No Surprises Act: Implications for Insurance Premiums

The No Surprises Act has largely succeeded in protecting patients from unexpected out-of-network bills, but the arbitration system behind those protections is creating billions of dollars in costs that could eventually place upward pressure on health insurance premiums.

An analysis by Georgetown University health policy researchers Jack Hoadley and Kennah Watts estimates that the federal independent dispute resolution system generated at least $5 billion in administrative expenses and additional medical payments from its launch in 2022 through the end of 2024.

That finding presents an important distinction for insurance professionals. The law can protect an individual patient from a financially devastating balance bill while still increasing costs elsewhere in the healthcare system. Those costs may eventually appear in employer health plan spending, renewal calculations, premium requirements, provider negotiations, and administrative budgets.

What the No Surprises Act Changed

The No Surprises Act took effect in 2022 to address situations in which patients unknowingly receive care from out-of-network providers. Common examples include emergency treatment at an out-of-network facility or services delivered by an out-of-network anesthesiologist, radiologist, or other clinician at an in-network hospital.

For covered services, providers generally cannot bill patients for the difference between the provider’s charge and the health plan’s payment. The patient is instead responsible for the cost sharing that would ordinarily apply to an in-network service.

When a provider and health plan cannot agree on an out-of-network payment, either party may initiate the federal independent dispute resolution process after an open negotiation period. Each side submits an offer, and a certified arbitrator selects one of the two amounts. The arbitrator cannot create a compromise figure.

This structure is often called final-offer or baseball-style arbitration. It was intended to encourage reasonable offers and resolve the limited number of disputes that could not be settled through negotiation. Actual dispute volume, however, has greatly exceeded the federal government’s original expectations.

The $5 Billion Cost Picture

The Georgetown analysis estimates that the dispute-resolution system accumulated at least $5 billion in total costs through 2024. Approximately $2.24 billion consisted of additional provider payments above the qualifying payment amount, a figure generally based on a plan’s median contracted rate for the same or a similar service in a geographic area.

The remaining costs primarily involved administrative fees, payments to arbitration entities, and the internal work required of plans and providers. Required administrative and arbitration fees totaled an estimated $885 million, including air ambulance disputes. Internal administrative work was estimated at another $1.9 billion.

The estimate is conservative because it does not fully capture every expense associated with outside consultants, dispute-management vendors, legal work, payment enforcement, eligibility reviews, or other operational demands. It also does not assume that every dollar awarded above the qualifying payment amount was caused solely by the law. Some of those expenses existed before the statute but could previously have been shifted directly to patients through balance billing.

Dispute Volume Far Exceeded Expectations

Federal regulators initially estimated that the process would resolve approximately 17,000 non-air-ambulance disputes annually, plus roughly 4,900 air ambulance disputes. Instead, more than 3.3 million disputes were filed between the system’s launch in April 2022 and May 2025.

The federal data illustrate how quickly the workload expanded. Parties initiated more than 610,000 disputes during the first six months of 2024 alone, a 56 percent increase from the second half of 2023. Arbitrators issued nearly 349,000 payment determinations during that six-month period, but a substantial backlog remained.

By May 2025, approximately 2.8 million disputes had been closed and more than 2.1 million payment determinations had been issued. Nearly 500,000 disputes were still awaiting closure. Because batched disputes can contain multiple claims, the number of individual medical services affected is even larger than the dispute count suggests.

Volume also affects timing. Although the statutory framework calls for payment determinations within 30 business days after an arbitrator is selected, the median time for line-item determinations reached 81 days during the fourth quarter of 2024. Only about one-third of single disputes and roughly one-fifth of batched disputes were decided within the required period.

Why Provider Awards Are Drawing Attention

Providers prevailed in 85 percent of the line-item claims decided during 2024, up from 81 percent in 2023. In cases won by providers, the median payment determination equaled 445 percent of the qualifying payment amount in 2024, compared with 327 percent in 2023. During the fourth quarter of 2024, the median reached 459 percent.

Those figures require careful interpretation. The qualifying payment amount is a regulatory benchmark based primarily on contracted rates, not necessarily a perfect measure of the appropriate payment for every clinical circumstance. Providers argue that it may not adequately reflect case complexity, specialty costs, inflation, or local market conditions.

