically how the payment arbiter (the IDR entity) must weigh various factors when determining a final reimbursement amount. The resulting legal battles, particularly those spearheaded by the Texas Medical Association, have repeatedly challenged the Departments’ attempt to give the Qualified Payment Amount (QPA) undue weight in the arbitration process, thereby raising fundamental questions about statutory fidelity and the fair compensation of healthcare services.

The Legislative Solution: The No Surprises Act 2020

Congress enacted the No Surprises Act (NSA) as part of the Consolidated Appropriations Act, 2021 to address this issue. The law’s core patient protection is straightforward: in surprise billing scenarios, patients are only responsible for their in-network cost-sharing amounts (deductibles, co-payments, and co-insurance). They are statutorily shielded from balance bills for any additional amount.

The Act’s complexity lies in its mechanism for resolving the ensuing payment dispute between the insurer or plan and the out-of-network provider. It establishes an Independent Dispute Resolution (IDR) process, whereby an arbitrator (‘certified IDR entity’) selects between the final offers submitted by each party. In making this determination, the IDR entity must consider several factors, including the Qualifying Payment Amount (QPA)—the insurer’s median contracted rate for the service in the region—alongside the provider’s level of training, the complexity of the case, and market share of the parties.

The Regulatory Controversy and Legal Challenges

The initial implementing regulations issued by the Departments of Health and Human Services, Labor, and Treasury in 2021 became the epicenter of legal conflict. The rules created a ‘rebuttable presumption’ that the QPA was the correct payment amount, instructing arbitrators to defer to it unless other factors clearly demonstrated a divergence in value. Provider groups, including the Texas Medical Association (TMA), argued this regulatory framework illegally advantaged insurers by placing a ‘thumb on the scale’ contrary to the statute’s text, which required all factors to be considered without presumption.

In Texas Medical Association v United States Department of Health and Human Services, the United States District Court for the Eastern District of Texas vacated portions of the rule. The court held that by making the QPA the primary factor, the agencies had ‘rewritten clear statutory terms’ and contravened the Act’s requirement for a balanced, multi-factor analysis. This victory for providers was subsequently reinforced by the Court of Appeals for the District of Columbia Circuit in LifeNet, Inc v United States Department of Health and Human Services, a case brought by air ambulance providers. The DC Circuit similarly found the ‘rebuttable presumption ‘conflicted with the ‘equal footing’ mandated by Congress for all statutory factors.

Following these defeats, the agencies issued revised rules in 2023, removing the presumption and aiming for a more neutral process. However, further litigation ensued over related provisions, such as the administrative fee for initiating IDR and the ‘batching’ of related claims. The TMA successfully challenged these in Texas Medical Association v United States Department of Health and Human Services (TMA III), where the court again found the agencies had strayed from the statutory text.¹⁹ The ongoing regulatory uncertainty and periodic closures of the IDR portal have created a significant backlog of unresolved disputes, undermining the system’s efficiency.

The Qualified Payment Amount (QPA) Controversy

The IDR system operates as “baseball-style” arbitration, where the arbiter must choose either the insurer’s offer or the provider’s offer. The statute explicitly lists factors for the arbiter to consider, including the Qualified Payment Amount (QPA) (defined as the median in-network contracted rate for the service in the geographic area), alongside other provider-specific factors like market share, teaching status, and complexity of care.⁵

The initial Interim Final Rule (IFR) issued by the Departments was challenged for unlawfully tilting the IDR process in favour of insurers. The rule mandated that the IDR entity must presume the QPA to be the appropriate payment rate unless other factors clearly demonstrated otherwise.⁶ Provider groups argued that this interpretation deviated from the clear legislative intent, which mandated consideration of all statutory factors without giving the QPA greater weight than the others.⁷

The No Surprises Act (NSA), enacted in December 2020 as part of the Consolidated Appropriations Act, protects patients from unexpected out-of-pocket costs for emergency services and certain non-emergency care from out-of-network providers at in-network facilities. It establishes an Independent Dispute Resolution (IDR) process where insurers and providers submit payment offers, and an arbitrator selects one after considering factors like the qualifying payment amount (QPA)—the median in-network rate—and provider experience or case complexity. Implementation began in 2022, but disputes have overwhelmed the system, with over 3.3 million IDR cases filed by mid-2025, far exceeding projections.

Provider groups, led by the Texas Medical Association (TMA), have filed nearly 30 lawsuits alleging that federal regulations unlawfully favor insurers by prioritizing the QPA over other statutory factors. In Texas Medical Association v. Becerra (TMA III), a Texas district court vacated rules imposing a “rebuttable presumption” for the QPA-closest offer, ruling they violated the Administrative Procedure Act (APA) by exceeding statutory authority; the Fifth Circuit affirmed this in 2024, criticizing “extra statutory requirements” like sequential factor consideration.

Major Court Rulings and Current Status

Federal courts have largely sided with the providers in challenges related to the IDR rules, leading to a complex and evolving regulatory landscape.

