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The Stacks – 3rd Quarter 2022 Newsletter | The Phia Group

No Surprises Act Open Negotiations: Strategy and Compromise in the Shadow of the Rule.

By: Scott Bennett, Esq.

2022 brings a new form to the inboxes of medical payment appeal departments nationwide: the Open Negotiation Notice.  Not to be ignored, this form carries with it a looming threat of formal action if negotiations fail after 30 business days. This article explores the important events and steps involved in the Open Negotiation process, examples of the factors and benchmarks available during the negotiation, and a few strategies that have surfaced in the early part of this year during these negotiations.

An Out-of-Network Emergency Claim Walks Into a TPA…

The Open Negotiations process includes the following events: initial payment or denial, the Open Negotiation Notice, review and a good faith response, and  resolution or representation.  Each stage is an opportunity to leverage the available rules for efficient closure of the claim.

Initial Payment or denial is most often communicated on the explanation of benefits (EOB) sent to the provider, and should include the contact email for the Open Negotiation Notice (perhaps in a reason code).  Including a contact email on the EOB not only provides a clear path to start the negotiation process, but that same EOB would serve as evidence if a party ignores the provided contact and sends the Open Negotiation Notice elsewhere and then attempts to leverage the failed notice later in the process.

The Open Negotiation Notice most likely will arrive by email, and intake actions should include verification that the form is complete and includes all required information, and a secure request for any additional, necessary information to identify the claim (Open Negotiation Notice forms do not presently require patient or claim identifiers).

Once the Open Negotiation Notice arrives and is verified as complete, a rapid review of the available benchmarks for the specific claim to validate the range for negotiation and a good faith response will keep the conversation on track.  A response might include an express intent to negotiate in good faith, a short explanation that the payment (or offer) is supported by independently reviewed benchmarks, and a clear outline of the dates and deadlines ahead.

As offers are exchanged there may be possibility for resolution, which avoids the formal process of Independent Dispute Resolution (IDR).  However, If it looks like the negotiation will fail, any records of benchmarks and good faith attempts to negotiate should be documented, and the final letter prior to IDR should clearly identify the contact information (including an email address) for representation in IDR.

The QPA no Longer Stands Out in a Crowd of Factors.

On January 1, 2022, the Interim Final Rule for the No Surprises Act (NSA) placed the qualifying payment amount (QPA) at the center of any dispute.  Independent Dispute Resolution Entities (IDREs) were instructed to presume the QPA as correct, and place the burden on a provider to prove why additional payment was necessary.  NSA negotiations (and disputes) looked like the exception rather than the norm.  However, the recent opinion in Tex. Med. Ass'n v. United States Dep't of Health & Human Servs. (E.D. Tex. 2022), struck down the presumption that the QPA was correct, and guidance now pointed to a number of equal factors to be considered in a payment determination in addition to the QPA.  While this case will be appealed, this litigation has essentially relegated the QPA to one of many starting points (and potential end points) in a surprise billing negotiation.

With the QPA in the relegated position (for now) the factors available for negotiation (and dispute resolution) are as follows: the QPA; the level of training, experience, and quality measurements; market share; patient accuity; teaching status, case mix, and scope of services; demonstration of good faith efforts; and additional related credible information.

The QPA 

This benchmark is either supplied by the network based on the median contracted rate, or derived from a database if the median contracted rate is not available. Identifying whether a QPA is from a network or derived from a database would be helpful information for an IDRE.  However, the rules do not identify the QPA as the primary factor, and the rules expressly do not require an exploration of the exact calculation or methodology as part of a negotiation or dispute.  A short and simple statement about the QPA source and calculation could avoid a situation where a QPA could be put on trial rather than the main issue: whether or not the payment is reasonable.

The Level of Training, Experience, and Quality Measurements 

Facility quality benchmarks are publicly available through the Hospital Value Based Payment System Data, which is arguably published for use in this kind of analysis. Further, the Merit Based Incentive Payment System data is also available for analysis of professional service providers.  Some services (like durable medical equipment sold in emergency situations) would not rely on training or experience of the provider, which might be worth noting if those are a large portion of a surprise bill.

