Fifth Circuit Rules That the No Surprises Act Does Not Delegate to Executive Branch the Authority to Set Substantive Standards for Independent Arbitrators

In Texas Med. Ass'n v. U.S. Dep't of Health & Human Servs., 2024 U.S. App. LEXIS 19431, , the Fifth Circuit held that the Departments of Health and Human Services, Labor, and the Treasury (“Tri-Agencies” or “Departments”), exceeded their authority by infringing on the discretion of the independent arbitrators appointed to resolve certain out-of-network insurance reimbursement disputes under the No Surprises Act. The Fifth Circuit reasoned that it is the arbitrator, not the Executive Branch, who “shall consider” how to balance the factors under the statute. See 42 U.S.C. § 300gg-111(c)(5)(C)(i). The Fifth Circuit found that by “taking this discretion away from the Departments and giving it to the arbitrator, Congress created an ‘outer statutory boundary’ beyond which the Departments were not authorized to stray.” The Court affirmed the District Court for the Eastern District of Texas’s universal vacatur order pertaining to certain provisions of August 2022 Final Rule. 

Importantly, the Tri-Agencies issued IDR Guidance for Disputing Parties in December 2023 that deferred to the District Court universal vacatur order. Consequently, the Fifth Circuit decision does not upset the IDR apple cart. It is not known whether the Tri-Agencies will seek reconsideration of the Fifth Circuit’s opinion or petition the U.S. Supreme Court for certiorari.