CFO, are you paying for a law that was supposed to protect your employees?
Because that is exactly what is happening right now.
This month, a coalition of 67 health care industry and advocacy groups sent a letter to congressional leadership calling the No Surprises Act arbitration process a "massive unforeseen crisis in employer-sponsored coverage." Those words belong to Melissa Bartlett, senior vice president for health policy at the ERISA Industry Committee. She is not a fringe voice. She speaks for the people managing the benefits your employees depend on.
Here is how a law designed to protect patients became a $15 billion revenue engine for a handful of provider groups.
What the No Surprises Act Actually Did
The No Surprises Act, passed in 2020, did something genuinely good. It shielded patients from getting blindsided by out-of-network bills after emergency visits or procedures at in-network facilities. Before the law, a patient could walk into an in-network hospital, get treated by an out-of-network anesthesiologist they never chose, and wake up to a $50,000 bill. Families USA and patient advocacy organizations had pushed for this protection for years, and when it finally arrived, it was one of the rare bipartisan achievements in health policy.
That part worked. Patients are protected.
But the law also created a "baseball-style" arbitration system called Independent Dispute Resolution (IDR) to settle payment disputes between providers and insurers when no contract exists. Here is how it works: when an out-of-network provider treats a patient at an in-network facility, the insurer pays an initial amount. If the provider disagrees, both sides submit their proposed payment to an independent arbitrator. The arbitrator must pick one offer. No splitting the difference. No middle ground.
The idea was that this would be a rare last resort. Congress expected roughly 22,000 disputes per year, according to CMS projections.
The actual number in 2025 was 2.5 million. That is not a rounding error. It is a 113-fold overshoot of what the system was designed to handle.
Follow the Money: $15 Billion in One Year
According to a Wall Street Journal analysis cited by AHIP, providers secured $15 billion in arbitration payments in 2025 alone. That is more than triple the $4.08 billion paid out in 2024.
To put that in context: those payouts averaged more than six times the local in-network rates. Some specialties pushed far beyond that. Neurology and neuromuscular procedure claims peaked at 30 times the qualifying payment amount (QPA) in the second quarter of 2025. Surgery specialties hit 15 times the QPA by year’s end.
The most extreme documented examples are staggering:
A plastic surgeon earned $440,000 for a routine breast reduction that would typically cost $15,000 to $25,000.
A spine surgery award came in at $34,000, which is 24 times the median in-network rate of $1,400.
A surgical assistant was paid $50,456 for the same procedure where the in-network surgeon received $1,843. The assistant earned 27 times what the surgeon did.
These are not anomalies. They are the predictable result of a system designed without guardrails.
Who Is Filing, and Why It Matters
This is not a story about individual doctors seeking fair compensation. Four companies filed nearly half of all 2025 disputes:
HaloMD: 19% of all filings, earning median awards of 835% to 920% of the QPA
TeamHealth: 12%
SCP Health: 10%
Radiology Partners: 7%
Several of these are private-equity-backed physician staffing firms. Before the No Surprises Act, they maximized revenue by staying out of network and balance-billing patients directly. The law closed that door. Arbitration opened a bigger one.
Emergency department services account for 54% of disputes. Radiology adds another 20%. Anesthesia and surgery make up most of the rest. These are the specialties where patients have no choice of provider, which is precisely why the No Surprises Act was written in the first place.
The arbitration system was supposed to be a safety valve. It has become a business model.
How We Got Here: The QPA Problem
Understanding why providers win so consistently requires a short detour into regulatory history. When Congress wrote the No Surprises Act, it intended the Qualifying Payment Amount (QPA), essentially the median in-network rate for a given service in a given market, to serve as the primary benchmark for arbitration decisions. Arbitrators were supposed to start from the QPA and adjust only for compelling reasons.
That framework lasted about five months.
In February 2022, a federal judge in Texas struck down the rule that gave the QPA presumptive weight, ruling that the law required arbitrators to consider all factors equally. That decision, later reinforced by additional litigation, effectively removed the anchor from the system. Without the QPA as a starting point, arbitrators could weigh provider arguments about training, complexity, and market conditions with the same importance as actual market rates.
The result was predictable. Providers began submitting dramatically higher offers, knowing that arbitrators were no longer bound to start from in-network benchmarks. Median provider offers climbed to 4 times the QPA across all specialties. By the final quarter of 2025, that median had reached 5 times the QPA. And since arbitrators must choose one offer, a high provider offer anchors the entire decision upward, even if the arbitrator picks the insurer’s number. The mere act of filing at inflated rates shifts the negotiating landscape.
CMS has attempted to issue revised guidance, but each iteration faces new legal challenges. A CMS spokesperson acknowledged the problem: "The system is being gamed to get higher prices, and CMS is actively working to clean it up." Working is the operative word. Four years after the law took effect, the cleanup has not caught the game.
The Premium Pipeline: How $15 Billion Reaches Your Paycheck
Providers win approximately 85% of disputes. Those awards do not vanish into an abstract policy debate. They flow through a direct pipeline:
Insurer pays the arbitration award (often 4 to 6 times the in-network rate).
Insurer raises premiums to cover higher-than-expected costs.
Employer absorbs most of the premium increase.
Employer passes a portion to employees through higher payroll deductions.
Employee receives the same coverage but pays more for it.
