A landmark piece of legislation designed to protect patients from the financial shock of surprise medical bills has inadvertently created a high-stakes battleground between healthcare providers and insurance companies, raising serious questions about its long-term impact on healthcare costs. The No Surprises Act (NSA), effective since 2022, successfully shielded consumers from being caught in the middle of payment disputes. However, the law’s core arbitration mechanism, the Independent Dispute Resolution (IDR) process, was intended as a final recourse but has instead become a central and contentious feature of the healthcare landscape. While patients are no longer facing unexpected bills, a growing body of evidence suggests this well-intentioned process is being systematically exploited, potentially driving up the very costs the healthcare system is trying to contain.
An Unintended Flood of Disputes
The sheer volume of cases now flowing through the IDR system has vastly exceeded all initial projections, signaling a fundamental shift from its intended purpose. When the law was enacted, the federal government anticipated approximately 17,000 IDR cases annually across the entire country. The reality has been a deluge, with millions of cases filed in the years since. To illustrate the scale, a single major insurer, Elevance Health, now reports handling 17,000 IDR cases every month—the same figure once projected for the entire nation over a full year. This unexpected overload is not only straining the administrative capacity of the system but is also the primary symptom of a much deeper conflict over how the process is being utilized by some healthcare providers, transforming it from a safety net into a primary channel for payment negotiation.
Insurers contend that this explosion in case volume is not a result of routine payment disagreements but rather a calculated strategy by certain provider groups. The accusation is that these groups, often backed by sophisticated private equity firms, are bypassing good-faith negotiations and instead “knowingly flooding” the system with thousands of claims. This approach is seen by payers as a deliberate effort to leverage the arbitration process to secure payments far higher than what would be achieved through normal contractual arrangements. Insurers allege that many of these claims are ineligible for the IDR process in the first place, suggesting a strategy designed to overwhelm the system and extract maximum revenue, effectively turning a patient protection tool into a mechanism to “gouge the healthcare system” for inflated reimbursements.
From Backstop to Battlefield
The data emerging from the arbitration process reveals a compelling financial incentive for providers to pursue this path, helping to explain why the system has become so overloaded. In 2024, providers have reportedly won approximately 85% of all payment determinations, a striking success rate that encourages further use of the system. More importantly, the awards have been substantial. The median payment awards in late 2024 were reported to be around 459% of the qualifying payment amount, which represents the median rate for an in-network service. In one prominent lawsuit, it was claimed that typical IDR awards were more than six times greater than what a contracted, in-network provider would have been paid for the identical service, creating a powerful economic motive to opt for arbitration over standard network agreements.
This trend has prompted industry experts to argue that the IDR process has fundamentally morphed from its original design as a “narrow, last-resort pressure valve” into a “fire hose.” It is no longer a simple backstop for resolving intractable disputes but has become what one expert called a “parallel payment system” with enormous financial consequences. This transformation has been accelerated by highly organized provider groups that have invested significant capital into building automated and administrative processes designed to maximize both the volume and success rate of their IDR submissions. By doing so, they have effectively weaponized a regulatory mechanism, creating a lucrative revenue stream that operates outside the traditional framework of provider-payer negotiations and threatens to introduce significant inflationary pressure into the healthcare market.
The Widening Legal Chasm
The escalating tensions have now spilled into the legal arena, with major insurers filing lawsuits that provide a granular look at the alleged abuses of the system. The lawsuit filed by Anthem against 11 Prime Healthcare facilities serves as a prominent case study, with Anthem accusing the hospital system of using the IDR process as an “extractive tool.” The complaint alleges that Prime initiated a flood of over 6,000 disputes, resulting in the company receiving approximately $15 million more than what Anthem had originally offered to pay. Anthem’s lawsuit further claims that Prime routinely submitted ineligible emergency claims into arbitration and even falsified information to circumvent eligibility rules, creating what it described as an “unnecessarily restrictive and cumbersome” communication portal designed to make it nearly impossible for the insurer to mount a timely response.
Prime Healthcare has vehemently rejected these claims, dismissing the lawsuit as “meritless” and asserting that its facilities have acted in full compliance with the No Surprises Act. A spokesperson for the health system stated that it has not balance-billed any patients and argued that the lawsuit ignores the broader context of large health plans amassing record profits by systematically underpaying providers and erecting administrative barriers to care. This legal clash is far from an isolated incident. Elevance has similar cases pending in other states, while insurers like UnitedHealthcare and Blue Cross Blue Shield of Texas have filed their own lawsuits against different provider groups. This wave of litigation indicates that the dispute over the IDR process has become a widespread, industry-level conflict with billions of dollars at stake.
A Cascade of Reforms and Consequences
In response to this contentious environment, insurers and policymakers are now pursuing significant changes to rein in the perceived misuse of the arbitration process. Elevance Health has been actively engaging with lawmakers and the Centers for Medicare and Medicaid Services (CMS) to advocate for reforms. Among the proposed changes are requirements for arbitrators to provide detailed justifications for unusually high payment awards and for clearer definitions of which elective services are eligible for the IDR process. In a more direct and controversial move, Anthem announced a new policy in the fall to deduct 10% from its payments to certain in-network hospitals whenever an out-of-network physician treats an Anthem patient for an elective procedure at that facility. This policy is explicitly designed to incentivize hospitals to ensure their affiliated medical staff are fully in-network.
Anthem’s new policy was met with immediate and forceful opposition from provider organizations like the American Hospital Association, which argued that the measure undermines the objectives of the NSA, limits patient choice, and unfairly targets hospitals for the actions of independent physicians. However, Anthem defended its policy as a necessary step to encourage hospitals to become “part of the solution” in managing healthcare costs, clarifying that the policy only applies to elective surgeries where in-network options are readily available and exempts critical access and rural hospitals. The insurer maintained that the unchecked exploitation of the IDR process was fundamentally inflationary. The resulting higher costs were ultimately passed on to consumers and employers through increased insurance premiums, all without any corresponding improvement in the quality of patient care.
