A recent excellent New York Times article explains how a change in law first effective in 2022 has quickly come to be used by out-of-network providers to obtain significant overpayments for routine medical procedures. Not stated in the article is the impact on self-funded group health plans and the sponsors of those plans. Specifically, the inflated health care costs are ultimately borne by the plan sponsors, who are on the hook for paying these claims. While the article notes the downstream impact this may have on benefit plan participants – notably, that increased health plan costs may contribute to rising premiums – in many cases, plan sponsors will bear the brunt of the increased financial exposure, and some may be caught off-guard upon finding the plan costs significantly exceed budgeted expectations.
What’s Happening?
Providers are prevailing in roughly 88 percent of the independent dispute resolution (“IDR”) cases arising under the No Surprises Act (which as described in a recent blog post we expect to receive increased attention from DOL, even if initially for unrelated reasons), and the resulting awards frequently dwarf prevailing in-network rates. Across all specialties, the median IDR award in 2024 was approximately 450% of the typical in-network rate – meaning out-of-network providers are routinely collecting more than four times the amount an in-network provider would receive for the same service. To illustrate the scale of these outcomes, a recent lawsuit described a $440,000 IDR award to a surgical practice for a procedure that the provider itself advertised as costing between $15,000 and $25,000. These costs ultimately flow to plan sponsors. A number of plan sponsors have increased premiums specifically to offset arbitration awards and fees.
Your third-party administrator (“TPA”) likely handles these disputes on your plan’s behalf, but TPAs may not proactively report on the volume, outcomes, or cost of IDR cases unless the plan sponsor specifically requests that information. The IDR process is opaque by design – submissions are made on an ex parte basis, meaning each side submits its position without seeing or being able to rebut the other’s submission. There is no discovery, no evidentiary standard, and no hearing. The arbitrator must pick a winner; there is no compromise or “splitting of the baby” under this process. Providers have exploited the lack of transparency and the fact that the volume of cases has overwhelmed the system to submit inflated billed charges and misrepresentations that drive irrational awards.
Thompson Hine Takeaways
Seek Information. We recommend asking your TPA to provide a report of all IDR disputes involving your plan, including the procedures at issue, the amounts claimed, the amounts awarded, and the arbitration fees paid. That information will give you a better picture of whether and how this issue is affecting your plan.
Consider Ongoing Monitoring. Even if your plan is not currently experiencing the effects of outsized IDR awards, we recommend monitoring the situation on a periodic basis. Unless the current issues are addressed by regulations or legislation, these issues are likely to get worse and involve more plans over time.
Options are Limited, and Extremely Fact Specific. If you find that IDR awards are having a meaningful impact on your plan’s costs or you are concerned that they may, there are steps that can be considered, however they are heavily dependent on your specific factual situation and therefore we recommend engaging in those considerations on an individualized basis.
Please contact the authors or your Thompson Hine attorney with any questions.