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The ‘Surprise Billing’ Racket
Biden officials predicted 17,000 arbitration disputes a year under the No Surprises Act. In 2026 there were 2.6 million.
By
The Editorial Board
July 23, 2026 5:55 pm ET
Jacquelyn Martin/Associated Press
Congress measures success by what it passes, not by the results of what it passes. A classic example is the No Surprises Act of 2020, which has had consequences nearly the opposite of what was intended. Read on and weep.
Surprise medical bills were the outrage du jour before the pandemic, and in 2019 President Trump leapt in: “For too long, surprise billings—which has been a tremendous problem in this country—has left some patients with thousands of dollars of unexpected and unjustified charges for services they did not know anything about.”
Surprise bills usually resulted from patients who received emergency care at hospitals outside their insurance network, or at in-network hospitals that contract with out-of-network providers. Hospitals sometimes employ outside provider groups that can be less expensive than putting physicians on their payrolls.
As Congress considered arbitration legislation, insurers and provider groups clashed. Insurers wanted Congress to require arbitrators to peg payments to out-of-network providers to their in-network rates. Provider groups called this unfair.
Congress finally attached the No Surprises Act to its December 2020 Covid spending splurge. Providers won. Insurers and their customers lost. The legislation ended surprise bills but swelled costs for insurers, which are now being passed along in higher premiums.
The law established baseball-style arbitration to resolve payment disputes between out-of-network providers and insurers. Third-party arbitration companies certified by the Centers for Medicare and Medicaid Services (CMS) are required to choose between payment rates proposed by a patient’s insurer and the provider. No splitting the baby.
Arbitrators last year ruled in favor of providers in nearly 90% of cases. Large provider groups on average win payments that are three to nine times in-network rates. One reason is that they can choose which CMS-certified arbitration company reviews their claims. No surprise, they funnel claims to those that rule in their favor.
Arbitrators also have a strong incentive to rule for providers to attract more business. Arbitrators set their fees—typically about $600 per claim—which are paid by the losing party. Ruling for providers encourages them to file more claims. No surprise, claims have exploded.
In 2021 Biden officials projected that 17,000 disputes would go to arbitration every year. Last year there were 2.6 million, and claims keep rising. Claims against Elevance Health increased 30% between last year’s fourth quarter and this year’s first.
Insurers have challenged about 40% of claims by providers as ineligible for arbitration under the no surprise law, usually because they involve elective procedures. But arbitrators don’t often throw out ineligible claims. Why not? Because they don’t get paid unless they issue a payment determination.
Providers are winning huge payouts for ineligible claims, which encourages them to file more claims seeking bigger payments. The riches that can be made have discouraged providers from joining insurer networks, which ironically was one of the surprise billing law’s goals.
Planned procedures—not emergencies that the law was designed to address—account for the bulk of insurer payouts. Elevance says plastic surgeons seek $100,000 on average for breast reduction surgeries, while its in-network providers are paid $2,000 to $5,000 on average. Medicare pays only $1,500. One Connecticut practice is obtaining awards of roughly $440,000 for the procedure.
In New York, podiatrists are filing claims averaging $30,000 for hammertoe surgeries. Medicare pays roughly $400 for the procedure, and in-network providers get $700. Doctors who remotely monitor patients’ nervous systems during surgeries—often from their homes in other states—have joined the racket.
In several markets reviewed by Elevance, surgeons performing spinal procedures are typically reimbursed $7,000 to $12,000, while out-of-network neurologists remotely monitoring them are winning upwards of $40,000 in arbitration. One provider sought $9 million in a single year for remote neuro-monitoring services.
A lucrative cottage industry has developed around this system. Medical billing companies—the most prominent is HaloMD—submit claims on behalf of providers and take a cut of provider awards. The owners of HaloMD also run a neuro-monitoring service.
Private-equity firms own some of the top billing providers, including TeamHealth, SCP Health and Radiology Partners. They also are financing arbitration companies. Don’t blame private equity for exploiting the perverse incentives that Congress created.
Hard to believe, but Democratic-run states are doing a better job of limiting arbitration abuse. Between May 2024 and May 2025, Virginia’s arbitration system for fully-insured commercial plans—enacted by Democrats in 2020—handled 252 cases compared to more than 34,000 Virginia cases that were filed in the federal system.
Democrats in New York recently capped provider payouts under their state system. The reforms came after state officials discovered that arbitration abuse was costing its state employees’ health plan more than $200 million. This abuse “is a primary contributor to the nearly 10 percent increase in premium rates this year,” the state said.
Insurers are begging Congress and the Administration for help to counter abuse. One place to start would be for CMS to audit and decertify arbitration firms that repeatedly rule for providers on ineligible claims. CMS could also issue guidelines setting caps on payments to providers, though legislation might be required to make this stick.
Alas, the Trump Administration recently finalized a Biden proposed rule aimed at making arbitration more efficient and less expensive for providers. This will encourage more claims. The surprise billing fiasco is typical of how the government works—or, more accurately, doesn’t.
