No Surprises Act: Understanding Arbitration Challenges and Reform Needs

In 2020, Congress enacted the No Surprises Act (NSA) to address concerns about unexpected medical bills from out-of-network providers. This legislation protects patients receiving treatment from out-of-network doctors at in-network hospitals and introduces an arbitration system to resolve payment disputes between providers and insurers. While the act has largely shielded patients from surprise billing, the arbitration component has faced challenges, leading to increased healthcare costs.

A New York Times article highlighted how the arbitration process has been inundated with claims, most favoring providers. This issue was the focus of a recent discussion hosted by the University of Pennsylvania's Leonard Davis Institute of Health Economics, featuring experts like Rachel M. Werner, Zack Cooper, Lindsey Murtagh, and Benjamin Chartock.

Following the seminar, the Centers for Medicare & Medicaid Services (CMS) announced revisions to address arbitration process issues. Murtagh noted these changes aim to refine procedural aspects, focusing on clearer eligibility criteria for disputes. However, they do not significantly alter the high award amounts and dispute volumes that remain problematic.

The panel discussed the arbitration system's design, originally meant to facilitate balanced outcomes, which has instead resulted in numerous provider-favoring disputes. Researchers highlighted that providers win over 80% of cases, often resulting in payouts significantly higher than standard negotiated rates.

Chartock explained how this structure might inadvertently encourage high claim volumes due to arbitrator fee incentives. Cooper identified certain provider groups, particularly those backed by private equity, as frequently leveraging this process to maximize payments.

The seminar also examined how legal challenges have affected the Act's implementation. Initial regulations sought to base decisions around a "Qualifying Payment Amount" (QPA), but court rulings, especially in Texas, have restricted regulators' ability to guide arbitration outcomes.

Panelists proposed reforms such as enhancing arbitrator oversight. Cooper suggested measures like auditing and performance tracking for legislative alignment. Chartock recommended adopting state arbitration models that manage fewer disputes and more moderate awards. The discussion underscored the necessity for ongoing legislative refinement, with Cooper cautioning against viewing lawmaking as a finite process.