No Surprises Act proves to be shock to the healthcare system

When the No Surprises Act took effect in 2022, it was a rare feat of bipartisan problem-solving. The law was meant to prevent a once all-too-common scenario: An insured patient would seek emergency care, only to face financial disaster because one of the providers involved was outside the patient's insurance network.

Imagine, for example, being rushed to the hospital with a broken ankle that requires emergency surgery, only to later receive a $12,000 bill because one of the many providers involved in your care was outside your insurance network.

Before the No Surprises Act, that happened all the time, even to people with generous coverage. (In fact, this happened to my editor.)

The law took that problem out of patients' hands, requiring insurers and out-of-network doctors to settle on a fair payment. That protection has spared millions of Americans from unexpected medical costs.

But consumers eventually might discover that they're paying the bill in other ways.

The process for settling disputes between insurers and providers has tilted heavily toward providers, leading to unusually high prices for care that could drive up costs throughout the healthcare system. Unless policymakers correct that imbalance, an otherwise good law could end up raising costs for everyone.

The risk stems from the law's method for resolving disputes. The No Surprises Act laid out a system for settling a tab: If an out-of-network provider says an insurance company isn't offering a fair payment for a service, the two sides go into arbitration. The insurance company and provider each name what they consider to be a fair price and an independent firm chooses a winner.

But the arbitration firm can only pick one of the two numbers offered — there's no splitting the difference. That decision is binding and the loser must pay the arbitration firm's fee.

In theory, this style of negotiation induces both sides to be reasonable. Anyone who asks too much or offers too little risks losing. The result should be fair payments and a roughly even division of winners. Meanwhile, the fees involved should motivate parties to work small disputes out among themselves.

In practice, the number of cases going into arbitration has blown past the government's expectations of about 17,000 disputes per year: In 2025, nearly 2.6 million cases were filed, according to data from the Centers for Medicare and Medicaid Services.

What's more, doctors are nearly always coming out on top, winning around 85% of all disputes. Providers brought in some $15 billion in payouts through the process in 2025 alone, a recent Wall Street Journal analysis found. And they're winning payments that often are vastly higher than what their peers earn.

Two recent investigations by the New York Times illustrate these eye-popping sums. Reporters uncovered a New Jersey-based plastic surgeon who in some cases had earned nearly 30 times the standard rate for a breast reduction; a neurosurgery practice in Pennsylvania that was paid $330,000 for a diagnostic procedure that typically runs under $2,700; and surgical assistants earning more than 25 times as much as surgeons.

These examples are undeniably alarming. Still, even with these high payouts, claims going through the dispute process don't make up a huge share of overall healthcare spending, says Matthew Fiedler, a senior fellow with the Brookings Institution's Center on Health Policy.

The larger concern is the potential for indirect consequences. "This potentially reshapes the bargaining landscape between providers and insurers," Fiedler says.

Most medical care Americans receive is covered by in-network insurance agreements. Those providers now can use the prospect of large arbitration awards to pressure insurers to raise their in-network payment rates.

In other words, a radiologist or ER physician can say, "Look, if we don't get something closer to what we want, we'll just stay out of network and win in the IDR (independent dispute resolution) process," according to Jack Hoadley, an emeritus professor of health policy at Georgetown University.

Researchers have yet to offer conclusive proof this is happening on a large scale, Hoadley stresses. But there's also no reason to believe it won't — and the financial incentives make the possibility hard to dismiss. The risk of rising price pressure is especially concerning since businesses have popped up to draw more doctors into the dispute process by promising higher payouts for their services.

And the costs aren't limited to higher payments to doctors. Arbitration firms get a fee for every dispute, and the number of disputes is rising rapidly. Researchers at Georgetown found those fees totaled $844 million in the first half of 2025 — nearly as much as in the law's first three years combined.

If physicians' fees rise and insurers face mounting arbitration costs, consumers will ultimately be on the hook. They might be spared surprise ER bills, but they could see their monthly insurance premiums rise as insurers pass those costs down.

The issue is already creeping into discussions of insurance rates for 2027. UnitedHealthcare of New York said that costs associated with the dispute process accounted for a portion of its premium hike for next year, and several other insurers have warned of its impact. And when PwC recently predicted that commercial healthcare costs will rise by 9% next year, it cited the disputes as one of five contributing factors.

To be clear, this doesn't mean the No Surprises Act is a bad law. It addressed a real problem many Americans regularly experienced. But it needs fixes to ensure it doesn't carry hidden harms.

Last month, the Congressional Budget Office called for more research into the consequences of the law — good or bad. And last week, federal health officials told the New York Times that the system is being gamed and said that the administration "is actively working to clean it up."

That work — and ideally congressional action to close any loopholes being exploited — must be completed with urgency. Otherwise, what began as an exercise in consumer protection could be remembered as yet another force pushing healthcare out of Americans' reach.

Lisa Jarvis is a Bloomberg Opinion columnist covering biotech, health care and the pharmaceutical industry.