‘No Surprises’ Act has become costly surprise, critics say

The No Surprises Act was designed to shield patients from unexpected out-of-network medical bills. Under the law, disputes over payments are resolved through a federal arbitration system known as independent dispute resolution, or IDR. But recent reporting, federal data and litigation suggest the system has triggered a surge in claims and sharply higher payouts to providers.

Now a Republican lawmaker is hosting a Capitol Hill discussion on a key provision of the legislation amid growing concerns that the law's arbitration system is being exploited and driving up health care costs.

On May 15, U.S. Rep. Aaron Bean (R-Fla.) is bringing together representatives from employers, doctors, insurers and industry groups to address the issue. Among them will be a senior executive from HaloMD, a Texas-based firm that has become a focal point of criticism over the arbitration process.

Providers and their representatives have filed millions of arbitration disputes, far exceeding early government estimates. Federal data show providers, facilities and air ambulance providers are winning about 88 percent of payment determinations, often securing payments above typical negotiated rates. In one widely cited example, The New York Times reported that a routine breast reduction procedure that might normally cost tens of thousands of dollars resulted in a $440,000 arbitration award.

Analysts and critics say the rapid growth in IDR claims is driving up costs for employers and patients. A Health Affairs analysis estimated the IDR process generated about $5 billion in additional costs during its first three years, including administrative fees, IDR entity fees, internal plan and provider costs, and payment amounts. Critics warn those costs are likely to be passed on through higher premiums.

At the center of the controversy is HaloMD, which helps medical providers navigate the arbitration process. A STAT investigation found the company has filed more disputes than any other firm and says it generates more than $1 billion annually for itself and its clients.

Insurers have accused HaloMD in multiple lawsuits of exploiting loopholes in the system, alleging the company floods arbitration with large volumes of claims – including ineligible ones – to overwhelm payers and drive up settlements. In some cases, insurers say they were forced to pay hundreds of thousands of dollars on disputes they contend should never have been eligible.

HaloMD founders Alla and Scott LaRoque have also drawn attention for the wealth they have accumulated since entering the IDR business, according to the STAT investigation. The couple live in a 20,000-square-foot home in Austin equipped with a helicopter hangar and swim-up bar, travel by private jet, and hosted a five-day wedding on Italy's Amalfi Coast featuring a performance by Andrea Bocelli. Their trajectory – from bankruptcy to a health care enterprise that says it generates more than $1 billion annually for itself and its clients – has become an example critics cite of how lucrative the new IDR industry can be.

Policymakers from both parties have begun signaling concern that the arbitration system may be driving unintended consequences. House Energy and Commerce Committee ranking member Frank Pallone (D-N.J.), a Democrat who helped craft the law, has defended the law's consumer protections while acknowledging concerns about the IDR process.

Health care economists say the structure of the arbitration system itself may be contributing to the problem. Academic research cited in recent reporting argues that because arbitrators are paid per case, they may have incentives to accept more disputes and issue provider-friendly decisions.

The upcoming congressional discussion reflects growing pressure in Washington to revisit the law, as employers and some policymakers argue that unchecked arbitration is fueling higher health care spending. Analysts say the system has already generated billions of dollars in payments and administrative costs since its rollout.