How a law to protect patients from surprise billing shifted the cost to employers

Patients are no longer stuck with surprise $20,000 bills after emergency surgery. The 2020 No Surprises Act took them out of the middle of payment fights between doctors and insurers.

Congress created a system for doctors and insurers to duke it out. But now these big bills are landing on the desks of employers that pay for their employees’ healthcare.

One of the desks belongs to Jaronimo Wright, vice president of healthcare delivery at Teachers Health Trust, the health plan for Clark County, Nevada teachers.

Month after month, Wright watched emergency costs for the 35,000 people on the plan climb. He realized the increase was not coming from more ER visits; rather, it came from the arbitration process that Congress created for doctors and insurers to resolve these payment disputes. By summer 2024, Wright calculated that just the fees the insurer charged on cases going through this pathway were costing the plan 7% of what the plan was paying for teachers’ emergency care.

“We monitor everything down to the penny,” Wright said.

The No Surprises Act was originally structured to incentivize doctors and insurers to agree on reasonable prices. But as a last resort, billing disputes are sent to an arbitrator who picks either the doctor’s or insurer’s bid.

Instead of 20,000 expected cases going to arbitration, 2.6 million ended up there last year. A handful of large doctors’ groups have flooded arbitration because they’re overwhelmingly winning. Trade associations representing physicians point the finger at insurers, saying they are refusing to accept fair rates.

Since patients are protected from these bills, their companies and employers like Teachers Health Trust are on the hook. Wright knew one of the doctors’ groups, TeamHealth, which was taking a lot of cases to arbitration. So, he picked up the phone and called.

“We just crunched some numbers, went back and forth, and we entered a direct contract with them within a matter of a few weeks,” Wright said. The arrangement saved the plan $500,000 in fees alone in a year.

“TeamHealth has approached about 15 employers about entering into contract agreements to provide in-network care directly, and we have a few agreements in place today,” said Kent Bristow, senior vice president of revenue management at TeamHealth. “Our goal is to continue expanding these relationships, and Teachers Health Trust is helping pave the way for self-funded employers to explore this approach.”

Other physician groups are using a similar strategy, according to James Gelfand, CEO of the ERISA Industry Committee, which represents self-funded employers that pay their own employees’ healthcare bills. He has heard of other doctors’ groups reaching out with direct contract offers, but said the prices are far above market rates.

“When the offers have been made, many of my companies have balked at it because it felt irresponsible to accept rates that were that much higher,” Gelfand said.

The costs from these arbitrations are so unpredictable that it’s hard for employers to plan. The City of San Antonio is $40 million over budget because of these cases, and the health plan for New York state employees is raising premiums 10% in part to deal with the costs.

Gelfand and other employer groups say it’s time to fix the law. Lindsey Murtagh, senior fellow at Brown University School of Public Health, agrees. She wrote the rules for arbitration to implement the original legislation.

“I think that it's really incumbent on Congress to act here to fix that problem,” Murtagh said.

She added that key to any fix is re-centering a benchmark price for arbitrations. That was part of the original rule, but doctors felt that rate was too low and challenged the benchmark in court. Doctors prevailed, and a judge threw out the rule.

The result has been that arbitrators are picking higher-priced doctors’ bids 85% of the time. Murtagh worries more doctors’ groups will see this success and start flooding arbitration in search of higher prices.

“I really worry that we're only looking at the beginning of what could be a huge, huge increase in costs,” she said.

Murtagh and at least one member of Congress also want to untangle conflicts of interest. They’re both concerned that the same investors are funding arbitration companies and the doctors’ groups filing and winning most of the claims.