5th Circuit Strikes Down Federal Out-of-Network Payment Formula Used by Insurers
The ruling forces a recalculation of how commercial insurers benchmark physician payments, with direct consequences for federal reimbursement policy and ongoing litigation involving the No...
The full 17-judge panel of the 5th U.S. Circuit Court of Appeals issued a ruling in August 2026 in Texas Medical Association v. HHS, striking down the federal government's formula governing how health insurers calculate out-of-network payment benchmarks, according to reporting by the Washington Examiner citing the court's decision. The court found that commercial carriers had been using what it characterized as unlawful placeholder prices, referred to in the ruling as 'ghost rates,' for services physicians do not actually perform, and that those rates were being factored into benchmark calculations used to determine physician compensation under federal rules.
The Texas Medical Association, which brought the case against the Department of Health and Human Services, argued that the ghost rate methodology systematically reduced the qualifying payment amounts used as benchmarks under the No Surprises Act, the 2021 federal law designed to protect patients from unexpected out-of-network bills. The 5th Circuit's en banc ruling represents a full-court reversal, meaning the entire active panel, not a three-judge panel, issued the decision, a procedural posture that typically signals higher legal significance and reduces the likelihood of further intra-circuit challenge.
The No Surprises Act, enacted as part of the Consolidated Appropriations Act of 2021 (Public Law 116-260) and signed December 27, 2020, established an independent dispute resolution process for out-of-network billing disputes between providers and insurers. Rulemaking by HHS, the Department of Labor, and the Department of the Treasury implementing that law has been the subject of multiple federal court challenges since 2022, with earlier 5th Circuit panels previously vacating portions of the implementing regulations. Court records in Texas Medical Association v. HHS are publicly available through the U.S. Court of Appeals for the 5th Circuit's PACER docket.
The financial scope of the ghost rate dispute is not fully quantified in available public records. The Washington Examiner's reporting references that insurers 'made billions' through the practice, but a precise dollar figure sourced to a government audit, actuarial report, or court filing has not been independently confirmed by The Congressional Times. A Government Accountability Office report or an HHS Office of Inspector General audit would be the appropriate public document to establish a verified aggregate figure.
What remains unknown is how quickly HHS will publish revised rulemaking in response to the ruling and whether the Department of Justice will seek Supreme Court review. A formal response timeline would appear in the Federal Register or in a DOJ filing on the PACER docket. Physician groups and insurance industry trade associations have not yet submitted public comment in a new rulemaking proceeding, as none has been formally opened as of the date of this report, August 18, 2026.