The federal ban on surprise medical bills has largely succeeded at its central task: keeping patients out of payment disputes between insurers and out-of-network providers. But the law, the No Surprises Act (NSA), has produced a surprise of its own since taking effect in 2022: providers have filed millions of claims in the federal arbitration process, winning 85% of cases, frequently at many times the typical in-network rate.
With health insurance costs expected to make another big jump next year it probably is no surprise that the NSA is in trouble. Two recent proposals underscore the urgency. The Paragon Health Institute, a leading conservative health policy think tank, urges a dramatic narrowing in federal arbitration, including exclusion of some nonemergency care. Rep. Frank Pallone (D-N.J.), one of the authors of the NSA, would install a benchmark-based payment system, replacing arbitration all together.
Before Congress makes such sweeping changes, it should consider a narrower repair strategy.
As a longtime student of the NSA, it is evident to me that three hard-won consumer protections should remain nonnegotiable:
First, the law bars surprise bills for covered emergency care, including air ambulance services, and certain out-of-network care at in-network facilities. This is the heart of the NSA and a provision that consumers would be loath to surrender.
Second, the amount owed by patients is generally calculated using the typical rate insurers pay in-network providers rather than an out-of-network provider’s charge. This rate, known as the qualifying payment amount, keeps out-of-pocket costs from being dragged higher if arbitration awards more money to the provider.
Third, the law calls for advance explanations of benefits, which could help patients anticipate expenses and compare options before receiving non-emergency care. This protection still hasn’t been fully implemented and deserves attention, not abandonment.
Arbitration, by contrast, has not delivered what many hoped. Independent dispute resolution (IDR) was intended to offer an accessible way to settle disagreements and encourage reasonable offers without constant adjudication. Instead, the complexity of IDR has created a growing market for third-party intermediaries that help providers and insurers pursue disputes. The process, though intended to resolve disagreements efficiently, has generally benefited large provider organizations and created opportunities for intermediaries to capture a share of healthcare spending, adding to administrative costs.
The system also created structural barriers for small medical groups. Fixed arbitration charges can make low-dollar disputes prohibitive (for instance, pathology and radiology claims), even as high-value claims and batching of claims offer large organizations greater potential returns. Large insurers and provider groups already have other legal channels for some disputes, such as litigation and commercial arbitration; federal IDR should not become another process that chiefly rewards scale.
Regulators are not standing still. A May 2026 final rule seeks to improve communication between insurers and providers, clarify eligibility and negotiation procedures, and reduce administrative costs. Some operational changes are still being rolled out. These steps reflect genuine efforts to improve the system within the limits of the statute and court rulings. But they cannot, by themselves, resolve every structural concern.
Four additional reforms deserve consideration:
First, the current baseball-style arbitration structure, in which arbitrators must choose either the payer or provider offer, has not incentivized moderate offers as legislators envisioned. Arbitrators should be able to choose any value they deem appropriate within the range of the two offers.
Second, arbitration fees should be aligned with the value of disputes, such as a percentage of the qualifying payment amount or the Medicare rate. A sliding-scale fee structure could make IDR more accessible to small independent physician practices, particularly those pursuing lower-dollar claims, while discouraging excessive use by organizations pursuing high-value or high-volume disputes. Properly calibrated fees could help reserve federal IDR for disputes that would otherwise be too costly to pursue, while encouraging better-resourced organizations and those facing larger financial stakes to resolve their disagreements through negotiation or existing commercial dispute mechanisms.
Third, decision-making should be more accountable. Requiring that the individual professionals who decide cases must be identified—rather than only their employing organizations—could strengthen reputational accountability. Policymakers should also examine decision patterns, qualifications, and conflict-of-interest disclosures to ensure impartiality.
Fourth, eligibility screening could be improved. For example, arbitrators should have no financial incentive to allow ineligible disputes (for example, claims regulated by states) to move forward to a decision. Payment rules should reward accurate, timely screening, including when a claim is found ineligible.
Some changes may fit within regulatory authority; others may require legislation, particularly given the litigation that has repeatedly reshaped implementation. The goal should be to preserve the protections that work, while completing the unfinished promise of better cost transparency and making arbitration more accessible, transparent, and credible.
Erin Duffy is the Managing Director of the USC Schaeffer Institute for Public Policy and Government Service.
