How the law protecting Americans from surprise medical bills is driving up healthcare costs

Source: The Conversation – USA (2)

Imagine you get hit by a car. An ambulance brings you to the nearest hospital. Your private health insurance covers emergency care, but the hospital isn’t in your plan’s network.

Before 2022, if you received emergency care from an out-of-network provider or hospital, you could get hit with an extra, often huge bill on top of what you owe as a copay, coinsurance or deductible.

A law called the No Surprises Act, which took effect in 2022, was designed to protect people with private health insurance from just these situations. It limits your costs to what you would have paid if the ambulance had brought you to an in-network hospital or you were treated by an in-network provider instead.

As a health policy researcher and a former federal employee who helped draft the rules to implement the No Surprises Act, I applaud the law’s success in preventing patients from being hit with surprise medical bills in most cases.

However, a small number of out-of-network providers are using the law to extract enormous payments from health plans. This behavior is starting to drive up the cost of coverage for both employers and individuals. In my view, if left unaddressed, these increases will only get steeper.

Medical bill concerns

The No Surprises Act was designed to address a troublesome feature of the U.S. healthcare system: It is notoriously difficult to predict how much your healthcare will cost. This is especially true when someone receives out-of-network care.

Before the law went into effect, roughly 20% of inpatient emergency department visits resulted in a surprise bill from an out-of-network provider. Surprise bills are common for other types of care too. One study found roughly 40% of air ambulance rides resulted in a surprise bill, costing an average of almost US$20,000.

The threat of these bills exacted an enormous emotional and financial toll. Roughly two-thirds of Americans reported being very or somewhat worried about unexpected medical bills, according to a 2020 poll conducted by KFF, a national health policy nonprofit.

Security from surprises

The No Surprises Act protects Americans from certain instances of a practice called balance billing, in which an out-of-network hospital or doctor asks you to pay the difference between what they billed for a service and what your insurance agreed to pay for it.

When a provider joins your plan’s network, they agree to accept a specific payment for a given service or procedure. They agree to charge you only for cost sharing, such as a copayment, coinsurance or deductible, and they aren’t allowed to balance bill you.

However, plans can’t prevent out-of-network providers or facilities from balance billing. On top of that, your own plan may also charge you a higher copayment, coinsurance or deductible when you go out of network. That’s why out-of-network care can be much more expensive than in-network care.

The No Surprises Act protects consumers from these extra costs in cases where they have little or no control over whether they see an in- or out-of-network doctor. The law prohibits balance billing and requires cost sharing to be at approximately in-network levels in three cases where surprise medical bills were common:

• If you receive out-of-network emergency care at a hospital or independent freestanding emergency facility. In a medical emergency, you’re not expected to figure out whether the closest hospital is in-network. You can’t be balance billed.

• If an out-of-network provider treats you during a visit to an in-network hospital or ambulatory surgical center. For example, if an out-of-network anesthesiologist cares for you during a surgery at an in-network hospital, that anesthesiologist cannot balance bill you.

• If you receive out-of-network air ambulance services.

The No Surprises Act doesn’t prevent big, unexpected medical bills in all cases. For example, you can still get balance billed for ground ambulance services or if you see an out-of-network doctor outside of a hospital or ambulatory surgical center.

Providers win big

The No Surprises Act is working as promised for patients – as of September 2026, it has prevented approximately 50 million surprise medical bills. But there’s a downside: Employers and unions are raising the alarm that the No Surprises Act is increasing the cost of providing health insurance.

What’s driving up costs is an arbitration process run amok.

Rather than specifying how much insurance plans should pay out-of-network providers, the law allows providers who are dissatisfied with the plan’s payment to bring disputes to arbitration. Each side submits an offer. The arbitrator must select one party’s offer as the out-of-network payment.

To choose an offer, the arbitrator considers information submitted by both parties. Information can vary by case. But the law requires the arbitrator to always consider an amount that is basically the middle amount the health plan pays in-network providers for the same service.

Health policy experts like me anticipated most disputes would be settled close to this amount. Over time, experts expected this would put downward pressure on the cost of healthcare and result in payments to both in- and out-of-network providers going down. The Congressional Budget Office predicted these lower payments would reduce premiums for consumers by 1% and reduce federal deficits by $17 billion.

As a federal employee, I worked on rules that would have required the arbitrators to treat the middle amount as a strong benchmark. I expected those rules to achieve savings like those predicted by the Congressional Budget Office. But lawsuits from providers blocked those rules from going into effect.

Without those rules, arbitrators are selecting offers that are far above what plans would pay in-network. The winning offers are also much larger than what Medicare would pay for the same service.

Providers are winning the vast majority – roughly 85% – of these disputes. They are also using arbitration more than expected. The federal government estimated there would be 17,000 disputes annually. Last year, there were more than 2 million disputes, many brought by providers with private equity investment. And the volume of disputes has grown every year.

Frequent and big provider wins at arbitration will not put downward pressure on healthcare prices. They will likely do the opposite.

Consumers bear the cost

When a provider wins an arbitration dispute, an individual patient’s cost sharing doesn’t change. It is capped at what the in-network amount would have been.

However, consumers as a group are the ones who ultimately will pay for the cost of arbitration. Researchers estimate the arbitration process alone cost health plans $22.4 billion in the law’s first four years. This doesn’t include the increases in in-network rates that are likely to occur if arbitration trends continue on pace.

I’m concerned that to pay for this, insurance companies will increase rates. Employers will need to budget more to pay for health insurance or increase the amount their employees pay.

We’re already seeing the costs of arbitration affect the price of health insurance. The New York state employee plan reported that the No Surprises Act was a key driver behind the plan’s 10% rate hike for 2027. A Texas city reported the No Surprises Act caused its employee plan to exceed its 2026 budget by $40 million.

Right now, only a small portion of providers use arbitration. If volume continues to grow and providers continue to win big, the cost of arbitration will grow as well – and so too will costs for consumers.

Looking forward

With healthcare costs a huge concern for Americans and a major issue in the 2026 midterm elections, the No Surprises Act is under scrutiny.

Congress appears interested in addressing this threat to affordability. In September 2026, the Senate Health, Education, Labor and Pensions Committee hosted a roundtable to discuss options to fix the law. In October, U.S. Rep. Frank Pallone, a New Jersey Democrat, introduced legislation to scuttle the arbitration system entirely.

Absent action by Congress, I fear that the protection the No Surprises Act offers Americans will come at a cost that ultimately limits consumers’ access to health insurance.

Lindsey Murtagh receives funding from Arnold Ventures

Original source: https://analysis1.mil-osi.com/2026/10/29/how-the-law-protecting-americans-from-surprise-medical-bills-is-driving-up-healthcare-costs/