The No Surprises Act (NSA), implemented to combat surprise medical billing and enhance transparency in healthcare costs, has been in effect since January 1, 2022. Since its inception, the NSA has been touted as the solution to surprise medical billing and a huge win for patients. While the NSA’s purpose of preventing surprise medical billing is fundamentally good, its implementation—particularly, its effectiveness —reveals a more complex reality. As with any new program, it is important to ask whether it is actually achieving its intended purpose, or whether the benefits go to other parties, and whether those ways are contrary to the public benefit.

The No Surprises Act benefits patients

The NSA has made significant strides in protecting patients from surprise medical expenses, with estimates suggesting that the law has blocked nine million surprise bills since January 2022. By establishing cost-sharing limitations, providers are now prohibited from billing exorbitant charges for out-of-network care received during emergencies at in-network facilities. This provision prevents physicians and physician management organizations from charging two to three times the in-network rate for services provided at in-network facilities.

While the claims data suggest the NSA has been effective in preventing surprise billing, many providers argue it unfairly puts money in the payors’ pockets. Currently, when out-of-network providers submit a bill for a service, they can only bill the patient the in-network rate. If they wish to collect an additional fee for out-of-network services, it is up to the provider and the payor to negotiate what that fee will be. This negotiation is now arbitrated by the independent dispute resolution (IDR) process, which is designed to be an independent third party that decides what the payment for the out-of-network service will be. The disputed reimbursement rates were initially tied to the median contract value of the service in 2019, with adjustment for inflation. However, ongoing litigation between provider associations and the federal government may change these determinations.

To the providers’ point, this means that insurers are, on average, saving money in the short term. Decreasing reimbursement rates for out-of-network providers incentivizes them to join payors’ networks, which results in lower costs of care and savings for the patient and payor. Because the IDR process is tied to 2019 rates plus inflation, this also means the average payout for out-of-network services will be much lower post-implementation of the NSA than it would have been in 2019 or before. As argued in a lawsuit between the Texas Medical Association and the federal government, providers claim the law as it is today will hinder patients’ access to care, claiming that benchmarked in-network rates are falsely depressed and will ultimately lead to patients not having access to care. The bare bones of the TMA’s claim is that the money is unfairly going into the pockets of insurers instead of patients (and providers).

Unfortunately, this argument does not hold up under scrutiny. In 2010, when the Affordable Care Act was codified into law, insurers had to start accounting for the percentage of collected premiums they spent on medical claims, deemed the medical loss ratio (MLR). Under current law, if an insurer spends less than 80% (or 85 percent in the large group market) of premiums on medical care and/or quality improvement efforts, they must refund the difference to policyholders. In practice, the MLR dictates that if insurers spend less on medical care, they must lower their customer’s premiums or otherwise pay the difference back. In other words, if insurers are saving money on the NSA, patients will too.

Challenges and room for improvement

The NSA has blocked many surprise billing attempts, but it is not blocking them all. At least one in five patients continues to encounter unexpected medical bills due to various factors, including inaccurate network directories, disputes over reimbursement rates, and new billing practices designed to circumvent the act's protections. Some believe emergency providers are now collecting above-market reimbursements through the independent dispute resolution process.

Even with the implementation of the NSA, the IDR process is increasing health care costs. In addition to a fixed $350 administrative fee—up from $50 in 2022— receiving a fixed certified determination for a dispute submitted to the IDR in 2023 costs $200–$938 ,depending on whether the dispute was a single claim or multiple “batched” claims, up from $200–$670 in 2022. When the NSA was enacted, the IDR expected to have 17,000 disputes annually. However, with over 90,000 disputes in the second and third quarter of 2022 alone, the backlog in the IDR process cost payers and providers anywhere from $18 to $60 million, not counting the administrative fees charged to file each dispute. If all reimbursements were benchmarked on a reasonable percentage of medicare rates, the IDR process could be eliminated, creating savings for providers, payers, and patients.

The NSA has not yet reached its full potential for blocking surprise bills. Even after its implementation, one in four individuals still report skipping care due to fear of receiving a surprise medical bill. Although the NSA received nearly ten times more surprise billing claims than they expected, this likely represents a fraction of the individuals receiving surprise out-of-network bills. For example, as recently as 2019, payors denied approximately 17 percent of all in-network claims, and less than one percent of these denied claims were appealed. Even worse, six in ten of these appeals were denied after the review process was completed. This suggests that consumers are highly unlikely to turn to appeals processes when they do receive surprise medical bills.

Due to the sheer size of the U.S. healthcare system, monitoring compliance with the NSA presents daunting challenges. Compliance largely will depend on claims made by patients. For patients to file a claim, they must first know that surprise billing for emergencies or out-of-network non-emergencies is illegal. They must also have the resources to file the claim themselves. Whether these limitations pose a challenge to compliance with the NSA remains unclear.

While the No Surprises Act has shown positive developments in protecting patients from surprise medical bills and promoting transparency, its full effects are mired by complexities surrounding implementation, network adequacy, and compliance monitoring, all of which underscore the need for ongoing evaluation, refinement, and collaboration among all stakeholders. By learning from the early experiences and feedback, policymakers, health care providers, insurers, and regulators can work together to optimize the act's impact, providing patients with greater protection against surprise medical bills and fostering a more transparent and consumer-centric healthcare system.