QPA Methodology: Multiple court decisions have found that rules “put a thumb on the scale” for the QPA, violating the Administrative Procedure Act (APA). The federal government has since appealed these decisions, and the full Fifth Circuit Court of Appeals granted an en banc review in May 2025, meaning the ultimate fate of the QPA methodology remains uncertain.
IDR Fees and Operations: A 2023 ruling vacated administrative fee increases and certain batching rules (which govern how similar claims can be grouped in a single dispute). The government has since implemented new rules through formal notice-and-comment procedures, setting the IDR administrative fee at $115 per party for 2024.
Private Right of Action: A significant point of conflict is whether the NSA grants providers a “private right of action” to sue insurers or IDR entities in court for non-payment or improper conduct. Circuit courts are split on this issue (e.g., the Fifth Circuit says no, while a Connecticut district court says yes), an issue that may eventually need Supreme Court resolution.
Implementation Instability: The legal challenges have resulted in the federal IDR process being paused multiple times, leading to a substantial backlog of over 600,000 disputes as of early 2025. Federal agencies have extended “enforcement discretion” for QPA calculations until at least February 1, 2026, to provide stability during the ongoing litigation.

The legal battles continue to shape the NSA’s implementation, with ongoing regulatory, judicial, and legislative efforts to refine the law and ensure full patient protection. For official information on patient rights,

Litigants and Lawsuits

The most significant and contentious legal fights have centered on how the IDR process works. The Biden administration’s implementing regulations issued a crucial rule: the arbitrator should begin by considering the Qualifying Payment Amount (QPA)—the insurer’s median in-network rate for that service in that geographic area—and then consider other factors (complexity of case, provider experience, etc.) only if they are not already reflected in the QPA.

This “rebuttable presumption” in favor of the QPA was seen as tilting the process toward insurers and potentially lowering payments to providers, especially specialized physician groups (like emergency medicine, anesthesiology, and radiology) and air ambulance services.

The main legal battles are led by provider groups against the U.S. Departments of Health and Human Services (HHS), Labor, and the Treasury:

Texas Medical Association (TMA) Lawsuits: The TMA has filed multiple successful lawsuits in the U.S. District Court for the Eastern District of Texas, resulting in several rules being vacated. Their key argument is that federal regulations improperly weighted the IDR process in favor of the insurer’s median in-network rate (the Qualifying Payment Amount, or QPA).

Medical Association (TMA) Challenges (Multiple Victories):

TMA v. HHS (2022): A federal judge in Texas vacated parts of the rule, agreeing with providers that the Biden administration’s emphasis on the QPA unfairly skewed the process against other factors Congress said to consider (like provider training, patient acuity). The court found this conflicted with the NSA’s text.

Subsequent TMA lawsuits successfully challenged the administration’s revised rules (on batching claims, fee increases) on similar grounds—that the agency was deviating from the statute’s more balanced approach.

Air Ambulance Industry Challenge:

LifeNet v. HHS (2023): The D.C. Circuit Court also struck down the “rebuttable presumption” rule, siding with air ambulance providers. The court stated the rule placed a “thumb on the scale” for the QPA, contrary to the law’s requirement for equal consideration of all factors.

Government Response and Current IDR Status:

Following these losses, federal agencies (HHS, IRS, DOL) have repeatedly rewritten the IDR rules to comply with court orders, attempting to create a truly neutral process.

The process has been turbulent. The IDR portal was shut down twice following court orders, creating a massive backlog of disputes (hundreds of thousands of cases). New rules are intended to clear this backlog and implement a more balanced approach.

Conclusion

The implementation of the No Surprises Act illustrates the tension between legislative intent and regulatory execution. While the Act has successfully ended the most egregious forms of patient financial harm, the protracted legal battle over the IDR process highlights the difficulty of constructing a fair payment adjudication system in a highly adversarial healthcare market. The courts have consistently served as a check, insisting that federal agencies adhere to the statutory compromise Congress drafted. The stability and finality of the surprise billing fix depend on the resolution of these continuing interpretive and operational challenges.

Reference(S):

Allison K Hoffman and others, ‘Calculating the Qualifying Payment Amount in the No Surprises Act’ (Commonwealth Fund, February 2023)

Consolidated Appropriations Act, 2021, Pub L No 116-260, div BB, tit I (2020) (No Surprises Act).

LifeNet, Inc v United States Department of Health and Human Services 73 F4th 342, 349-50 (DC Cir 2023).

Requirements Related to Surprise Billing; Part I’ 86 FR 55980 (2021) (Interim Final Rule

Texas Medical Association v United States Department of Health and Human Services 587 F Supp 3d 528, 537 (ED Tex 2022).

AUTHORED BY: Nwachukwu Esther Onyinyechi, A Law Student At The University Of Nigeria Nsukka, Enugu State, Nigeria.

LinkedIn profile link: https://www.linkedin.com/in/esther-nwachukwu-06891a389?utm

August, 26th 2025.

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