Insurance companies and healthcare providers are searching for clarity in light of two recent conflicting decisions regarding the enforceability of arbitration awards under the No Surprises Act. A federal court in New Jersey found arbitration awards under the act to be enforceable while another court in Texas did not. Looming over this unsettled law remains the question of whether the act has an enforcement provision. ABA Litigation Section leaders are concerned that the split undermines the purpose of the act and that uncertainty will prevail for the foreseeable future.
Congress enacted the act to shield patients from unexpected costs from out-of-network providers. Typically, uncovered costs from out-of-network care, even in emergency situations, are passed on to the patient. Thus, in an emergency, an insured patient could face unexpected and hefty medical bills for treatment over which they had no choice; e.g., an emergency airlift.
Under the act, patients pay only an amount similar to that which they would pay if the service were provided in-network. The insurer and the healthcare provider settle the outstanding balance without involving the patient.
If the provider and the insurer cannot agree about the payment, the No Surprises Act requires them to arbitrate the dispute. Specifically, each party submits a final dollar figure with their justification for the cost. The arbitrator then applies the statutory factors and chooses one of the proposed numbers, which is binding on both parties.
In limited circumstances, the arbitration award may be overturned. The act incorporates Section 10(a) of the Federal Arbitration Act (FAA), providing that a federal court may vacate an award if the movant can show one of the following: (1) evidence of corruption, fraud or undue means; (2) corruption or evident partiality by the arbitrator; (3) misconduct in refusing to postpone a hearing or to consider material evidence; or (4) where the arbitrator exceeded his or her powers so a mutual, final, and definite award was not made. Notably, the scope of judicial intervention is limited to vacatur without reference to any enforcement process. So, federal courts are split on whether the act gives courts authority to enforce these awards.
In Guardian Flight LLC v. Health Care Service Corporation, the U.S. District Court for the Northern District of Texas heard a dispute between two air ambulance service providers and an insurance company regarding the enforcement of an arbitration award. The court noted that the act did not provide an express provision to enforce arbitration awards unlike the enforcement provision found in the FAA.
While the FAA expressly allows a court to confirm, vacate, or modify arbitration awards, the act neither has its own process to confirm, vacate or modify the award, nor incorporates the FAA’s enforcement procedures. Further, the district court explained that the statute failed to include an implied enforcement mechanism. Implied means of enforcing awards can be established, for example, if the statute included a fee-shifting provision that awards attorney fees to the prevailing party.
Relying upon the Supreme Court decision in Cannon v. University of Chicago, the district court explained that Congress can include indicia in a statute of a private right of action. But since Congress did not provide any language conferring an implied enforcement provision in the act, the district court held that it was powerless to entertain enforcement claims. Accordingly, the District of Northern Texas concluded that Congress did not intend to create an enforcement remedy under the act and limited judicial review to vacating awards.
By contrast, in GPS of New Jersey v. Horizon Blue Cross & Blue Shield, the U.S. District Court for the District of New Jersey found that a final and binding arbitration award may be confirmed if it is not vacated, regardless of what the act fails to incorporate. The court concluded that the existence of a binding and final award “implicitly permits Federal court intervention to compel compliance.”
Litigation Section leaders were baffled by the Texas decision. It is “hard to believe Congress would have a binding arbitration process without a mechanism to enforce an arbitration award,” expressed Seth H. Row, Portland, OR, Co-Chair of the Section’s Insurance Coverage Litigation Committee. The purpose of arbitration under the act is to “streamline a chaotic process [to determine] who gets paid and how much,” explains John B. Mumford, Richmond, VA, Co-Chair of the Section’s Healthcare Disputes & Litigation Committee.
Mumford expressed concern about the inability of providers to enforce arbitration agreements. Even though he was encouraged that the New Jersey court “was willing to entertain the application of the entire FAA,” he cautions that nothing in the decision shows that the court would have applied the entire FAA to enforce an arbitration award.