Market Share 

The most common available data for this factor is a provider directory, such as the Hospital General Information published by Medicare. Directories such as this would allow an analysis of the ownership percentages in the area and whether there is meaningful competition, or whether the market power in the area allows a single entity to dictate price.

Patient Accuity 

One method to identify the acuity of the patient is the score assigned to a specific diagnosis or procedure for its complexity and resource use, such as the Diagnosis Related Group Relative Weight information published by Medicare.

Teaching Status, Case Mix, and Scope of Services 

Drawing from the individual case/acuity scores in patient acuity, a case mix index of the provider’s typical or historical services would help identify whether a specific case is an outlier for the provider. If the case is not an outlier, it would ,  not demand unique payment accommodations.

Demonstration of Good Faith Efforts 

The open negotiation period and related communications create an opportunity to document good faith. Also, if a party has access to past attempts to reach a network agreement, this data may be important as well. It would not be surprising if this factor tied in directly with market share to show that an entity with control over the market would not respond to any reasonable requests for compromise.

Additional Related Credible Information 

Specific cases may hinge on information that does not fit directly in the above categories. For instance, an article or interview that contradicts other pricing evidence, or an example of a medical device available online for a much lower or higher cost directly from the manufacturer could affect negotiations and dispute resolution when contract rates are in conflict.

Early Negotiation Strategies and Responses.

While many parties are using the Open Negotiations process to efficiently resolve disputes, two suspect approaches to Open Negotiations that might threaten efficiency have surfaced in the short time since the process has been in place: Open Negotiations as pretext and Open Negotiations as discovery.

Open Negotiations as Pretext. 

If a party does not include all of the required information on an Open Negotiation Notice, sends only one email to a generic inbox without follow up, and then files for IDR as soon as the time has passed, this is strong evidence that the communication is a pretext to pull the other party into a dispute without a meaningful conversation. An effective response to this strategy is to identify that the Open Negotiations Notice is incomplete, so the process has not started, and any attempt to file for IDR will be promptly disputed as untimely.  Further, even if the Open Negotiation Notice is sufficient, bad faith negotiations could arguably be a viable reason to request an extension of time (available for reasons except payment) when a dispute is filed, and as credible evidence as to why the non-initiating party’s offer should be considered in a dispute.

Open Negotiations as Discovery.

When a negotiating party stalls negotiations with demands for very specific evidence about the variables, algorithms, and sources for a QPA payment, they may be trying to use the Open Negotiations process as a discovery process rather than to resolve the claim at issue in good faith.  This strategy, and the laundry list of “interrogatories” included in these letters give the impression that the origins of a QPA are on trial, or will be on trial.  An effective response to this strategy is to provide a short statement that the QPA was “provided by the network” or “derived from a database” and, state an intent to negotiate in good faith, evidenced by responding to communications, presenting offers, and identifying a credible basis for those offers;  identify that the IDR process specifically does not require the IDRE to consider the calculation of the QPA, and the QPA is not on trial; and  warn that repeated demands for extensive information that is not to be considered in IDR is evidence of bad faith and an attempt to derail any meaningful negotiations.


From the initial payment to a settlement or final determination, a properly executed Open Negotiation strategy will likely resolve claims much faster than in the nebulous days of balance bill defense and confusing collection tactics.  The three most important strategies to adopt are:  a prompt response upon receipt of an Open Negotiation Notice, evidence packed communication in negotiations, and demonstrated, documented evidence of good faith.

The Newest Fiduciary Duty: Protecting Participants From Themselves

By: Jon Jablon, Esq.


In the recent case of Hughes v. Northwestern University, the US Supreme Court solidified some law that many feel is a misstep when applied broadly to fiduciary duties. Although regarding 401(k) plans, this case has potentially broad implications for any plans governed by the Employee Retirement Income Security Act, or ERISA.

The Old Way of Thinking

The industry at large tends to conceptualize fiduciary duties a bit nebulously, especially in the context of what benefits are offered by a given health plan. In general, although there are a few federal laws that tend to require that certain benefits be offered and under what circumstances, plan sponsors have enjoyed a great deal of freedom to offer any combination of benefits they see fit. Pension plans are subject to some different regulation given the different subject matter, but they are mostly in the same boat, especially when it comes to rules regarding plan administration under ERISA: pension plan sponsors are given a wide latitude to decide which investment options should be made available to their plan participants.