Health plans counter that consistently high awards can weaken the relationship between out-of-network payments and negotiated in-network rates. If providers believe arbitration will produce substantially higher payments, they may have less incentive to join networks or accept existing contract terms. That could influence both future network participation and the rates negotiated during contract renewals.

The results are also concentrated. Two large provider organizations accounted for 43 percent of resolved line-item claims in 2023 and 2024, while the five most active organizations generated 59 percent. Arizona, Florida, Tennessee, and Texas represented 63 percent of decided line-item claims despite accounting for a much smaller portion of the national population.

How Higher Costs Could Reach Premiums

The No Surprises Act does not create a direct premium surcharge. The concern is that higher claim payments and growing administrative expenses eventually become part of the cost base used to price insurance and employer-sponsored health benefits.

Carriers must account for expected medical claims, dispute frequency, staffing, vendor expenses, legal obligations, and uncertainty when developing rates. Self-funded employers may experience the impact more directly because claim and arbitration costs ultimately flow through the employer’s plan, even when a third-party administrator manages the process.

The premium effect will depend on how broadly IDR awards influence the market. If elevated awards remain concentrated among particular specialties, organizations, or states, the national impact may be limited. If those awards begin shaping provider contract negotiations or encouraging more clinicians to remain outside networks, the effect could become more widespread.

This is the tension at the center of the debate. The law removed surprise bills from patients’ mailboxes, but it did not eliminate the underlying disagreement over what out-of-network care should cost. It relocated that conflict to a formal process involving providers, plans, arbitrators, administrators, and, eventually, premium payers.

What Insurance Professionals Should Watch

Agents and agencies do not need to become arbitration specialists, but they should understand the connection between consumer protections and plan costs. That knowledge can improve renewal conversations when employers or individuals ask why premiums remain under pressure even as surprise-billing protections reduce direct financial exposure at the point of care.

Carriers and administrators face a more operational challenge. Accurate eligibility determinations, timely responses, defensible payment offers, complete documentation, and analysis of provider filing patterns can all affect outcomes. Federal data show that a meaningful share of disputes is challenged or found ineligible, making front-end claim accuracy and process controls particularly important.

Key areas for insurance organizations to monitor include:

• Dispute frequency by specialty, provider organization, state, and facility
• Award amounts compared with qualifying and contracted payment rates
• Administrative expenses and average time required to resolve cases
• Network participation changes following high arbitration awards
• Federal rulemaking, court decisions, and revised eligibility procedures

Consumer Protection Remains the Central Achievement

The cost concerns should not obscure the law’s central benefit. Patients are generally protected from balance bills in covered situations and are limited to in-network cost sharing when they receive qualifying out-of-network care without a meaningful opportunity to choose the provider.

For agents, this protection offers a useful client-education opportunity. Policyholders should understand that the law does not make every out-of-network service subject to in-network pricing. Protections depend on the setting, service, plan type, and circumstances. Consumers should still confirm network status for scheduled care whenever possible and carefully review explanations of benefits and provider bills.

Clear communication is especially important because a disputed payment between a provider and insurer should generally remain separate from the protected patient. Clients who receive a bill that appears inconsistent with the law may need help identifying the appropriate plan contact or federal or state consumer-assistance channel.

The Next Policy Challenge

The next phase of No Surprises Act implementation is likely to focus on improving the arbitration system without weakening patient protections. Potential approaches include better screening of ineligible disputes, stronger reporting requirements, more consistent decision-making, improved tracking of open negotiations, and clearer market information for arbitrators.

Policymakers must also consider competing concerns. Restricting awards too aggressively could underpay providers in legitimate out-of-network situations. Allowing awards to remain far above typical contracted rates could encourage additional disputes, weaken network incentives, and increase costs for plans, employers, and consumers.

For the insurance industry, the practical message is not that the No Surprises Act failed. It is that successful consumer protection and effective cost containment are separate goals, and the federal system has made substantially more progress on the first than the second.

Agents, agencies, carriers, employers, and provider organizations now have a shared interest in a process that keeps patients out of payment disputes while producing timely, consistent, and economically sustainable decisions. Whether federal policy can achieve that balance will help determine how much of today’s arbitration expense becomes tomorrow’s premium pressure.