A system designed to protect patients from surprise medical bills has turned into the worst kind of surprise for employers: Higher healthcare costs.
The No Surprises Act is designed to protect patients from big bills when they go to the hospital and see a provider they didn’t choose or who has stayed out-of-network. Problems emerge when providers and health insurers can’t agree on a payment amount and use a dispute resolution process. That process is being exploited, and the damage is often showing up in higher costs for health insurance that employers offer to their employees.
What businesses need to know
Consider one instance involving a dispute over a diagnostic procedure that usually costs $2,660. After arbitration, it became a $333,000 payout for a provider. Or an ER consultation that cost $1,195 for in-network providers but later became an astonishing $250,000 award by the arbiter. Or a spine CT scan that usually costs $1,500 for in-network providers but resulted in a $37,000 payment — more than twice what the provider originally billed, which was already outrageous.
These aren’t isolated cases. On average, this independent dispute resolution (IDR) process resulted in payments 450% above contracted rates,i with many instances far exceeding that amount.
Here’s what’s behind those higher costs:
A small number of private equity-backed providers are flooding the system with disputes. Federal regulators expected the process to be used sparingly, about 17,000 cases a year,ii but instead it created a new revenue generator for private equity: 2.6 million disputes were filed last year — compared to 1.4 million in 2024.iii Use of the system is expanding at an alarming rate.
The tidal wave has included a significant volume of cases that never should have been submitted. Nearly 40% of disputes initiated in 2024 involved claims ineligible under the law, according to a survey from BCBSA and AHIP. Even more outrageous, half of those ineligible cases still resulted in payment awards beyond what insurers already paid, creating waste and increasing employer costs without benefiting patients.
In one case, a provider filed a dispute over a Medicare-covered claim, ineligible under the No Surprises Act. But even after it was flagged, the provider was still awarded $2,400.
Who pays the price
These inflated amounts put pressure on premiums and out-of-pocket costs for employees and employers.
The broken dispute resolution system added at least $5 billion to overall costs through 2024, when use of the process was still somewhat limited. At a time when we need to do everything we can to reduce costs, the growing abuse of IDR is leading to higher plan costs and employee contributions.
For self‑funded employers, those higher costs come straight out of benefit budgets, forcing difficult tradeoffs around premiums, benefits, cost sharing, wages and hiring. Employers are trying to shield workers from these increases, but with continued abuse of IDR, there’s only so much they can absorb.
What employers can do
Employers play an important role in helping policymakers understand the impact of arbitration abuse on their businesses and their employees. Meaningful change requires broad action. Employers and plan sponsors can advocate for reform by:
- Sharing real-world examples of how arbitration abuse raises costs for employees and businesses.
- Engaging with policymakers to reinforce the importance of strong oversight and accountability so the system works as intended.
- Supporting efforts at the federal and state levels that keep ineligible claims out of arbitration from the beginning.
Employers work every day to deliver affordable, sustainable health benefits for their organizations. Employer-provided coverage is the foundation of our health insurance system and needs to be protected from abuse. A process that allows a handful of bad actors to exploit arbitration undermines those efforts and ultimately costs working families more.
[i] https://www.ahip.org/resources/new-ahip-bcbsa-survey-finds-providers-are-flooding-idr-system-with-ineligible-disputes
[ii] https://www.federalregister.gov/documents/2021/10/07/2021-21441/requirements-related-to-surprise-billing-part-ii
[iii] https://www.cms.gov/nosurprises/policies-and-resources/reports