A new study has found that physicians and hospitals are winning payment disputes for planned procedures handled through the No Surprises Act dispute resolution system, with awards sometimes more than 100 times typical rates.
These awards are adding “tens of thousands of, or in some cases even more than $100,000 in excess costs”, according to the study by Elevance Health. A law meant to drive down costs could end up raising health insurance premiums for employers and workers.
Here’s a look at what’s driving these unintended outcomes.
How No Surprises Act Works
The No Surprises Act took effect in 2022 to shield patients from 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. Before the law, those providers could send patients large bills for charges insurance did not cover.
Now, patients pay only their normal in-network cost in these situations. The health plan and out-of-network provider must then negotiate payment.
If they cannot agree within 30 days, either party can initiate arbitration, the law’s independent dispute resolution process. An independent arbitrator chooses either the insurer’s payment offer or the provider’s.
Lawmakers expected arbitration to be rare and awards to land near in-network rates. Instead, the system appears vulnerable to abuse, with providers often winning awards far above 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.
The payment amounts stood out even more. The average arbitration award reached nearly $40,000, compared to an average in-network claim of about $1,614, an average contracted price of about $766 and the comparable Medicare payment of roughly $645. Some awards were more than 100 times typical reimbursement levels.
No Surprises Act Growing Concerns
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 encouraging some providers to stay out-of-network, since disputes can yield higher reimbursements than negotiated contacts.
For employers that sponsor health plans, the concern is that higher claim costs tend to work their way into premiums.
Workers are protected from surprise bills at any point of care. However, employers may absorb the cost elsewhere through their higher health plan expenses and renewal rates.
Federal regulators have adopted new rules aimed at limiting misuse of the process and ensuring only eligible claims enter arbitration. Whether those changes reduce disputes and bring awards closer to market rates remains to be seen.