The plan administrator is charged with administering the benefits laid out in the applicable plan document, and ERISA plan administrators are subject to some strict burdens, which sometimes intersect with the plan sponsor’s basic framework for the plan.  The plan administrator is not necessarily permitted to administer the plan exactly as written, though, which creates a very odd distinction between the employer’s role as the plan sponsor and the employer’s (or a third party’s) simultaneous role as the plan administrator.

With Hughes, the Supreme Court has handed down some additional clarification on how exactly plan administrators can satisfy, or perhaps more relevantly, fail to satisfy, their considerable duties.

The New Way of Thinking

To summarize this case, some 401(k) plan participants sued the Plan Administrator, alleging that the aggrieved plan participants had made poor investments, and that the Plan Administrator should not have allowed that to happen.

The Seventh Circuit Court of Appeals disagreed with that logic, opining that the participants were given all available information and made their own choices, and it is not the Plan Administrator’s responsibility to curate 401(k) plan participants’ investments. According to the appeals court, the participants could have made better investments; they just didn’t.

The US Supreme Court, however, unanimously disagreed, indicating that – among other things – “even…where participants choose their investments, plan fiduciaries are required to conduct their own independent evaluation to determine which investments may be prudently included in the plan’s menu of options. If the fiduciaries fail to remove an imprudent investment from the plan within a reasonable time, they breach their duty.”

In other words, although plan administrators can certainly give plan participants freedom of choice in their investment options, the plan administrator must ensure that those investment options are all good options. The Supreme Court imposed a fiduciary responsibility to protect plan participants from themselves, holding that the existence of “bad” options is not excused even by the prevalence of “good” options.

The Court’s opinion may seem confined to the pension plan space, but this case interprets the fiduciary duties imposed by ERISA, which of course apply to self-funded healthcare plans as well.

Scope of Benefits

Take, for instance, a section 125 cafeteria plan that offers a cash-in-lieu-of-benefits option, a traditional and robust health plan, a high deductible health plan with qualified HSA, and a preventive-only health plan. Intuitively, the practical result is that the Plan Administrator can compliantly offer three competing options, since participants choose to pay (or receive) a certain amount of money in exchange for benefits (or no benefits). That is a matter of participant choice, and traditionally there has been no question of whether it is appropriate for the plan to offer these options.

But, then again, we might have said the same thing about 401(k) investments.

One could argue that being uninsured is inherently a poor decision, since most individuals will need some sort of medical care at some point. Regardless, consider a situation where a young, healthy, low-risk employee decides that having health insurance is unnecessary, and the employee elects the cash-in-lieu plan option.

To quote the Supreme Court, a fiduciary may have “breached the duty of prudence by failing to properly monitor investments and remove imprudent ones”. Interestingly, the difference between investments and benefits seems inconsequential here, since the defining relevant factors are apparently (1) that plan participants make the choice, and (2) that choice has a financial impact on the chooser.

Admittedly, there are other factors at play in the Hughes case other than the participants’ poor investment decisions. For example, certain investments were offered at a higher, retail-class rate than their institutional-class counterparts, thus costing participants more money than perhaps necessary. The complaint also alleged that the plan fiduciary offered too many investment options, which “thereby caused participant confusion and poor investment decisions”.

The Supreme Court did not elaborate, however, regarding which factors were relevant to this particular allegation, or how many investment options would not have caused undue confusion, since making such specific determinations is not the Supreme Court’s job; with any luck, now that the Supreme Court sent the case back – or “remanded” it – to the lower Court of Appeals with further instructions on how to correct its prior errors, we may eventually get more clear guidance.

It seems a bit irrational to think that a cafeteria plan fiduciary can be faulted for including a plan option that could result in financial detriment to the plan participant, despite being elected by an informed decision – but the Supreme Court has so determined with respect to 401(k) investments.

