District Court Confirms Application of Federal Arbitration Act to No Surprises Act Arbitrations

Epstein Becker & Green

Epstein Becker & Green

Recently, a federal judge in New Jersey confirmed an arbitration award in favor of an insurer resulting from the independent dispute resolution (“IDR”) process created under the No Surprises Act. This is one of the first times an IDR award has been confirmed by the courts and demonstrates that the FAA’s presumption in favor of arbitration awards will apply to IDR determinations even without reasoned awards.

GPS, a medical practice in New Jersey, performed emergency plastic surgery on a patient in 2022. Following the procedure, GPS submitted a bill to Horizon, the patient’s insurance carrier, for approximately $27,556. In response, Horizon remitted payment of $430.84. Horizon’s payment was subject to the No Surprises Act, a 2020 law, which addresses “surprise medical bills.” In addition to limiting the amount an insured patient will pay for emergency services furnished by an out-of-network provider, the No Surprises Act also established an arbitration process to resolve payment disputes between insurers and out-of-network providers.[1]

Following that process, after the required negotiations under the No Surprises Act, the parties submitted their claim to the IDR entity. The arbitrator selected Horizon’s proposed compensation as the most “fair and reasonable” amount and issued a short arbitration decision noting that it selected the payment amount submitted by Horizon “[a]fter reviewing all correspondence from both parties.” GPS then moved in federal court to vacate the arbitration award. Relying on the “skimpy” decision, GPS argued that the arbitrator failed to adequately consider relevant information and failed to address the issues required by the No Surprises Act.

Judge Kevin McNulty disagreed. Analyzing the decision under Section 10(a) of the Federal Arbitration Act, 9 U.S.C. § 10, Judge McNulty held, “the brevity of [the arbitrator’s] decision, alone, does not satisfy GPS’s burden of proving that the arbitration award at issue must be vacated.” He further explained that while both arbitration law and the No Surprises Act require consideration of relevant factors, “arbitrators are under no obligation to give their reasons for an award.”

Judge McNulty also noted that to invalidate an award, a party to the arbitration must prove “one of the essential flaws in the arbitration process” required under the Federal Arbitration Act, 9 U.S.C. § 10(a), which GPS failed to show. Horizon cross-moved to confirm the arbitration award and Judge McNulty found the award “‘must’ be confirmed,” holding the No Surprises Act “provides that any determination of the IDR entity is binding on the parties and is only subject to judicial review under the circumstances described in Section 10(a) of the Federal Arbitration Act, . . . . That language indicates the decision is to be ‘final and binding,’ and gives the court the authority to confirm the award.”

Although the specifics of the No Surprises Act’s implementation have been heavily litigated[2] this appears to be the first judicial confirmation of an NSA award. While this is a welcome outcome for prevailing parties in IDR arbitrations, the lack of a self-executing remedy to enforce payment remains a problem because the expense of litigating award confirmations can easily exceed the eventual recovery.

[1]  We have previously discussed the IDR process here.

[2] We have discussed some of the lawsuits here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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