No Surprises Act Loophole Drives Up Health Costs, Undermines Trump-Era Law

Five years after President Trump signed the No Surprises Act (NSA) into law, a landmark victory intended to shield American families from unexpected and often exorbitant medical bills, a troubling trend is emerging. While the law has largely succeeded in its initial aim – eliminating those shocking, post-treatment invoices – a component designed to resolve disputes between providers and insurers is now being exploited, driving up healthcare costs instead of lowering them. The issue centers on the independent dispute resolution (IDR) process and recent reporting from STAT News details how a small number of out-of-network provider groups are leveraging the system for profit.

The Promise and Peril of the IDR Process

The No Surprises Act was born from the widespread frustration with “balance billing,” the practice where out-of-network providers send patients the difference between their billed charges and what the insurer is willing to pay. The IDR process was established as a last resort, intended for the relatively rare instances where negotiations between providers and insurers stalled. The idea was to offer a fair, independent arbitration system. Both parties submit their proposed payment amount, and a third-party IDR entity selects one, binding both sides to the decision. However, the system, while seemingly straightforward, has become a significant cost driver.

The core problem isn’t that the IDR process *exists*, but how it’s being *used*. Instead of being reserved for genuine disputes, it’s become a routine tactic for certain out-of-network groups to inflate payments. The scale of This represents substantial. In the first half of 2024 alone, 610,000 cases were filed, and the associated costs – including administrative fees and inflated awards – have reached a staggering $5 billion between 2022, and 2024.

A Small Group, a Large Impact

Crucially, the abuse isn’t widespread among all out-of-network providers. Most are reportedly satisfied with insurer payments. The vast majority of IDR cases – approximately 44% in the first six months of 2024 – originate from just three provider groups. And these groups are remarkably successful, prevailing in between 83% and 88% of cases. The resulting payouts are significantly above in-network rates, with insurers often paying more than four times the standard amount. This drives up costs for employers and, for patients through higher premiums and deductibles.

The problem is compounded by the submission of ineligible claims. Nearly 40% of disputes filed in 2024 were identified as ineligible – meaning the provider was already in-network, or the patient had coverage through Medicare or Medicaid. Despite this, only 17% were ultimately deemed ineligible by the arbitrators, leaving employers and health plans footing the bill for costs they shouldn’t have to bear. This suggests a lack of rigorous oversight and a willingness by IDR entities to proceed with cases that clearly violate the terms of the No Surprises Act.

Why is this Happening? Incentives and Loopholes

The IDR process, as currently implemented, creates perverse incentives. Arbitration companies profit from every case filed, giving them little motivation to dismiss ineligible claims. Providers who successfully exploit the system are rewarded with inflated payments, encouraging them to continue filing disputes. This creates a cycle of escalating costs that undermines the original intent of the law. As one observer place it, these providers “always pass ‘Go’ and always collect,” mirroring the game of Monopoly.

The roots of the problem lie in the legislative compromise that created the NSA. While consumer and employer groups advocated for a benchmark payment rate to resolve disputes, Congress ultimately sided with providers and mandated arbitration. This arbitration mandate, while intended as a limited solution, has opened the door to abuse.

What’s Being Done, and What Needs to Happen

The issue is gaining attention from lawmakers. Senators Bill Cassidy (R-La.) and Maggie Hassan (D-N.H.), key architects of the NSA, recently sent a letter supporting the Trump administration’s efforts to address the IDR process. Their recommendations include stronger enforcement to eliminate ineligible claims, increased accountability for arbitrators, and penalties for those who game the system.

More than 60 stakeholder groups representing employers, labor organizations, and consumer advocates have also called on regulators to clarify guidance for arbitrators, increase transparency in decision-making, and establish meaningful oversight of IDR entities.

Looking Ahead: Strengthening Enforcement and Oversight

The future of the No Surprises Act hinges on addressing these issues. Without stronger enforcement and oversight, the IDR process will continue to drive up healthcare costs, eroding the benefits that patients were promised. The Trump administration has an opportunity to correct course and ensure that the NSA works as intended, protecting patients from surprise bills and promoting affordability. This will require a multi-pronged approach, including stricter eligibility criteria for IDR cases, increased scrutiny of arbitrator decisions, and penalties for providers who engage in abusive practices. The goal is to restore the IDR process to its original purpose: a limited, last-resort mechanism for resolving genuine disputes, not a profit center for a select few.

James Gelfand is president and CEO of the ERISA Industry Committee (ERIC), and Patricia Kelmar is senior director, health care campaigns at PIRG.