No Surprises Act arbitration may raise premiums and healthcare costs, CBO says

The Congressional Budget Office (CBO) may need to rethink its original projection that the No Surprises Act would save money for the federal government, the agency said this week in a recommendation for additional research on the issue.

In 2021, the CBO estimated that the newly signed law would lower provider payments, especially out-of-network rates, while reducing commercial insurance premiums by roughly 1% and decreasing federal deficits by $17 billion through 2030.

New data suggests a different trajectory, the CBO wrote June 15 in a blog post, even as the law fulfills its core goal of protecting patients from out-of-network balances on surprise bills.

The issue stems from arbitration outcomes that have tilted in favor of providers since the independent dispute resolution (IDR) portal opened in April 2022.

“Although evidence suggests that prices for services affected by the No Surprises Act may have initially decreased, arbitration outcomes could lead to higher prices over time,” the CBO wrote. “If providers can systematically secure large payments through the IDR process, they have an incentive to remain out of network or demand higher in-network rates.

“An increase in prices would increase premiums for commercial health insurance and, in turn, lead to larger federal deficits,” the CBO added.

The link between a rise in commercial insurance premiums and federal deficits is the correspondingly higher federal spending on subsidies for Affordable Care Act (ACA) marketplace insurance, along with a reduction in tax revenue as employers shift spending from wages to health benefits.

What the CBO initially anticipated

In 2021, with balance billing newly prohibited and the insurer’s median in-network rate (i.e., the qualifying payment amount, or QPA) expected to anchor arbitration decisions, the CBO anticipated that reduced out-of-network reimbursement would tamp down in-network negotiated rates and, in turn, result in lower insurance premiums.

Roughly 80% of the projected savings were from lower in-network rates, the CBO noted.

“That percentage reflects the comparatively small share of spending that is out of network and the influence of out-of-network prices on in-network prices,” the blog post states. “A provider that can credibly threaten to remain out of network when negotiating in-network payment rates can demand higher rates. Before the No Surprises Act became law, providers had greater leverage because they could credibly threaten to stay out of network and then balance-bill patients if the insurer refused to pay higher rates.”

That advantage may still exist after all, which is why the CBO is calling for additional research.

IDR volume has far exceeded projections

With arbitration volume surging past initial expectations of 22,000 disputes filed annually, the IDR process is being utilized more aggressively than anticipated. There were 3.4 million disputes filed between the launch of IDR in 2022 and mid-2025, the CBO noted.

Potentially contradicting the trends at issue in the blog post, the CBO alluded to an apparent increase in in-network participation and an inflation-adjusted decrease seen in recent years for applicable in- and out-of-network services.

“However, those studies rely on just a few years’ worth of data since the law was enacted, and isolating the law’s effects from previous trends is difficult,” the CBO wrote.

“By contrast, evidence based on outcomes from arbitration suggests that the law could cause premiums to increase if outcomes from arbitration enhance providers’ ability to secure higher prices by credibly threatening to stay out of network.”

Provider win rates and award amounts reshape the debate

Providers are winning more than 80% of disputes in the IDR portal, and IDR awards are often far above expected payment benchmarks such as the QPA, average in-network commercial rate and Medicare benchmarks. The CBO said some estimates place awards at between 400% and 500% of Medicare rates.

One issue is that IDR did not get applied as CMS officials planned when they were drafting No Surprises regulations said Lindsey Murtagh, senior fellow at the Brown University School of Public Health and, prior to that, a regulatory and policy director with CMS while No Surprises was being implemented in 2021.

“The rules that we actually adopted would have put downward pressure on prices and achieved many of the cost containment goals of the No Surprises Act, while protecting consumers,” Murtagh said during a recent webinar hosted by the University of Pennsylvania and the Tradeoffs podcast. “However, they have not been implemented as intended. I think if they had been, we wouldn’t be seeing such a high percentage of disputes going to providers. We certainly wouldn’t be seeing such high award amounts.”

Specifically, she said, “litigation has transformed the arbitration process into an extremely provider-friendly environment,” with the Texas Medical Association (TMA) filing lawsuits that successfully challenged both the central role of the QPA in deciding arbitration cases and insurers’ methodology for calculating the QPA.

The TMA argued that an objective reading of the No Surprises statute shows Congress never meant for the QPA to be the dominant factor in an IDR case. Rather, the law was designed to allow arbitrators to equally consider multiple factors.

New federal rules target IDR operations, not arbitration criteria

In a recently published final rule, CMS and the Departments of Labor and Treasury implemented regulations to improve the efficiency of IDR, incorporating guidelines and processes that are intended to better weed out ineligible cases and keep things moving.

The rule does not address IDR criteria and thus seems unlikely to affect the outcome trends seen in recent years. If anything, volumes can be expected to rise after CMS dropped the IDR administrative fee from $115 to $15 per party per case, hoping to improve access for small providers.

Providers’ overall success in IDR merely reflects the extent to which they are systematically underpaid by insurers in the out-of-network payment negotiations that precede arbitration, advocates say. The new rule does not address a recurring complaint of providers that insurers delay making arbitrated payments well past the 30-day statutory deadline or withhold the payments altogether.

“Despite this clear [deadline], insurers have too often treated final payment determinations as optional,” the American Medical Association wrote in comments about drafted legislation that would penalize insurers for delays. “The impact of this failure to enforce the No Surprises Act has been widespread.”