Reference-Based Pricing

In the industry today, no discussion of health plan practices seems to be complete without some mention of reference-based pricing (or RBP). That’s because there are so many different factors involved in reference-based pricing, and it touches on so many aspects of the industry, making it an excellent example for so many things.

Reference-based pricing – or pricing claims based on Medicare or some other reference other than billed charges – is a practice that is increasingly common, necessitated by the growing feeling among those in the the self-funded industry that most medical bills are exorbitant, arbitrarily marked-up, and somehow immune from ordinary market forces.

Typically, health plans using reference-based pricing models are able to save a great deal of money in claims payments, which results in a lower overall participant contribution – but the primary trade-off is that the lower-than-billed payments provide significantly less protection for affected plan participants. Whenever a non-contracted medical provider is paid less than its full billed charges, the provider may bill the balance to the patient (assuming that the claim in question is not one for which the patient is protected by the No Surprises Act, such as emergency claims, out-of-network air ambulance claims, or certain out-of-network claims rendered at in-network facilities). This bill for the balance – aptly known as a “balance bill” – is a reality of almost all reference-based pricing programs.

Many health plans and their reference-based pricing vendors wisely adopt some way to mitigate balance bills and increase participant security, but there can be situations where balance bills still negatively impact the patient. Health plans can create “safe harbors” for participants with contracts or otherwise finding providers that will not balance bill, but one of the staples of a reference-based pricing model is that participants can choose to visit any providers they want.

Recall that 401(k) plan participants are also able to choose which investments they want. Recall also that the Supreme Court iterated that the fiduciary must ensure that participants are not even able to make poor decisions.

Since balance billing can have deleterious effects on plan participants when not effectively managed by a health plan, an important question is how the duty of prudency, as explained by the Hughes case, might apply to a situation where a health plan has elected to utilize some type of reference-based pricing model.

The Hughes decision tells ERISA-governed plans that their fiduciaries must protect plan participants from their own decisions. If a plan participant has the option to visit a contracted provider but chooses instead to visit a non-contracted provider, the participant may end up subject to a balance bill. In that case, it seems clear that the plan fiduciary has allowed the participant to make what amounts to a poor investment decision: the patient effectively elected to incur a balance bill from its chosen provider, whereas a comparable provider down the street would have been subject to a contracted rate, leaving the patient with no balance.

Digging a bit deeper, perhaps the Hughes precedent would even require a plan fiduciary to remove higher-charging providers from the pool of provider options, effectively offering no benefits for those providers. Literally speaking, if a provider is excluded from benefits altogether, the participant’s cost for the claim is maximized (since the full bill is the participant’s responsibility) – but perhaps including all providers within the class of covered providers increases the number of analogized “investment options”, contributing to the consumer confusion referenced by the plan beneficiaries in Hughes.

The Parallels

The aggrieved plan participants in Hughes identified three primary allegations:

  1. For some investments, there were multiple ways to elect them, some costing more than others for virtually the same result.
  2. Some poor investment options were offered among the better options.
  3. Too many investment options caused consumer confusion.

With the examples provided above – a cafeteria plan and a reference-based pricing model – those three allegations can be extrapolated into the health benefits universe. It would be folly to suggest that the Hughes decision is confined to the pension plan space; the fiduciary duty explained by the Supreme Court in Hughes is an interpretation of existing ERISA law, which is the common denominator of pension plans and health benefit plans alike.

With an increased focus on consumer protection (take, for instance, the recent advent of the No Surprises Act and additional Mental Health Parity and Addiction Equity Act obligations and enforcement), health plans and their fiduciaries should be acutely aware of emerging consumer protection laws that in many ways change the historical application of ERISA.

ERISA is almost 50, but it continues to evolve with the times as much as ever. Who ever said you can’t teach an old dog new tricks?

Ongoing Litigation of Interest to Employer Group Health Plans

By: Corrie Cripps

With COVID-19 temporary coverage mandates, transparency in coverage rules, and implementation of the No Surprises Act (NSA) provisions, the first quarter of 2022 has been a busy one for group health plan sponsors and third party administrators (TPAs). As policy changes and compliance issues continue to evolve this year, there is also a wide variety of court cases to watch, as they will have implications for employer-sponsored health plans.

