Our Take
The IDR process is working as designed to protect patients from surprise bills, but insurers are correct that PE-backed providers have weaponized arbitration to extract 450% markups—and the burden falls on employer premiums, not the arbiters.
Why it matters
More than 5 million disputes have funneled through IDR since April 2022, and 40% are ineligible yet still advance. Employers and their workers absorb the cost through higher premiums when arbitration awards spike claims by multiples of contracted rates.
Do this week
Health plan compliance officers: audit your 2024 IDR submissions against the new CARC/RARC coding requirements before the 15-business-day open negotiation deadline kicks in, so you can catch ineligible disputes before arbitration selection.
CMS tightens IDR eligibility after 40% invalid claims advanced to arbitration
The Centers for Medicare & Medicaid Services released a final rule last week aimed at reducing ineligible payment disputes in the Independent Dispute Resolution process under the No Surprises Act. The rule requires payers to provide specific claim adjustment reason codes (CARCs) and remittance advice remark codes (RARCs) to initiate the 30-business-day open negotiation period. IDR entities must determine eligibility within five business days of selection.
The move follows sustained pressure from health insurers. America's Health Insurance Plans (AHIP) and the Blue Cross Blue Shield Association reported that deliberate gaming of the arbitration system has added more than $5 billion in wasteful spending (per AHIP). Nearly 40% of disputes submitted in 2024 were identified as ineligible, yet many still advanced through the full arbitration process.
The disparity between negotiated rates and arbitration awards is stark. BCBS cited a diagnostic procedure that typically costs $2,660 being awarded at $333,000 after arbitration; an ER consultation ranging $1,195 in-network but awarded $250,000; and a spine CT scan usually $1,500 but paid $37,000. Across the dataset, IDR payments averaged 450% above contracted rates (per BCBS).
The abuse is driven by private equity-backed provider groups exploiting arbitration
The No Surprises Act, enacted to protect consumers from surprise medical bills, established the IDR process as a backstop when payers and out-of-network providers cannot agree on payment within 30 days of negotiation. The mechanism was necessary and has succeeded in its primary goal: reducing surprise billing exposure to patients.
What was not foreseen is that PE-backed provider groups would use aggressive billing tactics and strategic out-of-network positioning to manufacture disputes that reach arbitration at inflated ask prices. Arbiters, asked to split the difference between payer and provider claims, anchor upward when the provider anchor is already outrageous. The system delivers a rational decision in each case but accumulates irrational system-wide spending.
The cost does not stick to providers or arbiters. It flows back to employers and workers through premium increases. AHIP and BCBS identified the abuse as a material driver of healthcare cost inflation and pushed CMS to raise the eligibility bar before disputes enter the arbitration stage.
Plan leaders must automate eligibility review before open negotiation notice
The new CARC and RARC requirement codifies what should have been standard data hygiene: specific, timestamped claim denial reasons that allow IDR entities to screen ineligible disputes before selection. The five-business-day eligibility window is a hard deadline; disputes that fail review should not be certified to arbitration.
For health plans, the practical task is straightforward but operationally heavy. Claims systems must map denial codes to IDR eligibility criteria and surface disputes that meet the new coding standard before the open negotiation notice is sent. Manual review will miss volume at this scale. Payers that automate this gate will reduce submission volume, shorten negotiation timelines, and avoid arbitration costs for winnable claims.
For providers, the rule closes a loophole: submitting ineligible disputes to arbitration in hopes of a lucky award is no longer a viable billing strategy. Legitimate out-of-network disputes will still reach arbitration, but the noise in the system will fall.