The No Surprises Act (NSA), implemented on January 1, 2022, represents a significant legislative effort to protect patients from unexpected medical bills arising from emergency and out-of-network care (1). The Independent Dispute Resolution (IDR) process, an important component of the NSA, is designed to resolve payment disputes between insurers and healthcare providers (2). The American healthcare landscape has historically favored insurers over providers, leading to concerns from many providers about the fairness of IDR (3). However, current data on NSA’s Independent Dispute Resolution suggest a departure from this pattern.

To eliminate surprise medical bills, the NSA stipulates that out-of-network healthcare providers and facilities cannot bill patients for more than their typical in-network co-pay, deductible, or co-insurance for emergency services (1). In the past, patients were billed their typical fee for the emergency care, but later, roughly 1 in 5 patients received surprise bills, wherein hospitals or providers billed them for the difference between the amount their insurance paid and the actual cost (4). With the NSA in place, patients’ insurers must cover the complete cost minus the in-network fee — thus, most surprise bills have been eliminated, with more than 10 million prevented within the first nine months following the NSA’s implementation (5).

To account for discrepancies between insurers’ payment rates and out-of-network providers’ pay, the NSA included the IDR process (1). When providers and insurers disagree on the amount owed, either the insurer or the provider can initiate an IDR (1, 2). Next, both parties submit their offers, and an independent arbitrator reviews these submissions, the case, and certain details, including the NSA’s “qualifying payment amount” (QPA), which is based on the median in-network rate, or the typical amount paid for similar yet in-network care (2). Importantly, the arbitrator cannot consider the provider’s charges or public program payment rates (e.g., Medicare rates) (2). Despite the NSA’s goal of quick arbitration, each case can take up to 6 months, after which the arbitrator then selects one of the two offers in a binding decision (2, 6).

Since the NSA’s implementation, the amount of IDR cases has far exceeded the projected number of 17,000 per year (7). Between early 2022 and mid-2023, nearly 500,000 cases were initiated, resulting in a significant backlog (7). So far, data on the Independent Dispute Resolution process show that it appears to favor providers, with insurers “winning” only 23% of cases, a novel occurrence after a history of legislative processes that have favored insurers (7-9). In cases won by insurers, the median payment to providers is close to the insurer’s typical payment for a similar in-network provider, but in cases won by providers, the median payment is 322% of this amount (7, 9). Additionally, the data show that nearly two-thirds of IDRs were initiated by the same four provider organizations, each backed by a private equity firm, some of which have previously been accused of using surprise billing as a business strategy (7). Many insurers, critical of the process for favoring providers, have pointed to this as evidence that providers are abusing the IDR system to increase their own revenue, though this is unlikely (7).

As the IDR process continues to mature, experts expect changes as the agency attempts to speed up arbitration and as providers, insurers, and IDR entities adjust to account for providers’ high “win rate” (9). Notably, despite the massive IDR caseload, around 80% of initial out-of-network payments are accepted by providers, 13% are settled between providers and insurers informally, and only the remaining 7% go through the IDR process, which is typically the longest and most expensive option (7). If changes related to speed and arbitration occur, the IDR process may become a less burdensome, more favorable process. However, more data will be necessary to continue evaluating and improving Independent Dispute Resolution.

References

1: Pollitz, K. 2021. “No Surprises Act implementation: what to expect in 2022.” KFF. URL: https://www.kff.org/affordable-care-act/issue-brief/no-surprises-act-implementation-what-to-expect-in-2022/.

2: Amin, K., Pollitz, K., Pestaina, K. and Cox, C. 2023. “Explainer: federal independent dispute resolution process for surprise medical bills.” Peterson-KFF Health System Tracker. URL: https://www.healthsystemtracker.org/brief/independent-dispute-resolution-explainer/.

3: Bennett, W. 2019. “Opinion: insurance companies aren’t doctors. So why do we keep letting them practice medicine?” The Washington Post. URL: https://www.washingtonpost.com/opinions/2019/10/22/insurance-companies-arent-doctors-so-why-do-we-keep-letting-them-practice-medicine/.

4: Pollitz, K., Rae, M., Claxton, G., Cox, C. and Levitt, L. 2020. “An examination of surprise medical bills and proposals to protect consumers from them.” Peterson-KFF Health System Tracker. URL: https://www.healthsystemtracker.org/brief/an-examination-of-surprise-medical-bills-and-proposals-to-protect-consumers-from-them-3/.

5: Lagasse, J. 2024. “No Surprises Act prevented 10 million surprise bills in 2023, survey finds.” Healthcare Finance News. URL: https://www.healthcarefinancenews.com/news/no-surprises-act-prevented-10-million-surprise-bills-2023-survey-finds.

6: Waddill, K. 2024. “What to expect in the NSA’s independent resolution process.” Health Payer Intelligence. URL: https://healthpayerintelligence.com/features/what-to-expect-in-the-nsas-independent-dispute-resolution-process.

7: Hoadley, J. and Lucia, K. 2024. “Report shows dispute resolution process in No Surprises Act favors providers.” The Commonwealth Fund. URL: https://www.commonwealthfund.org/blog/2024/report-shows-dispute-resolution-process-no-surprises-act-favors-providers.

8: Hut, N. 3034. “​​New data on No Surprises Act arbitration cases show providers are faring well amid systemic challenges.” Healthcare Financial Management Association. URL: https://www.hfma.org/payment-reimbursement-and-managed-care/health-plan-payment-and-reimbursement/new-data-on-no-surprises-act-arbitration-cases/.

9: Fiedler, M. and Adler, L. 2024. “A first look at outcomes under the No Surprises Act arbitration process.” The Brookings Institution. URL: https://www.brookings.edu/articles/a-first-look-at-outcomes-under-the-no-surprises-act-arbitration-process/.