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A new study has found that physicians and hospitals are winning payment disputes for planned procedures like surgeries handled through the No Surprises Act dispute resolution system with awards that are sometimes more than 100 times typical rates.
These awards are adding “tens of thousands of, or in some cases even more than one hundred thousand, dollars in excess costs” per claim, according to the study by Elevance Health. This consequence of a law that was supposed to drive down costs could raise health insurance premiums paid by employers and workers.
Here’s a look at what’s driving these unintended outcomes.
How the law works
The No Surprises Act, which took effect in 2022, was designed to shield patients from so-called surprise medical bills.
A common example occurs when a patient schedules surgery at an in-network hospital but unknowingly receives care from an out-of-network anesthesiologist, radiologist, pathologist or other specialist involved in the procedure. Before the law, those providers could send patients large balance bills for charges not covered by insurance.
Under the No Surprises Act, patients generally pay only their normal in-network cost sharing in these situations. The health plan and out-of-network provider must then negotiate payment.
If they cannot agree after a 30-day negotiation period, either party can initiate the law’s independent dispute resolution process. In this process, an independent arbitrator chooses either the insurer’s payment offer or the provider’s.
The law anticipated that arbitration would be used sparingly and that awards would generally land near prevailing in-network rates. Instead, some studies have found that the system is being abused by providers who often receive awards that are significantly higher than customary charges.
Study finds large awards
Elevance reviewed more than 7,300 payment disputes involving planned procedures such as spine surgery, plastic surgery and colonoscopies that occurred at in-network facilities but involved out-of-network providers. Providers prevailed in nearly 90% of disputed claims.
Even more striking were the payment amounts. The average arbitration award was nearly $40,000. By comparison, the average in-network claim amount for the same services was approximately $1,614, the average contracted price was about $766 and the comparable Medicare payment was roughly $645. Some awards were more than 100 times typical reimbursement levels.
Growing concerns for employers
The findings come as the federal dispute resolution system is already struggling under the weight of millions of cases, far more than regulators anticipated.
Critics argue that the arbitration process may be creating incentives for some providers to remain outside insurer networks because the dispute process can yield significantly higher reimbursements than negotiated contracts.
For employers that sponsor health plans, the concern is that higher claim costs eventually find their way into premiums.
While workers are being protected from surprise bills at the doctor’s office or hospital, the cost of those protections may increasingly appear in employers’ health plan expenses and future renewal rates.
Federal regulators have adopted new rules intended to limit misuse of the process and ensure that only eligible claims enter arbitration. Whether those changes will reduce disputes and bring awards closer to market rates remains to be seen.
