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A law designed to protect patients from surprise medical bills succeeded in eliminating unexpected charges, but spawned a lucrative arbitration industry with providers and specialized middlemen extracting payments far above benchmark billing rates.
The practice is ultimately driving up healthcare costs for consumers, a CBS News investigation found.
The arbitration system Congress created to settle disputes between insurers and out-of-network providers allows doctors and resolution specialists acting on their behalf to win payments many times higher than typical rates for medical services. Those costs don’t disappear: Much of the money comes from employer-sponsored health plans, meaning workers may ultimately pay through higher premiums or reduced benefits.
Under the arbitration system established by the No Surprises Act, which took effect in 2022, insurers are paying healthcare providers hundreds of dollars for routine lab tests that typically cost between $10 and $30, industry researchers told CBS News. In one instance, a plastic surgeon was awarded more than $400,000 to perform a breast reduction, a procedure the insurer said it had previously paid the doctor between $6,000 and $30,000 to perform.
The plastic surgeon, Dr. Norman Rowe, routinely was awarded around 170 times the benchmark rates for his services under the NSA’s arbitration system, a CBS News analysis of public data shows.
A spokesman for Dr. Rowe told CBS News that insurers had manipulated benchmark rates to lowball doctors and create “artificially low reimbursement rates.”
“Dr. Rowe uses the widely recognized gold standard FairHealth benchmarks set by the independent nonprofit FairHealth.org using reliable and objective market data. FairHealth data is so reliable that it is incorporated into statutes and regulations around the country and serves as the official data source for many state health programs,” the spokesman added.
In addition to the typical benchmark rate arbitrators consider (known as the “qualifying payment amount,” or QPA), FairHealth provides another rate that can be used during the dispute resolution process. Medicare rates, meanwhile, may not be considered.
CBS News found that another doctor — Long Island spine surgeon Vadim Lerman — was being awarded an average of 280 times the benchmark rates in arbitration. He declined an interview, but a spokesman for Lerman said that “the suggestion that a physician is receiving ‘hundreds of times’ above benchmark rates is incorrect. No comparison should be made to the insurer’s initial offer — which can be inappropriately low for a complex surgical procedure — and the award given to the physician.”
“Baseball-style arbitration”
Insurers have, in many cases, been forced to pay high rates like those Dr. Rowe charges under the law’s so-called “baseball-style” or “pendulum” arbitration system.
In an arbitration under the No Surprises Act, insurers and providers each propose a rate for a given service. There’s no room for negotiation, as an arbitrator must choose between one of the two parties’ suggested figures.
Arbitrators side with providers in more than 85% of the cases, according to Leland Robbins, a product leader at Turquoise Health, a data transparency startup. Some arbitrators – officially called certified Independent Dispute Resolution, or IDR, entities – have track records of siding with providers in an even larger share of cases, according to Robbins’ group.
He told CBS News that while patients are no longer being surprised by large medical bills, there is a catch to the new system.
“The transaction didn’t go away. It went behind closed doors and has moved into this arbitration process when a payer and a provider can’t agree what the fair price should be,” Robbins said. “Given that 70% of these awards are being taken out of employer-sponsored health plans, consumers are going to start seeing it when it comes time for open enrollment.”
He added, “You know, employers are not able to withstand and absorb these kinds of big fees. They’re going to be probably not paying for as much of your premiums.”
Last year, 15 government-certified arbitrators earned fees per case, with 17 arbitrators designated to do this work today. Each side in the dispute — the healthcare provider and the insurer — pays into the process prior to the arbitrator making any decision.
During the first six months of 2025, insurers and providers submitted 1.2 million new disputes to the arbitration portal, while federal officials had only expected approximately 17,000 cases per year, research from the Center on Health Insurance Reforms (CHIR) at Georgetown University’s McCourt School of Public Policy shows.
However, HaloMD, a company that files cases on behalf of providers, told CBS News that the initial estimates “were objectively flawed in how they calculated expected volume.”
Collectively, arbitrators making the decisions have earned more than $2 billion in fees. None agreed to on-camera interviews with CBS News.
New Jersey House Rep. Frank Pallone, a Democrat and the lead sponsor of the No Surprises Act, blames private equity, in part, for breaking the system he helped create.
He said just a few private equity firms – which are increasingly buying up anesthesiology, radiology and emergency room practices — are driving arbitration cases.
Pallone told CBS News that doctors should be paid the equivalent of in-network rates for the services they provide, but said “we had no choice” but to introduce the arbitration system “if we wanted to actually get rid of surprise billing.”
“I knew it was not going to go well, but I didn’t know it was going to be this bad,” he added.
Dispute resolution cottage industry
The law’s arbitration provision has also created an opportunity for intermediaries to guide providers through the process and rake in profits by taking a cut of bills that are up to 1,000% above the benchmark rate for a service, CBS News found. Critics argue that such firms demand more money on providers’ behalf, leading to the large settlements that drive up everyone’s costs.
HaloMD bills itself as “the expert” in arbitration cases brought under the No Surprises Act. Founded by Texas couple Scott and Alla Laroque in 2022, the same year the No Surprises Act took effect, the company is one of the fledgling industry’s biggest players.
Private equity firms also sometimes own both physician staffing firms and Independent Dispute Resolution entities, creating a conflict of interest and undermining the law’s fairness. HaloMD is not private equity-backed, but Halo and two other groups with investments from buyout firms collectively handled more than 75% of disputes settled in arbitration last year, according to Georgetown University’s Center on Health Insurance Reforms.
According to Halo, the firm made more than $1 billion for its clients, routinely earning awards that are nine times the benchmark rates for services. Halo takes a cut of the payouts but has not disclosed the amount.
Halo chief external affairs officer Patrick Velliky told CBS News that insurance companies, not firms like his, are responsible for driving up consumer healthcare costs by either not participating in the arbitration process or submitting ludicrously low offers.
“24% of the time, insurers lose by default. They didn’t submit an offer at all. Another 9 1/2% of the time, insurers submit an offer, like a dollar or less,” Velliky told CBS News. “So what that actually looks like, a patient goes to the E-D with a heart attack, we go to arbitration and the insurer is offering a total of $1.00.”
He also said that insurance companies are offering misleading information about the benchmark rate. “Whatever the actual median in-network rate is, it’s not what the insurer presented,” Velliky told CBS News. “They’re miscalculating it.”
A federal court sided with providers on the issue this summer, saying the benchmark rate is “artificially low,” pulled down by insurers’ $0- or $ 1-reimbursement offers to doctors.
Proposed reforms
Pallone wants to reform the law to gut what he sees as the root of the issues arising from the No Surprises Act: arbitration.
He plans to introduce legislation this week to eliminate the arbitration process and stipulate that providers be paid in-network rates, even if they are out-of-network. Pallone’s office also told CBS News that so-called ghost rates, which often drag the benchmark rate down, will be excluded from calculations moving forward.
“Whether it’s the hospitals, the doctors, the nurse, they’re really trying to care for people. Of course, all of them should have a decent income so they can live,” the New Jersey lawmaker said. “But why should these outside investors be making all this money off the backs of, you know, your insurance premiums, essentially?”
