No Surprises Act Arbitration System Drives Up Health Costs

Key points

• The No Surprises Act's arbitration system allows providers to win payments many times higher than typical benchmark rates.
• Arbitrators side with providers in over 85% of cases, leading to inflated costs for employer-sponsored health plans.
• A new industry of intermediaries, like HaloMD, files cases on behalf of providers, taking a cut of the inflated payouts.
• Congressman Frank Pallone plans to introduce legislation to eliminate the arbitration process and mandate in-network rates for out-of-network providers.
• The volume of arbitration disputes has far exceeded federal expectations, with 1.2 million new disputes submitted in the first half of 2025.

Background

The No Surprises Act, enacted in 2020 and effective in 2022, was designed to protect patients from unexpected medical bills. However, recent reports indicate that the law's arbitration provision has created unintended consequences, including rising healthcare costs and a new cottage industry of dispute resolution firms. This follows earlier concerns from large employers and Marsh surveys projecting significant increases in employer health-plan costs, partly driven by the 2022 federal dispute-resolution process.

How outlets are covering it

CBS News highlights the financial burden on consumers through higher premiums and reduced benefits, citing specific cases of providers receiving awards 170 to 280 times the benchmark rates. The Conference Board and RamaOnHealthcare (4sight Health) echo the concern that the arbitration system is driving inflation and creating a costly new problem. Yahoo's coverage aligns with the narrative that Congress's attempt to fix surprise costs has created another issue. Providers and intermediaries, such as HaloMD, argue that insurers are responsible for driving up costs by submitting low or no offers, and that benchmark rates are artificially low. Private equity firms are also blamed by some for driving arbitration cases through the acquisition of medical practices.

Why it matters

The arbitration system is shifting costs to employer-sponsored health plans, potentially leading to higher premiums or reduced benefits for workers. The inflated costs are also driving up overall healthcare inflation, affecting the broader economy and consumer spending. The proposed reforms by Congress could significantly change how out-of-network providers are paid, impacting the healthcare industry and patient costs.

What to watch

Congressman Frank Pallone plans to introduce legislation this week to eliminate the arbitration process and mandate in-network rates for out-of-network providers. The legislation also aims to exclude 'ghost rates' from benchmark calculations. The outcome of these reforms will determine the future of the No Surprises Act and its impact on healthcare costs.