Surprise Billing Reform Surprises

Historically, one of the more nettlesome healthcare affordability issues was so-called surprise bills presented to plan beneficiaries when they—often unwittingly—received out-of-network services on an emergency basis or at an in-network provider facility.

The 2020 No Surprises Act (NSA) intended to solve that dilemma by holding health insurance beneficiaries harmless and establishing an independent dispute resolution (IDR) process for healthcare providers and payors who disagree on appropriate compensation for an out-of-network service covered by that law.

The Act has insulated plan beneficiaries from these disputes. But—surprise!—rather than serving as a limited, neutral billing disagreements resolution backstop, IDR has become a costly mechanism that disproportionately benefits providers and shifts expenses to self-insured plans, health insurers, and ultimately, consumers.

As a recent Wall Street Journal editorial examining the program’s failures put it, “Providers won. Insurers and their customers lost. The legislation ended surprise bills but swelled costs for insurers, which are now being passed along in higher premiums.”

A June 2026 Congressional Budget Office (CBO) report concluded similarly that the NSA framework has not resulted in the lower health insurance premiums the agency forecast in 2020 because it incorrectly assessed at the time that the law would give providers less incentive to remain out of network.

Indeed, being out of network pays. As The Wall Street Journal editorial noted, providers received nearly $15 billion in NSA payouts in 2025, up from about $4 billion in 2024. As the CBO found, because “providers can systematically secure large payments through the IDR process, they have an incentive to remain out of network or demand higher in-network rates.” One large provider group, for example, recently notified carriers that it would not renew its contracts and would instead operate solely on an out-of-network basis.

Favoring Providers

A few key data points:

• Providers initiate IDR 99.9% of the time.
• Arbitrators rule for providers roughly 90% of the time.
• Five private equity-backed providers bring a disproportionate number of the IDR disputes (62% in Q2 2025), and large providers are being awarded three to nine times the prevailing network rates for their services.
• In 2021, the Biden administration projected that there would be approximately 17,000 NSA IDR disputes per year. In 2025, providers filed over 2.6 million provider claims, and we are on pace for even more in 2026.
• In over 40% of disputes, payors assert that the claims are not eligible for IDR under the statutory framework, but arbitrators almost never dismiss those claims.

There are a few significant drivers of these trends. First, private equity-backed provider groups appear to be (ab)using this process to increase profits. These groups file large volumes of disputes and secure payment awards that far exceed prevailing market rates, winning upward of 500% of the qualifying payment amount (QPA).

(The NSA permits consideration of the QPA, which is defined as the median contracted rate for a specific provider and service type in a specific geographic area and insurance market, calculated separately for individual, small, and large group insurance markets.)

Second, IDR arbitrators certified by the Centers for Medicare & Medicaid Services (CMS) are heavily incentivized to rule on behalf of providers. Their fees, averaging $600 per dispute, are paid by the dispute loser. But the arbitrators are selected by the dispute initiator, almost always the provider, which naturally selects those with a history of ruling in their favor.

The provider community, of course, sees this differently, arguing for the following:

• They win disputes because plans do not make fair offers during the process; if plans offered higher payments at the outset, their offers would be chosen more often in the baseball-styled IDR process under which the arbitrator’s only option is to impose one of the offers presented by the parties as the resolution.
• Despite statutory requirements for insurers to pay within 30 days after an IDR decision, there are widespread delays, partial payments, or no payment whatsoever.
• Insurers are relying on CMS technical guidance intended for rare circumstances to broadly revisit previously settled payment determinations in order to withhold payments to providers.

We also have been told, anecdotally, that third-party administrators often do not participate in the IDR process at all, effectively generating default judgments for the participating providers.

In May, the Departments of Health and Human Services, Labor, and Treasury, along with the Office of Personnel Management, finalized the Federal Independent Dispute Resolution Operations rule in an effort to make the IDR process more efficient and transparent by streamlining communications (specifying additional information sharing between the parties and standardized coding requirements, for example), clarifying timelines (including dictating a response to an initial notice within 15 days), and reducing administrative costs from $115 to $15 per party per dispute. Many fear that the cost reduction will only incentivize more dispute filings, and nothing in the rule is viewed as potentially solving the current provider/payor imbalance.

In contrast, outcomes are significantly different in states with analogous surprise billing arbitration processes. For example, awards are more in line with prevailing market pricing norms in California, Colorado, New Jersey, Virginia, and Washington, where providers win closer to 50% of the time. Today, 21 states have such processes in place; six of those—Georgia, Maine, Nevada, New Jersey, Virginia, and Washington— allow self-insured plans to opt into their system in lieu of using the federal NSA process.

Federal Reform

The Council is exploring potential NSA framework reforms, such as:

• Amend the process to produce reasonable, negotiated awards.
  • Eliminate the baseball-style arbitration model that forces arbitrators to choose between the sides’ offers and free them to negotiate compromises.
  • Define the QPA, or an alternative, in statute. The QPA is a key quantitative factor, but its integrity has been called into question.
  • Put more emphasis on quantitative factors. The NSA directs arbitrators to consider multiple factors, including the QPA, in settling disputes. But many of these are qualitative and arguably favor providers (e.g., experience, training, and quality of outcomes of the provider). In contrast, some states, including New Jersey, California, and Virginia, emphasize more quantitative measures, such as consideration of in-network rates or standard charges for comparable services.
• Impose more “process governors” to disincentivize or minimize high-volume churn and IDR abuse.
  • Establish minimum monetary thresholds to limit small-dollar claims, as some states have done. New Jersey, for example, allows arbitration only if there is at least a $1,000 difference between the final party offers.
  • Add stronger guardrails to stop serial filers. The NSA prohibits similar disputes between the same parties during a 30-day cooling-off period, but Virginia fully disallows arbitration if it rises to level of a “general business practice.”
  • Disallow claims filed by providers that failed to obtain requisite preauthorization from plans or provide statutorily required notices to patients of their potential exposure to out-of-network charges. Some providers are, allegedly, not adhering to these requirements to force a bill into the NSA process.
• Regulate the arbitrators.
  • Allow appeals challenges for jurisdictional questions (is the claim IDR eligible?) and for whether arbitrators considered the appropriate factors.
  • Revise cost incentive structures to split the arbitration costs between the parties, as some states dictate, rather than the current NSA losing party pays rule.
  • Institute neutral arbitrator selection to eliminate provider forum shopping.
  • Audit arbitrators to ensure they are adhering to the IDR requirements.

State Options

The Council also is exploring expanding the list of states with their own resolution frameworks and attempting to improve existing state models. For example:

• Seek a self-insured plan opt-in option in states such as California and Colorado where it currently is not available.
• Make it easier for plans to opt-in in those states like Virginia and Washington that already offer that option.
• Reform the frameworks in large-market states like Texas and New York that are not economically balanced.

The best surprise is no surprise. The Council is all in.