A truism in regulatory analysis is that if the government fails to take steps to clarify an unduly vague regulation, litigation will inevitably ensue that will force the courts to do so. In one of the final acts of President Trump's first term, he signed legislation to codify the No Surprises Act, which ended the practice of out-of-network healthcare providers sending “surprise” bills to patients.
The legislation resulted in patients receiving fewer unexpected invoices for out-of-network non-emergency services, and most healthcare policy analysts consider the legislation to have been a success.
The basis of this legislation calls for removing the patient from the equation and letting the healthcare insurance companies and healthcare service providers resolve any payment disputes via an independent arbitration settlement process facilitated by the U.S. Department of Health and Human Services.
However, it appears that some of the parties to the dispute settlement process are not playing fair. The Centers for Medicare and Medicaid Services estimated that the dispute settlement process would be utilized less than 50,000 times a year in the first few years, but there were approximately 657,000 disputes initiated in 2023 and nearly one million filed in the last half of 2024.
The dispute settlement process established by the No Surprises Act was not designed to handle this many cases, and it seems some providers have figured this out and are gaming the system to fleece the insurance plans we pay into. For example, seventy percent of all cases initiated in the second half of 2024 were filed by just ten healthcare providers, with the top three healthcare providers initiating over forty percent of the cases.
It appears that the issue will soon be coming to a head. In the last two months Anthem Blue Cross Blue Shield has filed complaints against several providers for initiating fraudulent claims under the dispute settlement process established by the No Surprises Act, alleging it has paid the providers listed in their civil suit over $30 million in improper dispute settlement awards. It also alleges that a conspiracy exists between several providers to collectively exploit the No Surprises Act to bilk the insurer of more money and has pursued a RICO lawsuit.
Awarding money to healthcare providers in these disputes is not free money: It represents foregone revenue for the insurer that will inevitably necessitate higher insurance premiums.
It is clear that despite the legislation, the dispute settlement process between providers and insurers is broken. A 2024 study released by the Center on Health Insurance Reform at Georgetown University found some healthcare providers are consistently submitting fraudulent or otherwise ineligible claims to the dispute settlement arbitrators.
One problem with the status quo is that the incentives of the current dispute settlement process are misaligned: Arbiters only receive compensation when they hear a dispute and make a judgment for a financial settlement. Certain providers have recognized this flaw and decided to file as many disputes as possible, regardless of merit.
President Trump has the opportunity to cement his legacy on banning surprise medical bills--by directing his Administration to do what the Biden Administration failed to do.
The federal government needs to resolve these issues. There needs to be more intensive screening for which cases actually qualify for the dispute settlement process, better training for arbiters on the pricing of services, and greater transparency between providers, insurers, and arbiters about decisions so that policies can be adjusted to avoid disputes in the future.
