A law created to stop patients from receiving surprise bills may be leading to higher costs for those same people.
The No Surprises Act was implemented in 2022 to protect people with employer-sponsored health plans from many types of costly out-of-network billing disputes. The law has delivered on that promise but its baseball-style arbitration system has been unexpectedly overwhelmed with challenges from providers and provider-aligned companies, with all stakeholders asking Congress to pass legislative fixes.
State health plans, unions and insurers such as UnitedHealth Group subsidiary UnitedHealthcare and Elevance Health have warned of the costs borne out by the law’s Independent Dispute Resolution process.
Employers say arbitration awards can add between 1% and 6% to a company’s cost trend, leading to higher costs for workers, according to a report the ERISA Industry Committee published last month. The coalition of large employers derives its name from the Employee Retirement Income Security Act of 1974.
Here’s how employers are impacted by the No Surprises Act landscape.
Where are higher costs seen?
The New York Civil Service Department estimated arbitration to be the largest contributing factor to a nearly 10% premium rate increase for its Empire Plan this year, a spokesperson wrote in an email.
The city of San Antonio, Texas, blamed one emergency clinic provider as the leading culprit for a $40 million budgetary shortfall, City Manager Erik Walsh told local news outlets. The city did not respond to an interview request.
The United Service Workers Union health plan increased premiums by an additional 1.75 percentage points. Taft-Hartley trust 32BJ Health Fund, affiliated with the Service Employees International Union, was forced to pay $37 million on claims, instead of $8 million as expected.
Two UnitedHealth Group insurance subsidiaries in New York attributed a 0.8% increase in healthcare costs to the Independent Dispute Resolution process, according to an analysis of small-group rate filings by the Peterson Center on Healthcare and the health policy research institute KFF.
Elevance Health has cracked down on hospitals making out-of-network referrals to stem rising costs. Self-funded employers bear the responsibility of nearly 90% of arbitration-related costs, the insurer disclosed in December.
That’s because employers enlist their third-party administrators, often owned by insurance carriers, to manage No Surprises Act disputes, but the employers are on the hook when they lose.
Who do employers, insurers and providers blame?
Insurers argue that a small subset of providers filing the bulk of disputes, and the arbitrators that disproportionately rule in their favor, are responsible for excess costs. Georgetown University researchers estimated the law led to $22.4 billion in additional spending through last year.
But providers reject the assumption that the law is increasing healthcare costs, or that they are the root cause.
“We frankly find the claims hard to believe, since the federal [Independent Dispute Resolution] process touches much less than 1% of all U.S. claims,” said Dr. Patrick Giam, president of the American Society of Anesthesiologists.
Out-of-network emergency medical spending has declined between 13% and 52% since 2022, HaloMD, the leading claims initiator, reported last month.
“If premiums are going up despite being able to demonstrate that the actual cost of care is declining, then employer sponsors should really be asking some tough questions of their [third-party administrators],” said Patrick Velliky, chief external affairs officer for HaloMD.
Employers agree third-party administrators deserve further scrutiny for their role because their contracts are not transparent, said Melissa Bartlett, senior vice president of health policy at the ERISA Industry Committee. “When an employer wants more information, it’s not readily available to them,” she said.
One of those charges often levied to employers is a shared savings fee when a third-party administrator negotiates down an out-of-network bill, said Christine Buttorff, a health policy researcher at the Rand Corp. The third-party administrator then collects a percentage of the savings, typically about 30%. Fee structure arrangements can vary substantially, Buttorff said.
These fee structures “may reward [third-party administrators] for pushing providers out of network and then paying below-market rates,” as fees can more than offset a high volume of disputes, executives from Nashville, Tennessee-based Radiology Partners wrote in a report published in the journal Health Affairs Forefront last year.
In 2025, insurers also lost disputes by default by failing to participate in the process nearly one-quarter of the time, according to an analysis the American College of Emergency Physicians, the American College of Radiology and the American Society of Anesthesiologists sent to Congress last month. Insurers offered $1 or less in initial offers 8.2% of the time, the report said.
What fixes could Congress make?
The Senate Health, Education, Labor and Pensions Committee convened stakeholders last month to hear perspectives on future legislation before the end of the year.
Chair Dr. Bill Cassidy, R-La., did not respond to a request for comment on a bill’s status. Cassidy is not returning to the Senate next year after losing his primary election in May.
Congress should better enforce award determinations that insurers refuse to pay, Giam said.
Employers should be able to get a clearer picture of all fees charged by a third-party administrator, Bartlett said. And legislation should also restore the qualifying payment amount, or the inflation-adjusted median in-network rate, as a critical factor in an arbitrator’s determination, she said.