The rigged fight over medical bills costs you more

The No Surprises Act was meant to protect patients from unexpected medical bills. But its system to settle payment disagreements between hospitals and insurers—arbitration—is being abused, driving up costs for patients and employers.

The arbitration process was intended to be used sparingly when insurers and providers couldn’t agree on a fair payment. Data shows the process has turned into a jackpot for providers.

In one recent case, a Blue Cross Blue Shield (BCBS) company went through arbitration where the provider who originally billed just $30 was inexplicably awarded $6,529, with no justification for the drastic hike.

On average in 2024, arbitration helped providers secure payments 4 times higher than median in-network rates. 

These inflated awards ripple through the system, raising premiums and out-of-pocket costs for everyone. The process has added at least $5 billion in wasteful health care spending in just two years, a new Health Affairs analysis finds, raising overall costs instead of protecting patients and employers.

According to data from the Centers for Medicare & Medicaid Services (CMS), 99% of disputes are initiated by doctors and hospitals. And it is easy to see why: Arbitration decisions overwhelmingly favor care providers.

Why the system is broken

The structure of the arbitration process does not include safeguards against inflated charges and does not discourage overuse of arbitration. While providers know they’re likely to win—and win big—that means patients and businesses lose. Providers opt out of networks and flood the system with disputes or require increases to stay in-network. Many even submit ineligible or incomplete claims, knowing the process lacks meaningful oversight. This raises costs for everyone.

It’s a business model. Some companies exist solely to extract higher provider payments through arbitration. Over 60 percent of resolved cases in 2024 came from just five private equity-backed organizations. Together, over 1.4 million disputes were filed in 2024, far surpassing CMS’s initial estimate of 17,000 annual cases when the arbitration system launched.

One BCBS company received over 600 ineligible disputes in a single month from a single entity, while another saw nearly 750 per day. In one instance, a provider filed arbitration for a Medicare claim, which the insurer flagged as ineligible. Despite this, the provider was still awarded $2,400.

5 policy solutions to fix the flaws

To ensure the No Surprises Act’s works as intended, we need targeted reforms that:

1. Discourage improper filings: Introduce an upfront eligibility fee for initiating parties to reduce ineligible disputes.
2. Increase transparency: Require arbitrators to share submissions and provide detailed rationales as part of the final decisions.
3. Enable determination appeals: Create a formal process for parties to challenge arbitration outcomes before CMS.
4. Monitor arbitrator performance: Implement metrics and penalties for arbitrators that show bias, poor performance or poor compliance.
5. Scrutinize provider behavior: Track patterns of abuse by providers and their vendors to curb manipulation of the system.

These changes would better align incentives and curb abuse by those who are gaming the system. That will help everyone by lowering costs.

The administration must finalize rules governing the arbitration process and implement meaningful oversight. BCBS companies are committed to protecting patients from surprise bills and the systemic cost increases that threaten affordability. It’s time to fix this broken system and restore the promise of the No Surprises Act.