ERIC estimates that employers and workers have absorbed $22.4 billion in arbitration-driven costs over four years (spring 2022 through 2025). IDR filings increased 77% from 2024 to 2025 alone. The trajectory is accelerating, not stabilizing.
As ERIC President James Gelfand put it: "We like the No Surprises Act; we want to protect patients. But if we want to continue having a system where employers and unions work together to make sure 160 million people have health insurance through the private sector, not the government, we have to do something to restore accountability and balance to this system."
The Arbitration Machine: Who Profits From the Process Itself
Beyond the awards, the IDR process itself has become a profit center. Total program costs surpassed $2.8 billion by the end of 2025. Independent Dispute Resolution Entities (the arbitration firms) collected $1.2 billion in compensation.
Arbitrators are paid $300 to $9,000 per case, creating volume incentives. A University of Pennsylvania analysis found that some investment firms own both physician staffing companies and arbitration entities, raising questions about structural conflicts of interest.
Rep. Frank Pallone Jr. (D-N.J.), the top Democrat on House Energy and Commerce, is now scrutinizing the arbitration firms themselves. Senate HELP Committee Chair Bill Cassidy (R-La.) has announced a members’ roundtable. House Ways and Means Republicans are investigating the cost spiral.
But legislative roundtables move slowly. Premiums do not wait.
What This Looks Like for a Mid-Size Employer
Consider a self-insured employer with 5,000 covered lives. In 2025, their total health plan spend was approximately $75 million. If arbitration-driven cost increases added even 2% to their claims experience (a conservative estimate given the $22.4 billion aggregate), that is $1.5 million in additional cost that did not exist before the IDR system took its current shape.
That $1.5 million does not show up on a line item labeled "No Surprises Act arbitration surcharge." It arrives as higher stop-loss premiums, increased claims reserves, and actuarial adjustments at renewal. The CFO sees a 6% to 8% renewal increase and attributes it to general medical inflation. But embedded in that number is a cost created entirely by a dispute resolution process that was supposed to be rare.
Multiply that across the 3.4 million employer-sponsored health plans in the United States, and the aggregate impact becomes the $22.4 billion that ERIC has documented. Self-insured employers bear the most direct exposure because they pay claims dollar-for-dollar. Fully insured employers feel it through premium increases. Either way, the cost finds the people who write the checks.
The Counterpoint, and Why It Is Not Enough
The provider argument deserves a fair hearing. In-network rates can be artificially suppressed by payer leverage. In many markets, one or two dominant insurers control 60% or more of the commercial population, giving them enormous negotiating power. Small physician groups, independent practices, and rural providers genuinely struggle to negotiate fair contracts with these dominant insurers. Arbitration was meant to correct that imbalance, and for some providers, it has.
But a system where four companies file half of all disputes, awards routinely exceed 400% of benchmark rates, and providers win 85% of the time is not correcting an imbalance. It is exploiting one. The correction mechanism has become a revenue strategy, and the costs are landing on the 160 million Americans whose employers provide their health coverage. When a surgical assistant earns 27 times what the surgeon does for the same procedure, the system is not finding fair market value. It is finding whatever number the arbitrator will accept.
What Needs to Happen
The coalition of 67 groups advocates benchmarking disputed payments to Medicare rates or median in-network rates instead of the current free-for-all. Washington state already uses a transparency-focused model with significantly fewer disputes, suggesting alternatives exist.
Three structural fixes would address the core problem:
Anchor awards to benchmarks. Re-tie arbitration decisions to the Qualifying Payment Amount or adopt direct benchmark payment systems. Without an anchor, the system drifts toward whoever asks for more.
Audit arbitrator decisions. Track performance metrics across arbitrators, condition contracts on alignment with the law’s original goals, and address the 85% provider win rate that suggests systemic bias rather than case-by-case evaluation.
Close the volume loophole. When four companies generate half of all filings, the system is being used as a revenue channel, not a dispute resolution mechanism. Volume caps, filing fees tied to claim value, or consolidated case requirements would discourage strategic flooding.
The Oatmeal Health Take
Health policy is almost never a clean win. The No Surprises Act protected millions of patients from financial ruin at the point of care, and that matters enormously. Patients should never go bankrupt because they had no say in which anesthesiologist walked into the operating room.
But when the solution to one crisis becomes the engine of another, the system owes it to everyone in the room to get honest about what is actually happening. Right now, the arbitration market is not honest. It is a $15 billion signal that something is broken, and the people paying the price are the ones we said we were trying to protect.
The question is whether Congress will act before the next open enrollment cycle, or whether employers and their workers will absorb another year of costs from a system that was supposed to save them money.
Jonathan Govette is CEO of Oatmeal Health, a lung cancer screening company. Follow for daily healthcare insights. Deeper dives in The Oatmeal Bite on Substack: https://news.oatmealhealth.com
Key References:
Roll Call: "Surprise billing dispute process in 'crisis,' groups say" (September 14, 2026)
AHIP/WSJ: "$15 billion paid to providers in 2025 alone"
ERIC: "Employers Are Absorbing the Costs" (2026)
Niskanen Center: "New Data, Same Problem" (2026)
Penn LDI: "How the No Surprises Act Solved One Problem and Created Another"
CMS: Independent Dispute Resolution data