In an adverse development for managed care organizations (MCOs) facing significant administrative burdens, high costs, and compliance challenges associated with the No Surprises Act, the Fifth Circuit will consider vacating qualifying payment amount (QPA) calculation rules. On May 30, 2025, the Circuit granted a request from plaintiffs in Texas Medical Association et al. v. U.S. Department of Health and Human Services et al. (TMA III) to vacate and conduct an en banc review of an appellate panel’s decision to uphold the government’s methodology for determining QPAs and, by extension, compensation for out-of-network providers.
If the Fifth Circuit rules differently, MCOs could again be thrown into limbo regarding how to appropriately calculate QPA rates. Aside from the obvious compliance challenge, this outcome could intensify legal contention with providers over acceptable out-of-network compensation, create regulatory risk in QPA audits given the scant guidance for compliant calculation methods, and exacerbate administrative costs for payors. While a hearing date for the en banc review – which will involve the entire Fifth Circuit judiciary rather than a select panel – has yet to be set, the court has requested that appellate briefs be filed by June 30, 2025.
From district court to the Fifth Circuit: TMA III
TMA III is one of several decisions that shook the No Surprises Act (NSA) implementing regulations. In late November 2022, the Texas Medical Association and several other providers filed a complaint in the Eastern District of Texas, contending that several provisions of the July 2021 interim final rule and subsequent agency guidance conflicted with the plain text of the NSA and were therefore unlawful under the Administrative Procedure Act. The plaintiffs sought to overturn the government’s accepted QPA calculation methodology, requested more detailed payor disclosures regarding QPA calculation methods, and sought to vacate several rules relating specifically to air ambulance compensation.
The plaintiffs achieved a sweeping – and for MCOs, concerning – victory in August 2023, when a district court vacated several regulatory provisions that had previously guided QPA calculations, including those:
- Allowing inclusion of rates for services not actually provided by a provider (“ghost rates”)
- Permitting inclusion of out-of-specialty rates in QPA calculations
- Excluding bonus, incentive, and retrospective payments from the QPA
- Allowing self-insured group health plans to use rates from all plans administered by a third-party administrator (TPA)
- Extending the statutory 30-day deadline for insurer payment determinations
- Requiring two separate arbitration proceedings for a single air ambulance transport
- Excluding case-specific agreements from QPA calculations
The plaintiffs did not prevail on every point. The district court upheld existing disclosure requirements and guidelines relating to air ambulance QPA calculations, finding both to be reasonable and reasonably explained. However, the loss of an agreed-upon QPA methodology (and provisions to streamline calculations) far overshadowed these small wins. With these rules vacated, MCOs faced an impractical volume of administrative work. For example, TPAs, no longer permitted to apply universal QPA rates, were expected to calculate bespoke QPAs for every self-funded plan, taking unique offerings and specialty-specific rates for in- and out-of-network providers into consideration – an impractical ask, given that TPAs may administer hundreds of self-funded employer health plans.
Equally challenging was the lack of clear instructions from the government. The U.S. Department of Health and Human Services and related agencies have provided little to no guidance on how MCOs should adapt their processes to remain in compliance with partially vacated requirements. Defining compliance has been largely left to MCOs, as was reflected in a December 2023 guidance, which summarily stated that “[plans] must calculate the QPA using a good faith, reasonable interpretation of the applicable statutes and regulations that remain in effect after the TMA III decision.”
MCOs achieved a reprieve in October 2024, when the Fifth Circuit reversed the district court’s vacatur of several QPA calculation provisions. The appellate panel found that the agencies’ methodology for calculating the QPA – including the inclusion of all contracted rates, the exclusion of retrospective adjustments, and the treatment of case-specific agreements – was within the agencies’ statutory authority and was not arbitrary or capricious. The court emphasized that the NSA gave the agencies broad discretion to establish the QPA methodology and that the rules were a reasonable exercise of that authority.
Unfortunately, the government did not appeal every aspect of the district court’s decision, instead opting to target provisions relating to QPA methodology that it viewed as essential to the functioning of the NSA’s payment and arbitration framework. As a result, certain vacated rules – a notable inclusion being the rule allowing self-insured group health plans to use rates from all plans administered by a third-party administrator – remain invalid and out of use. Nevertheless, the restoration of the QPA calculation methodology clarified compliance expectations and constituted a significant win for MCOs.
Forthcoming en banc review for TMA III may not bode well for MCOs
The government’s victory in the appellate court may be short-lived, however. On May 30, 2025, the Fifth Circuit granted the plaintiffs’ request for an en banc review to consider overturning the panel’s decision. The plaintiffs filed their petition for rehearing in December, calling for the full Fifth Circuit to correct what they allege is a significant misreading of the NSA. The providers further contend that the rules upheld by the panel unlawfully deflate QPAs by including non-negotiated “ghost rates” and excluding incentive payments, and will create a lasting imbalance in the NSA’s dispute resolution process if left in place. The government, for its part, filed its opposition to the petition in January 2025.
An adverse outcome in this yet-to-be-scheduled rehearing is not guaranteed; the upcoming review could result in a reaffirmation of the Fifth Circuit’s decision to uphold the original QPA calculation methodology. However, the fact that this case has received an en banc rehearing suggests that one or more members of the judiciary have doubts about the panel’s ruling. For now, it remains to be seen how compelling the full bench will find the plaintiffs’ argument.
Regardless of whether this rehearing delivers a positive or negative outcome for MCOs, it will have significant implications for QPA calculations, regulatory audits, and the IDR process. We will continue to monitor this case and provide timely updates as it unfolds; however, MCOs should not expect these proceedings to clarify compliance expectations regarding QPA calculations. Regulatory uncertainty has been a theme for the NSA since its inception, and it is unlikely to dissipate anytime soon.
Client Alert 2025-152
