No Surprises Act’s Arbitration Loophole Drives Up Healthcare Costs, Investigation Finds

While the No Surprises Act successfully eliminated unexpected medical bills for patients, a CBS News investigation has found that its dispute resolution mechanism has inadvertently created a lucrative arbitration industry. This system allows out-of-network providers and specialized intermediaries to secure payments significantly higher than standard billing rates, ultimately increasing healthcare costs for consumers.

Under the law, which became effective in 2022, insurers are frequently required to pay hundreds of dollars for routine laboratory tests that typically cost between $10 and $30. In extreme cases, such as with plastic surgeon Dr. Norman Rowe, awards have exceeded $400,000 for a breast reduction—a procedure previously compensated at between $6,000 and $30,000. Data analysis indicates Dr. Rowe was awarded approximately 170 times the benchmark rate for his services.

Dr. Rowe’s spokesman argued that insurers manipulate benchmark rates to offer artificially low reimbursements. He stated that Dr. Rowe relies on FairHealth benchmarks, a nonprofit data source considered the gold standard and incorporated into many state health programs. Meanwhile, spine surgeon Vadim Lerman was found to receive awards averaging 280 times the benchmark rate, though he disputed the characterization, arguing that insurer initial offers for complex surgeries are often inappropriately low.

The dispute process operates under a “baseball-style” or pendulum model, where an arbitrator must choose between one of two proposed rates without room for negotiation. Leland Robbins, a product leader at Turquoise Health, noted that providers win more than 85% of these cases. Robbins explained that while patients are shielded from surprise bills, the financial burden has shifted behind closed doors.

“The transaction didn’t go away. It went behind closed doors and has moved into this arbitration process,” Robbins said. He added that because roughly 70% of arbitration awards are drawn from employer-sponsored health plans, consumers will likely see the impact through higher premiums or reduced benefits during open enrollment.

The volume of disputes has far exceeded federal projections. In the first six months of 2025 alone, 1.2 million new cases were submitted to the arbitration portal, compared to an estimated annual volume of just 17,000. Consequently, arbitrators have collectively earned over $2 billion in fees. While some companies, such as HaloMD, argue that initial government estimates were flawed and blame insurers for submitting nominal offers, critics contend that middlemen exploit the system to extract excessive payouts.

Rep. Frank Pallone, the Democrat from New Jersey who sponsored the original legislation, expressed regret over the outcome. He attributed part of the problem to private equity firms acquiring practices in anesthesiology, radiology, and emergency medicine, which drive the volume of arbitration cases. Pallone stated that the arbitration system was a necessary compromise to eliminate surprise billing but acknowledged the current results are severe.

Looking ahead, Pallone plans to introduce legislation this week to abolish the arbitration process entirely. The proposed reforms would mandate that out-of-network providers be paid in-network rates and exclude so-called “ghost rates”—insurer offers of $0 or $1—from benchmark calculations. “Why should these outside investors be making all this money off the backs of, you know, your insurance premiums, essentially?” Pallone asked.