A federal appeals court has ruled that the government’s methodology for calculating the qualifying payment amount within the No Surprises Act’s arbitration process is partly unlawful, a decision that could force insurers to recalculate QPAs and raise some benchmark payments.
In the Aug. 11 decision, a majority of the Fifth Circuit’s 17 active judges sided with the Texas Medical Association and other plaintiffs on two of three challenges to rules previously issued by HHS and the Labor and Treasury Departments in 2021. The court found the agencies violated the statute by allowing insurers to include so-called “ghost rates” in QPA calculations and by excluding bonus and incentive payments. The judges upheld the agencies’ exclusion of single-case agreements, such as those common in air ambulance billing.
Ghost rates are non-negotiated placeholder rates that sit in insurer-provider contracts for services a provider typically doesn’t perform. An OB-GYN who does not deliver babies, for example, might still have a contract that includes rates for obstetrical services at little or no cost. Because providers have no incentive to negotiate those rates, they can be as low as $1, so including them in QPA calculations pulled the benchmark down.
A lower court previously found the agencies’ rules allowed insurers to include rates for services “that are not provided, never have been provided, and never will be provided.” The Fifth Circuit agreed, writing that the rules had “upended” the IDR process. The court noted that arbitrations have far exceeded original federal projections, providers have prevailed in more than 80% of resolved disputes and arbitrators are choosing a rate above the QPA in 85% of decisions.
The agencies had also skipped the standard notice-and-comment rulemaking process when writing the original 2021 rule, then tried to fix the $0 ghost rate problem through an informal FAQ document.
“So it is awkward, to say the least, for the agencies now to complain that they do not have sufficient information from providers,” the court wrote.
On bonus payments, the court found the agencies could not categorically exclude bonus, incentive and other payment adjustments connected to the relevant item or service, as doing so could omit part of the required “total maximum payment.” For air ambulance companies, the court sided with the government, finding that one-off emergency billing agreements are not “contracted rates” under federal law.
The court said the agencies can use their enforcement discretion to let insurers keep using existing QPAs while new calculations are completed, preserving balance billing protections for patients in the interim.
The decision arrives as major insurers have been escalating their public criticism of the IDR system, with leadership at Aetna, Cigna and UnitedHealthcare in recent weeks describing “abuses” of the IDR system by providers or calling for major reforms to the process. UnitedHealthcare told Becker’s it now sees about 100,000 disputes a month, far beyond the 22,000 a year CMS originally projected across the entire system.
Providers won 85% of the 1.15 million disputes that received payment determinations in the second half of 2025 and awards exceeded the QPA in 87% of those cases, according to federal data.
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