COVID-19 Testing Payment

The Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) require group health plans to cover the cost of COVID-19 diagnostic testing and related services, but the CARES Act doesn’t specify a reimbursement amount for out-of-network providers. Instead, the law states these items are paid at the negotiated rate, if one exists.  If no negotiated rate exists, the plan will pay the cash price publicly posted on the provider’s website, or such other amount as may be negotiated by the provider and plan. 

As a result, there are lawsuits involving both payers and providers. For example, a Texas medical lab (Diagnostic Affiliates of Northeast Houston) is suing United Healthcare Services, Inc. in federal court alleging that the insurer failed to properly reimburse for COVID-19 testing services (Diagnostic Affiliates of Northeast Houston v. United Healthcare Servs., No. 21-cv-0131 (N.D. TX Jan. 18, 2022)).  From a payer perspective, Premera Blue Cross is suing a COVID testing company (GS Labs), in Western Washington District Court, alleging that the lab attempted to exploit the pandemic through price gouging for its services (Premera Blue Cross v. GS Labs, No. 2:21-cv-01399 (W.D. WA filed Oct. 14, 2021)).

Plan sponsors should monitor these cases and review how payment is processed for out-of-network COVID test claims with their TPAs.

ACA’s Preventive Care Mandate

The Affordable Care Act’s (ACA’s) preventive care mandate (under Section 2713 of the Public Health Service Act) requires non-grandfathered group health plans to cover, without cost-sharing, in-network, certain preventive care services. These services are identified by the US Preventive Services Task Force, the Health Resources and Services Administration, and the Advisory Committee on Immunization Practices.

The entire preventive care mandate is being litigated in a case called Kelley v. Becerra (Kelley v. Becerra, No. 20-cv-00283 (N.D. TX filed July 20, 2020)).  The plaintiffs in Kelley argue that Section 2713 is unconstitutional and unenforceable because it violates the “nondelegation doctrine,” the Appointments Clause, and the Vesting Clause. The plaintiffs are asking the court to declare that all preventive service mandates under Section 2713 are no longer required to be covered. They further argue that some of the recommendations—to cover contraceptives and pre-exposure prophylaxis (PrEP) to prevent HIV—also violate the Religious Freedom Restoration Act (RFRA).

A decision is expected this year and could significantly impact the coverage of preventive services in group health plans.

ACA Section 1557

The US Department of Health & Human Services (HHS) is expected to issue a revised ACA Section 1557 rule this year, which will be the third version of this rule.[1]  ACA Section 1557 is the law’s nondiscrimination provision that prohibits health programs or facilities that receive federal funds from discriminating based on race, color, national origin, age, disability, or sex. There are ongoing legal challenges to the two previous iterations of the rule (from the Obama administration and from the Trump administration). The district court orders for these cases will stay in place unless overturned.

A decision from the US Supreme Court is expected soon in Cummings v. Premier Rehab Keller (Cummings v. Premier Rehab Keller, No. 20-219 (US filed Aug. 21, 2021)). In this case, a physical therapy provider refused to provide Jane Cummings (who is deaf and legally blind) with an ASL interpreter to help treat her chronic back pain. Cummings sued, alleging that the refusal is a form of disability discrimination, and is asking for damages for the emotional distress caused by her experience. The court is deciding whether damages for emotional distress can be awarded under Section 504 of the Rehabilitation Act of 1973 and Section 1557. This will be an important case to watch, as it involves discrimination claims brought under Section 1557 by individuals.

Federal IDR Process of the NSA

The No Surprises Act (NSA) of the Consolidated Appropriations Act, 2021 (CAA) contains extensive provisions intended to protect consumers from surprise medical bills for services provided by nonparticipating providers or facilities.

Many medical providers and facilities take issue with the presumption in the federal independent dispute resolution (IDR) interim final rule (IFR) that the qualifying payment amount (QPA) is the correct reimbursement amount for out-of-network services. Provider groups argue that the law lists many factors that an arbitrator may consider, such as the out-of-network provider’s experience and training, and does not give presumptive weight to the QPA.

