Pallone Bill Would End No Surprises Act Arbitration After 2027 as Cost Estimates Top $22 Billion

The No Surprises Act did what it promised for patients. The arbitration system attached to it is where the money is going.

The law took effect in 2022 to end unexpected bills when patients unknowingly get out-of-network care at in-network facilities. By most measures it has worked on that front. But the process for deciding what insurers owe those out-of-network providers, known as independent dispute resolution (IDR), has become a fight over billions of dollars.

The numbers

Georgetown University researchers estimate the IDR process has added more than $22 billion in healthcare costs since the law took effect. They attribute that mainly to providers filing, and winning, an outsized share of disputes.

In an opinion piece for the Washington Post, Jackson Hammond and Brian Blase of the Paragon Health Institute put the cost to Americans at nearly $17 billion last year alone. Blase is Paragon's president, and Hammond is a senior policy analyst there. They argue that affordability is a top issue for candidates in both parties less than a month before the midterms, and that Congress should start with this arbitration system.

The Georgetown researchers also found that for some services, providers were paid far above Medicare rates. Breast reductions drew more than 80 times what Medicare would have paid last year.

Those figures are estimates from researchers and advocacy-group authors, not audited totals.

What a CBS News investigation found

A CBS News investigation, updated Oct. 7, found that insurers are paying hundreds of dollars for routine lab tests that typically cost $10 to $30, according to industry researchers. Much of the money comes from employer-sponsored health plans, so workers can end up paying through higher premiums or reduced benefits.

In one case, plastic surgeon Dr. Norman Rowe was awarded more than $400,000 for a breast reduction. The insurer said it had previously paid him between $6,000 and $30,000 for that procedure. CBS's analysis of public data found Rowe routinely won around 170 times the benchmark rate. It found Long Island spine surgeon Vadim Lerman won an average of 280 times the benchmark.

The design helps explain it. Under the law's "baseball-style" arbitration, each side submits an offer and the arbitrator picks one. Arbitrators weigh the insurer's median in-network rate, called the qualifying payment amount, and may also look at rates from FairHealth, a nonprofit data source. Medicare rates may not be considered.

The providers' response

The doctors' side says the problem is the insurers' benchmark, not the awards. A spokesman for Rowe told CBS that insurers had manipulated benchmark rates to create "artificially low reimbursement rates." He said Rowe relies on FairHealth benchmarks, which he called the "gold standard" and which are written into statutes and regulations around the country.

A spokesman for Lerman said the claim that he receives "hundreds of times" benchmark rates is incorrect. He said an insurer's initial offer "can be inappropriately low for a complex surgical procedure" and should not be the comparison point.

Pallone's bill

Rep. Frank Pallone, D-N.J., ranking member of the House Energy and Commerce Committee, has introduced the "Lower Premiums, Faster Payments Act." It would end arbitration between payers and providers after 2027.

From 2028, plans would pay out-of-network providers a flat rate. That rate would be the insurer's median contracted rate as of Jan. 31, 2019, adjusted each year for the Consumer Price Index. The bill would also bar judicial review of the methodology, aimed at cutting off the lawsuits that have dogged the process.

Pallone said the arbitration process is "clearly not working." He also said: "A few bad actors — largely backed by private equity — are gaming the system, creating backlogs, delaying payments, and driving up premiums."

The Georgetown researchers found that more than three-fourths of resolved disputes in 2025 came from three private-equity-backed organizations. That is a finding about who files the disputes. It does not establish what any of them did wrong.

What is at stake

Congress created this arbitration market in 2022 to settle prices between insurers and providers. Pallone's bill would replace it with a government-set formula tied to a 2019 insurer rate. That would remove the awards critics call inflated. It would also remove the ability to challenge a payment rate in court.

The bill's path is unclear. It was introduced by a minority-party member, and no hearing or markup has been announced. The $17 billion and $22 billion figures are the numbers any reform debate will be argued over, along with the dispute between providers and insurers about which benchmark is fair.