A new working paper from the National Bureau of Economic Research finds that the No Surprises Act’s arbitration process is incentivizing providers to go out-of-network and driving higher premiums. The economists estimate that the undue costs of the independent dispute resolution (IDR) process could increase premiums by $183 per year for a 27-year-old and by $322 per year for a 50-year-old with coverage from the individual market.
Key takeaways (emphasis added):
- “[The No Surprises Act (NSA)] reduced provider network participation in the specialties and states most affected by the reform…The decline is consistent with arbitration strengthening providers’ outside option: arbitration is high-volume and provider-favorable, with awards well above the statutory benchmark; and network participation declines after provider groups’ first favorable arbitration outcomes.”
- “These results reveal an unintended consequence of the NSA: the law’s direct consumer protections may be accompanied by narrower networks and higher premiums.”
- “The law protects patients from the visible shock of a surprise bill. But the arbitration-option mechanism changes provider–insurer bargaining, and those changes can reappear as narrower networks, higher premiums, and higher public subsidy outlays.”
The economists outline changes that could mitigate the incentive to remain out-of-network:
- Higher filing fees for disputes going through arbitration;
- A stronger role for the Qualifying Payment Amount (QPA) benchmark in decisions; and
- Measures targeting providers who file large dispute volumes while remaining out-of-network.
The findings add to a growing body of evidence that abuse of the arbitration process designed to protect patients is creating incentives that leave them with fewer in-network options and higher costs.
Read the full paper here and learn more about how arbitration abuse is driving up healthcare costs here.
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