In a significant en banc decision issued on August 11, 2026, the U.S. Court of Appeals for the Fifth Circuit largely affirmed a district court ruling that invalidated key portions of the federal agencies’ rules governing the calculation of the “qualifying payment amount” (QPA) under the No Surprises Act (NSA). The court’s decision has major implications for how insurers calculate the benchmark rate at the center of the NSA’s independent dispute resolution (IDR) process.

Regulatory Background

The NSA, which took effect January 1, 2022, was designed to protect patients from unexpected out-of-network medical bills by requiring insurers and providers to resolve payment disputes through an IDR process rather than billing patients the full balance. The linchpin of that process is the QPA, defined by statute as the median of the “contracted rates” recognized by an insurer as the “total maximum payment” for a given item or service, sorted by provider specialty and geographic region.

In July 2021, the Departments of Health and Human Services, Labor, and Treasury (the agencies) jointly promulgated an interim-final rule (the July Rule) establishing the methodology for calculating the QPA. The July Rule was issued without notice and comment, and it directed insurers to include in the QPA every rate appearing on the face of their contracts with providers, regardless of whether the provider had ever actually furnished that service. When problems surfaced, the agencies attempted a fix through an informal “Frequently Asked Questions” (FAQs) document in August 2022, which directed insurers to exclude $0 rates from the QPA but left all other non-negotiated rates intact.

The plaintiffs, a coalition of medical associations and providers led by the Texas Medical Association, challenged three specific aspects of the agencies’ rulemaking as contrary to the NSA and arbitrary and capricious. The district court ruled for the plaintiffs. A Fifth Circuit panel reversed, but the en banc court granted rehearing and vacated the panel opinion.

The En Banc Court’s Rulings

Ghost Rates (Issue 1). The en banc majority held that the July Rule was unlawful insofar as it directed insurers to include “ghost rates,” contracted rates for services that a provider does not actually furnish, in the QPA calculation. The NSA limits the QPA to rates for services “provided by a provider” and “furnished” in the relevant geographic region. The court found that rates appearing in default fee schedules for services a provider never performs, and in some cases was never equipped to perform, plainly fall outside that statutory definition. The court further held that the agencies’ attempt to fix the problem by excluding only $0 ghost rates through the FAQs was insufficient: if a $0 rate must be excluded because the provider obviously did not negotiate it, the same logic applies to any non-negotiated below-market rate (e.g., $1). The resulting QPAs were so artificially deflated, the court noted, that providers prevailed in over 80% of IDR arbitrations and arbitrators selected rates above the QPA in 85% of cases.

Bonus and Incentive Payments (Issue 2). The majority also ruled in favor of plaintiffs on bonus and incentive payments. The NSA requires the QPA to reflect the “total maximum payment” an insurer is contracted to pay, and the court held that the word “total” means exactly that. By excluding “risk sharing, bonus, penalty, or other incentive-based or retrospective payments” from the QPA, the July Rule impermissibly understated the full contracted payment amounts, further deflating the benchmark rate.

Single-Case Agreements — Air Ambulances (Issue 3). The court sided with the agencies on the third issue, holding that one-off, single-case agreements, prevalent in the air ambulance industry, are not “contracted rates” within the meaning of the NSA and may properly be excluded from the QPA. The court reasoned that the word “rate” implies a per-unit price applicable across multiple transactions, not a one-time emergency billing arrangement. Moreover, such agreements arise outside the terms of an insurer’s general health plan and involve out-of-network providers charging precisely the kind of surprise rates the NSA was enacted to curb. Including such rates in the QPA benchmark, the court explained, would be contrary to the statute’s purpose of approximating median in-network market rates.

Remedy. The court affirmed vacatur of the unlawful portions of the July Rule and FAQs as the default remedy under the Administrative Procedure Act (APA), rejecting the agencies’ argument that the scale of disruption should counsel against it. The court noted that agencies may exercise enforcement discretion to allow continued use of existing QPAs while new ones are calculated, as they have been doing throughout this litigation, preventing immediate disruption to patients’ balance-billing protections.

Notable Concurrences and Dissent

Judge Ho wrote separately to question whether universal vacatur of agency rules is constitutionally permissible under Article III, though he acknowledged current circuit precedent supports vacatur and concurred on that basis. Judge Oldham concurred only in part, arguing the case should have been resolved on the narrower ground that the FAQs were procedurally invalid because they purported to amend a formal legislative rule without undergoing the notice-and-comment rulemaking required by the APA. Judge Haynes, joined by five colleagues, dissented from the rulings on ghost rates and incentive payments, concluding that the July Rule reasonably interpreted the NSA’s “provided by a provider” language to require only that a service be made available, not that claims have actually been submitted, and that Congress expressly delegated to the agencies the discretion to handle incentive-based payments in the QPA methodology.

Our Take

This decision will require the agencies to recalculate QPAs using only rates for services that providers actually furnish, and to incorporate the full value of bonus and incentive arrangements into those calculations. Both changes are expected to raise QPAs significantly. At the same time, the court’s ruling that single-case air ambulance agreements may be excluded from the QPA preserves an important agency judgment that out-of-network emergency billing rates should not set the benchmark for in-network market pricing.

Troutman Pepper Locke will continue monitoring developments in this area and providing updates as the agencies respond to the court’s mandate.