Arbitration showdown: insurers, providers clash over surprise billing

By mid-2026, healthcare providers like Jefferson Health have aggressively challenged insurers such as Independence Blue Cross and Aetna over reimbursement policies they claim violate the No Surprises Act and breach contractual agreements. Jefferson Health's lawsuit, seeking nearly $100 million in disputed payments and a permanent injunction, highlights specific insurer tactics including downgrading inpatient stays to observation rates and underpaying drug costs tied to Medicare benchmarks. These legal actions underscore providers' frustrations with systematic underpayment practices that significantly strain their financial stability.

Beyond payment disputes, providers are contesting insurer policies that penalize hospitals for out-of-network physician services, as seen in the California Hospital Association's dispute with Anthem Blue Cross. Meanwhile, insurers have countered with lawsuits accusing providers like Prime Healthcare of abusing the No Surprises Act arbitration process by filing thousands of allegedly ineligible disputes. This reciprocal litigation dynamic reveals a contentious battleground where both sides accuse each other of exploiting regulatory frameworks to their financial advantage.

Complicating the landscape further are antitrust lawsuits targeting vendors such as MultiPlan (now Claritev), accused of enabling insurer price-fixing on out-of-network reimbursement rates. These allegations have sparked multidistrict litigation and Department of Justice criminal probes, with providers filing separate lawsuits after Blue Cross Blue Shield settlements. This ongoing legal turmoil highlights broader systemic challenges in the arbitration and reimbursement ecosystem, where alleged anticompetitive practices exacerbate provider grievances and fuel protracted conflicts.

Insurers have mounted a robust defense of their payment policies amid escalating disputes, with companies like Anthem Blue Cross accusing providers such as Prime Healthcare of abusing the No Surprises Act arbitration process through thousands of ineligible claims. This contention is echoed by leaders at UnitedHealthcare, Cigna, Elevance Health, and Aetna, who argue that a concentrated group of providers and billing companies are exploiting the Independent Dispute Resolution (IDR) system, thereby undermining the original intent of Congress and imposing undue financial burdens on employers and workers.

The financial repercussions of arbitration abuses have become a central concern for insurers, who warn that soaring arbitration awards are inflating healthcare costs and insurance premiums. Since the arbitration mechanism's inception in 2022, providers have won 85% of disputes, receiving payments averaging four times the insurers’ median in-network rates, culminating in $22.4 billion in additional awards and fees through 2025. This surge has prompted the Congressional Budget Office and industry executives like UnitedHealthcare’s Dan Kueter to question the efficacy of the IDR process and its unintended consequences on premium inflation.

In response to these challenges, insurers have actively engaged in advocacy efforts to reshape the arbitration landscape, with the Coalition Against Surprise Medical Billing launching multi-million-dollar ad campaigns targeting perceived misaligned incentives among arbitrators and opposing stricter enforcement legislation. While acknowledging clear abuses within the IDR process, executives such as Cigna’s Brian Evanko maintain that the overall financial impact remains manageable, even as insurers continue to sound alarms in court filings and earnings calls about the growing strain arbitration awards place on the health insurance market.

Despite the No Surprises Act's independent dispute resolution (IDR) process producing legally binding arbitration awards, enforcement remains a significant hurdle, with delayed reimbursements and limited mechanisms to compel payment. Patrick Velliky of HaloMD highlights how these payment challenges not only frustrate providers but also risk accelerating industry consolidation, threatening the viability of independent physician practices and narrowing patient choice.

The Fifth Circuit Court of Appeals dealt a critical blow to the No Surprises Act’s Qualifying Payment Amount (QPA) methodology by striking down insurer use of 'ghost rates' and mandating inclusion of bonus and incentive payments, while upholding the exclusion of single-case agreements common in air ambulance billing. This ruling came amid a surge in IDR disputes—over six million filed since 2022—with providers winning approximately 85% of cases, fueling insurer calls for reform due to perceived abuses and soaring arbitration awards now projected to reach $15 billion in 2025.

Major insurers like UnitedHealthcare and Cigna have publicly criticized the IDR system as being exploited by a small cadre of providers and billing firms, with UnitedHealthcare CEO Dan Kueter lamenting that the process is 'not working, certainly not as Congress intended it,' citing average payouts 11 times higher than Medicare rates. This lucrative intermediary sector, dominated by firms such as HaloMD, TeamHealth, and SCP Health, accounted for nearly 38% of disputes in late 2025, intensifying regulatory and legislative scrutiny and sparking multi-million dollar advocacy campaigns targeting arbitration incentives and enforcement.

Radiology groups including the American College of Radiology have raised alarms with CMS about stagnant or declining in-network rates pushing practices out-of-network and into the IDR process, which insurers sometimes undermine by missing payment deadlines or rejecting market-based offers. These groups also criticized the QPA benchmark as outdated and disconnected from current market realities—a concern underscored by the Fifth Circuit’s recent ruling. While CMS Chief of Staff Rebekah Armstrong acknowledged the agency’s limited enforcement authority under the No Surprises Act, she affirmed that addressing compliance issues remains a high priority for regulators.

The arbitration process under the No Surprises Act has dramatically increased payments to out-of-network providers, with providers winning roughly 85% of disputes and awards frequently exceeding insurer median in-network rates by fourfold. This surge has fueled a lucrative intermediary sector dominated by a few players such as HaloMD, TeamHealth, and Radiology Partners, which together account for a significant majority of arbitration cases and awards, raising concerns about market consolidation and its role in driving up healthcare costs.

Insurers like UnitedHealthcare and Cigna have become increasingly vocal about the unsustainable cost trends stemming from the arbitration process, with UnitedHealthcare’s CEO Dan Kueter highlighting that average payouts are 11 times higher than Medicare rates and that the company faces around 100,000 disputes monthly. This has prompted calls for reform of the independent dispute resolution (IDR) system, as major insurer and employer groups, including AHIP and the Blue Cross Blue Shield Association, have launched multi-million dollar campaigns targeting perceived abuses and misaligned incentives within the arbitration framework.

The financial ramifications of the arbitration boom are substantial, with total arbitration-related payments and administrative costs exceeding $22 billion since 2022 and $16.6 billion in 2025 alone—more than triple the previous year’s amount. These escalating expenses are expected to be passed on to consumers through higher insurance premiums, a trend employers have already begun to attribute to arbitration costs, complicating the balance between ensuring fair provider reimbursement and controlling overall healthcare spending.

Underlying the economic tensions is a fundamental conflict between providers and insurers: providers, exemplified by Radiology Partners, argue that insurers engage in 'lowball offers' to maximize profits, while insurers warn that inflated arbitration awards are driving unsustainable cost inflation. This push-and-pull highlights the challenge of maintaining equitable payments to providers without exacerbating healthcare premiums, a dilemma that continues to fuel debate and uncertainty about the No Surprises Act’s long-term impact on the healthcare market.