On February 23, 2022, a federal judge in Texas struck down a narrow piece of the NSA IFR dealing with the IDR process (Texas Med. Ass’n v. HHS, No. 21-0425 (E.D. Tex. Feb. 23, 2022)). The lawsuit was led by the Texas Medical Association (TMA), which argued that parts of the IDR rule are inconsistent with the NSA and should be invalidated. The judge agreed and vacated these provisions on a nationwide basis. An appeal is expected.

The TMA lawsuit is one of six NSA-related lawsuits filed by health care providers. Plan sponsors should monitor these provider lawsuits, since they could impact the amount health plans must pay out-of-network providers for protected services under the NSA.

The federal agencies have indicated they will issue a final IDR rule by May 2022.

Mental Health Parity

The CAA further enhanced federal mental health parity protections, with an emphasis on compliance regarding non-quantitative treatment limitations (NQTLs) on mental health and substance use disorder (MH/SUD) benefits. As federal enforcement of the Mental Health Parity and Addiction Equity Act (MHPAEA) for employer-sponsored health plans continues to increase, plans should be aware of several class action lawsuits related to plan coverage of MH/SUD benefits.

  • In a class action lawsuit against UMR, Inc., the plaintiffs, who were denied coverage for residential treatment of mental health or substance abuse issues, ask for a declaratory judgment that clinical criteria used by UMR to deny coverage are overly restrictive and breach generally accepted medical care standards (Berceanu v. UMR Inc., No. 3:19-cv-00568 (W.D. WI Dec. 15, 2021)). Further, they seek a determination that the administrator acted in an arbitrary and capricious manner by adopting these guidelines.

  • In a class action lawsuit against United Behavioral Health (UBH), six plaintiffs allege UBH unlawfully denied coverage for medically necessary mental health and substance use disorder treatment (Beach v. United Behavioral Health, No. 3:21-cv-08612 (N.D. CA filed Nov. 4, 2021)). The lawsuit is challenging a UBH coverage policy that allegedly causes UBH to deny coverage for certain services merely because they are provided in a residential treatment setting, even though UBH accepts that the services themselves are medically necessary. 

  • The complaint filed in Deighton v. Aetna Life Insurance by a proposed class of health plan participants allege that Aetna applies disparate limits to residential mental health/substance abuse facilities and rehabilitation amenities, in violation of MHPAEA. (Deighton v. Aetna Life Ins. Co., No. 2:21-cv-07558 (C.D. CA filed Sept. 21, 2021)).

The Department of Labor’s (DOL’s) published enforcement reports suggest that the DOL is continuing to investigate compliance with MHPAEA. To ensure compliance, self-insured health plans should consider conducting periodic claims audits and reviews, and can use the DOL’s self-compliance tools to assist with this.[2]

Dialysis Benefits

Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita, Inc. is a case scheduled for argument before the Supreme Court of the United States on March 1, 2022 (Marietta Mem’l Hosp. Emp. Health Benefit Plan v. DaVita, Inc. (No. 20-1641 (US filed May 21, 2021)).

The case concerns the Medicare Secondary Payer Act (MSPA), which prohibits group health plans from considering a plan participant’s eligibility when the individual has end-stage renal disease (ESRD) and from providing different benefits to these individuals than from other covered participants. The case also involves how much plans must reimburse their members for dialysis treatment costs.

The outcome of this case could have a significant impact on dialysis benefits in employer-sponsored group health plans.


For plans and TPAs, being well-informed on regulatory developments is always of the upmost importance. Due to rapid changes in the regulatory landscape, plan sponsors should review their plan documents as well as their plan administration procedures to ensure they are compliant.

Corrie Cripps is a plan drafter/compliance consultant with The Phia Group.  She specializes in plan document drafting and review, as well as a myriad of compliance matters, notably including those related to the Affordable Care Act.


[1] Department of Health and Human Services, Statement of Regulatory Priorities for Fiscal Year 2022, October 2021,, (last visited February 28, 2022).

[2] Self-Compliance Tool for the Mental Health Parity and Addiction Equity Act (MHPAEA), October 23, 2020,, (last visited February 28, 2022).