Anthem Sues HaloMD over Alleged No Surprises Act Arbitration Abuse

Jeremy Avila, Raja Sékaran, Alexis Boaz, and Jean-Claude Velasquez, attorneys in the firm’s Health Care & Life Sciences practice, co-authored an article in the American Health Law Association, titled “Anthem Sues HaloMD over Alleged No Surprises Act Arbitration Abuse.” (Read the full version – subscription required.)

 Following is an excerpt:

On July 7, 2025, Anthem Blue Cross Life and Health Insurance Company and Anthem Blue Cross (collectively, Anthem) sued HaloMD (Halo), Sound Physician Enterprises (SPE), and their related entities in the U.S. District Court for the Central District of California (Anthem Litigation). Anthem has sued Halo in federal districts in various regions of the country.[1] This Briefing focuses on the California case.

Anthem asserted violations under the Racketeer Influenced and Corruption Organizations Act (RICO), the Employee Retirement Income Security Act (ERISA), negligent and fraudulent misrepresentation and related state law claims arising from defendants' alleged exploitation of the federal Independent Dispute Resolution (IDR) arbitration process under the federal No Surprises Act (NSA). Anthem seeks damages, injunctive relief, and vacatur of the arbitration awards. As of this writing, briefing on defendants' motion to dismiss is ongoing, and several organizations including the California Medical Association have filed amicus curiae briefs expressing their views and interest in the dispute.

Overview of the No Surprises Act and the IDR Process- Genesis of the NSA and IDR Process

Congress enacted the federal NSA in December 2020, to prohibit certain out-of-network providers and emergency facilities from "balance billing" patients-i.e., charging for outstanding amounts after reimbursement-for certain services and to create a payment framework for these out-of-network services. Prior to the NSA, several states had already implemented state-level balance billing protection laws. However, such state laws varied significantly in scope and typically applied only to group and individual health insurance issued by health insurance issuers subject to state-level regulation, and therefore excluding the substantial population of individuals with employer-sponsored group plan coverage. This landscape prompted stakeholder engagement and efforts to implement a comprehensive, nationwide framework of balance-billing protections. This led to the NSA and its protections, which are triggered whenever the items and services at issue, the patient's type of coverage, and the applicable care setting and/or provider satisfy the statute's threshold criteria.

Specifically, the NSA prohibits emergency providers, emergency facilities (including hospital-based and free-standing emergency departments), and air ambulance services providers from balance billing patients covered by group or individual health insurance or a group health plan for emergency services and post-stabilization services. The NSA further prohibits out-of-network providers from "surprise billing" such patients for out-of-network services furnished in connection with the patient's visit for non-emergency services at an in-network hospital, hospital outpatient department, ambulatory surgical center, or critical access hospital unless the patient properly waived their protections under the NSA's notice-and-consent requirements. In such circumstances, the NSA effectively holds such patients harmless for amounts above the patient's applicable in-network cost-sharing amount-leaving the insurer and out-of-network provider or emergency facility to handle the remaining unpaid amounts.

Establishing an out-of-network payment mechanism-a key point of contention that nearly led to the failure of Congress' legislative efforts-became and remains one of the more controversial aspects of the IDR process. While the aforementioned state-level surprise billing laws implemented various mechanisms to determine the correct out-of-network payment amount (such as benchmarking, arbitration, and other methods or combinations thereof), Congress ultimately compromised by agreeing to establish a two-part solution: an out-of-network payment process that involved an initial payment and IDR process.

In theory, under the NSA's out-of-network payment mechanism, once the out-of-network provider or emergency facility (collectively, the provider) submits a claim subject to the NSA, the insurer then issues an initial payment to the provider. While the NSA does not specify a minimum initial payment amount, the law allows out-of-network providers who disagree with the initial payment amount to initiate negotiations with the insurer to attempt to agree upon the amount. If the 30-day negotiation period ends without settlement and the claims are in fact eligible for IDR, either party can initiate the IDR process whereby a neutral entity selected by both parties determines which of the parties' offered payment amounts constitutes the correct out-of-network payment for the items and services provided.

The IDR entity must make this determination based on factors enumerated in the NSA and information obtained from both parties through the IDR process. Thus, under Congress' intended out-of-network payment mechanism, the final out-of-network payment amount for claims subject to the NSA would be either the amount agreed upon by both parties or the amount determined through the IDR process. …

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