Appeals court strikes down No Surprises Act payment calculation method

The U.S. Court of Appeals for the Fifth Circuit has ruled that the federal government's methodology for calculating the No Surprises Act's qualifying payment amount is partly unlawful. Siding with the Texas Medical Association, the court determined that insurers cannot include non-negotiated 'ghost rates' and must include incentive-based bonuses in the benchmark. While providers celebrate the decision as a step toward fairer pay, insurers warn that the resulting higher arbitration payouts will drive up commercial premiums for patients.

5th Circuit QPA methodology ruling

• ▪The Fifth Circuit Court of Appeals vacated the qualifying payment amount methodology but allowed insurers to use existing metrics temporarily to prevent interruption to the No Surprises Act dispute resolution process.
• ▪The U.S. Court of Appeals for the Fifth Circuit ruled on August 11, 2026, that the federal government's methodology for calculating the No Surprises Act's qualifying payment amount is partly unlawful.

Ghost rates in payment calculations

• ▪The Fifth Circuit Court of Appeals ruled that the qualifying payment amount should not include ghost rates, which are placeholder rates for services that providers do not actually negotiate or furnish.
• ▪A Texas judge ruled in 2023 that including ghost rates in the qualifying payment amount was illegal, a decision the Fifth Circuit Court of Appeals overturned in 2024 before agreeing to readjudicate the case.

Incentive payment inclusion requirements

• ▪The Fifth Circuit Court of Appeals ruled that the qualifying payment amount must include risk-sharing, bonus, penalty, or other incentive-based compensation.
• ▪The Fifth Circuit Court of Appeals ruled that single-case agreements, which are common in air ambulance billing, should be excluded from qualifying payment amount calculations.

Provider arbitration win rates

• ▪Insurers argue that high provider win rates in arbitration show the system is skewed, while doctors contend the elevated payouts reflect artificially low qualifying payment amounts set by insurers.
• ▪Healthcare providers win approximately 85% of surprise billing arbitration cases under the No Surprises Act, with awards exceeding the qualifying payment amount about 87% of the time.

No Surprises Act implementation

• ▪The Texas Medical Association filed a lawsuit in 2022 challenging the federal government's rule for calculating the qualifying payment amount used in No Surprises Act arbitrations.
• ▪The Department of Health and Human Services, the Department of Labor, and the Department of the Treasury promulgated the rules implementing the No Surprises Act in 2021.

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