No Surprises Act Intended to Protect Patients, but Loopholes Drive Up Health Costs
Key Highlights:
- Misuse of the No Surprises Act’s dispute resolution process is threatening to drive up healthcare costs and creating affordability pressures.
- Some nonparticipating care providers are using scheduled, nonemergency procedures performed at participating hospitals or surgical centers to prompt arbitration and secure inflated payments.
- Elevance Health is implementing a new facility administrative policy and advocating for federal reforms to curb misuse, strengthen accountability, and restore the law’s original goal of protecting patients.
The federal No Surprises Act secured important protections for patients in the United States. The law, which took effect in 2022, shields individuals from surprise bills after they unexpectedly receive treatment from care providers that are not contracted with their health plan’s network.
But increasingly, the very system built to protect consumers is being used in ways that Congress never intended — fueling billing disputes far beyond what regulators projected and driving significant cost escalation across the healthcare system.
“The law has succeeded in protecting patients from unexpected bills, but clearly it’s also being used contrary to its original purpose,” said Ariel Bayewitz, vice president of health economics for Elevance Health. “And that misuse is creating real affordability pressures throughout the healthcare system.”
A System Strained by Unintended Consequences
At the heart of the No Surprises Act is the Independent Dispute Resolution (IDR) process, designed to resolve payment disagreements between health plans and nonparticipating care providers. If the two sides cannot agree on a payment within 30 days, each submits an offer and a certified arbiter chooses one.
The intent was to create a backstop — not a parallel pricing system.
Federal regulators originally estimated about 17,000 claims would enter IDR annually. In stark contrast, more than 850,000 disputes were filed in just the second half of 2024, roughly 100 times the original annual projection. Arbitration requests involving Elevance Health have increased about 40% year over year.
Care providers file and win the majority of cases. Arbitrators — who are compensated only when a case proceeds — frequently award payments that are multiples above the Qualifying Payment Amount (QPA) benchmark Congress established to anchor reasonable reimbursement.
A significant share of cases submitted for dispute resolution are also ineligible under the law, yet limited enforcement allows many of them to advance through arbitration anyway.
“The purpose was to protect patients — not create a workaround for higher prices,” Bayewitz said. “But arbitration has become a business and revenue strategy. And that’s eroding affordability across the entire system.”
How Loopholes Drive Costly and Avoidable Disputes
Many IDR cases stem from scheduled, nonemergency procedures performed at participating hospitals or surgical centers — settings where patients reasonably assume every provider involved in their care will also be a participating, in-network care provider. But when a facility chooses to use nonparticipating providers for these planned services, the claim is treated as a “surprise bill” under the No Surprises Act, even though nothing about the service was actually a surprise to the providers or facility.
This facility-driven use of nonparticipating care providers is the loophole: It makes the claim automatically eligible for IDR and creates a predictable pathway for securing elevated payments that would never be achievable through normal contracting.
Consider a patient who schedules spine surgery at a participating orthopedic center. The patient should expect that the surgeon performing the procedure is participating in their network as well. Yet too often, that’s not the case. A nonparticipating physician performs the surgery, disputes the insurer’s initial payment, and then secures a significantly higher award through IDR — even though the service was planned in advance at a participating facility when there are other participating physicians available.
Breast-reduction surgery offers another example. Medicare reimburses about $1,145 for the procedure, yet the average IDR award nationally is close to $90,000. In Connecticut, a single practice has repeatedly secured awards of more than $100,000 through IDR and is responsible for more than half of all arbitration dollars for breast-reduction surgeries in the state. At the same time, roughly half of the cases decided in this practice’s favor should have been deemed ineligible or out of scope under the No Surprises Act.
What Is the No Surprises Act?
Enacted in 2020 and in effect since 2022, this bipartisan federal law was designed to protect patients from unexpected medical bills when they receive care from nonparticipating care providers in emergency situations or when they have no control over who treats them.
How Is the No Surprises Act’s Independent Dispute Resolution Process Not Working as Intended?
The law created the Independent Dispute Resolution (IDR) process to settle payment disagreements between health plans and nonparticipating care providers. However, that process is now being used by some care providers as a revenue strategy rather than a fair arbitration mechanism.
How Does This Affect Health Care Affordability?
The IDR process has added an estimated $5 billion in health system costs since implementation. Higher arbitration awards drive upward pressure on in-network rates as care providers demand more money. These costs ultimately will flow to patients, employers, and taxpayers through higher premiums, out-of-pocket expenses, and health plan costs.
What Is Elevance Health Doing to Address This?
Elevance Health is taking action to reinforce the intent of the No Surprises Act and help control costs. We’re introducing a new facility administrative policy that will be implemented by some of Elevance Health’s affiliated commercial health plans to prevent nonparticipating care providers from billing through participating hospitals or ambulatory surgery centers for planned, nonemergency procedures. We’re also advocating for reforms that include requiring arbitrators to reject ineligible disputes and justify high awards, and having policymakers clarify that elective services should not qualify for IDR. These steps aim to restore affordability, fairness, and integrity to the health care system.
How We’re Addressing IDR Misuse
The financial impact of these loopholes is substantial. Research shows the IDR process has added at least $5 billion in costs to the healthcare system, and some provider groups now use the prospect of inflated arbitration awards to demand higher in-network rates.
“When arbitration inflates payments, the impact doesn’t end at the negotiating table,” Bayewitz said. “Those costs ripple across the system and ultimately land on employers and families.”
The burden falls disproportionately on self-funded employers, who take on the responsibility of paying their employees’ claims costs. They shoulder nearly 90% of IDR-related costs — including some employers who have faced more than $10 million in unexpected exposure this year alone. This level of volatility was never what the No Surprises Act was intended to create.
These pressures are why, beginning in 2026, Elevance Health is introducing a new facility administrative policy that will be implemented by some of our affiliated commercial health plans in 11 states. It will curb cases where nonparticipating care providers bill through participating facilities for planned, nonemergency care. The policy is intended to strengthen shared accountability by encouraging participating hospitals or surgical centers to use participating providers when they are available, closing a loophole that has contributed to inflated arbitration volumes. It does not apply in emergencies or when no participating care provider option exists.
Elevance Health also has urged federal regulators to address the broader structural issues enabling IDR misuse. In a comment letter to the Centers for Medicare and Medicaid Services, we outlined targeted reforms to return arbitration to its intended role as a safeguard, not a pricing mechanism. Examples include:
- Requiring arbitrators to reject ineligible claims and justify unusually high awards.
- Suspending entities that repeatedly file excessive or high-volume disputes.
- Clarifying that planned or elective services at participating facilities are not eligible for IDR.
- Anchoring arbitration decisions to the QPA and requiring justification for any deviation.
- Modernizing the IDR portal to block ineligible or duplicative filings and cooling-off–period violations.
- Strengthening performance and transparency standards for IDR entities, including auditing outlier award patterns and requiring clearer written rationales.
Collectively, these actions would strengthen the system’s guardrails and reduce the cost pressures created by today’s IDR volumes.
“Real affordability depends on shared accountability,” Bayewitz said. “If hospitals and surgery centers, regulators, and health plans work together, we can ensure the No Surprises Act safeguards patients and supports a more stable, sustainable healthcare system.”