Surprise Billing Legislation Had Unintended Consequences

The No Surprises Act turned out to contain an unpleasant surprise for employers—an arbitration process that has added billions in excess healthcare costs. Now, lawmakers are seeking to address the problem by preventing providers from obtaining outsized payments in disputes over out-of-network services (Healthcare Dive).

The background: The No Surprises Act, which went into effect in 2022, sought to protect consumers from surprise medical bills when they unknowingly received care from out-of-network providers at in-network facilities, such as an anesthesiologist during a surgery.

• However, the law has largely favored providers in its newly established arbitration process, called Individual Dispute Resolutions, to resolve payment disputes. In 2025, providers initiated 2.6 million new disputes, up 77% from 2024 (Health Affairs).

Why it matters: This has left employers holding the bill. Employer-sponsored health plans are often forced to absorb higher costs while private equity-backed providers take advantage of an oversight—the arbitrator cannot negotiate a middle-ground price.

• According to recent analysis, “providers also continue to overwhelmingly prevail in the IDR process, winning about 85% of all IDR disputes in 2025 with a median award of more than four times the qualifying payment amount (QPA), which is defined as the median contracted in-network rate for care,” reported Health Affairs.

The price tag: The arbitration process has resulted in an estimated $22 billion in additional healthcare costs since 2022, according to researchers at Georgetown University.

• Providers can receive payments that far exceed what insurers would otherwise pay for the same services. This includes $15.6 billion in payment amounts awarded by IDR entities that exceed in-network rates.
• “In one instance, a plastic surgeon was awarded more than $400,000 to perform a breast reduction, a procedure the insurer said it had previously paid the doctor between $6,000 and $30,000 to perform,” a CBS News analysis found.

NAM in action: The NAM policy team recognizes the rising financial impact of IDRs on employers and is engaging with policymakers to work through policy solutions.

• A bill introduced earlier this month by Rep. Frank Pallone (D-NJ) aims to address the unintended consequences of the arbitration process. For example, the bill directs insurers to pay out-of-network providers a set rate based on an insurer’s median contracted rate, adjusted for inflation.