Will the Federal Ban on Surprise Medical Bills Work?

February 25, 2021

Photo by Leslie Walker

At the end of 2020, Congress finally passed legislation protecting patients from surprise out-of-network medical bills. We dig into the research to understand what we can expect from this long-awaited policy fix.

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The Problem: Surprise Bills

A surprise bill happens when a patient unwittingly gets care from an out-of-network doctor or hospital. Common sources of surprise bills include emergency room physicians, pathologists, radiologists and anesthesiologists.

If the insurer refuses to pay the higher out-of-network rate demanded by the doctor, the patient can end up responsible for the difference — known as a balance bill — often $500 or more with the largest bills topping $100,000.

According to the Commonwealth Fund, 32 states have implemented laws in recent years limiting this practice, but those laws vary in scope and don’t cover the roughly 120 million people in self-funded employer plans, which are exempt from most state regulation.

This gap has led to bipartisan calls for federal protections, but those efforts faced significant industry opposition — especially from private equity-backed companies that own physician staffing firms and use surprise billing as a business model.

The Solution: The No Surprises Act

In December 2020, Congress passed the No Surprises Act as part of the year-end government spending bill. It is set to take effect in 2022 and includes two key provisions:

Patient Protections

Under the law, patients who unknowingly see an out-of-network provider cannot be charged more than what they would have paid to an in-network provider. This includes air ambulances but not ground ambulances and includes exceptions if patients consent to seeing the out-of-network provider.


With patients off the hook, the law sets up a dispute resolution process for providers and insurers to settle on a fair price. If they can't agree to a deal within 30 days, the dispute goes to final offer or "baseball style" arbitration. Each side makes an offer, presents their case, and the arbitrator must pick one of the two offers — they cannot select a number in the middle.

The Research: 3 Big Numbers

Univeristy of Minnesota health economist and Tradeoffs Contributing Research Editor Sayeh Nikpay identified three major findings from the surprise bill literature that can help us better understand what to expect from the No Surprises Act:

0 %
drop in out-of-network billing

Source: Surprise! Out-of-Network Billing for Emergency Care in the United States (Zack Cooper, Fiona Scott Morton and Nathan Shekita; Journal of Political Economy; September 2020)

The Finding: Before New York passed its surprise billing law in 2014, 14.5% of patients in emergency departments saw an out-of-network provider. After the law passed, that dropped to 1.7% — an 88% reduction. Researchers believe this drop is due to more providers moving in-network because the law made it less lucrative for them not to.

Why It Matters: If you don’t see an out-of-network provider, you can’t get an out-of-network surprise bill. And if more providers move in-network, that could lead to lower insurance premiums.

0 %
drop in insurance premiums

Source: Congressional Budget Office (CBO) Score of the No Surprises Act (December 2020)

The Finding: The CBO estimates that the No Surprises Act will lower payments to providers in many markets, leading to a drop in insurance premiums of 0.5%-1%.

Why It Matters: If insurers end up paying providers less thanks to this new law, those savings could get passed down to all of us through lower premiums, something that doesn’t happen very often.

0 th
percentile of billed charges

Source: Arbitration Over Out-Of-Network Medical Bills: Evidence From New Jersey Payment Disputes (Benjamin L. Chartock, Loren Adler, Bich Ly, Erin Duffy and Erin Trish; Health Affairs; January 2021)

The Finding: In New Jersey, two-thirds of arbitration decisions in 2019 were awarded to the side whose offer was closest to the 80th percentile of billed charges — the number higher than 80% of the “sticker prices” set by providers for a service in a particular area and one of the few hard numbers arbitrators in the state are allowed to use as a reference in making their decision. This helped push arbitration awards nearly 6 times higher than the median in-network price of the same service. 

Why It Matters: Because billed charges are unilaterally set by providers and rarely paid in full, using them as a guidepost can lead to inflated arbitration awards. Under the No Surprises Act, arbitrators are barred from considering billed charges and instead are instructed to use median in-network rates. Because insurers typically negotiate in-network rates down from billed charges, those rates should provide a lower reference number than the billed charges used in New Jersey.

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Episode Resources

Additional Reporting and Research on Surprise Billing:

Quantitative Research on Surprise Billing (Georgetown University Center on Health Insurance Reforms)

An Unpleasant Surprise (Tradeoffs, 9/3/2020)

Out-of-Network Bills for Privately Insured Patients Undergoing Elective Surgery With In-Network Primary Surgeons and Facilities (Karan R. Chhabra, Kyle H. Sheetz, Ushapoorna Nuliyalu, et al; JAMA; 2/11/2020)

Selected Reporting and Analysis of Surprise Billing Laws:

Unpacking The No Surprises Act: An Opportunity To Protect Millions (Jack Hoadley, Katie Keith and Kevin Lucia; Health Affairs; 12/18/2020)

Understanding the No Surprises Act (Loren Adler, Matthew Fiedler, Paul B. Ginsburg, Mark Hall, Benedic Ippolito and Erin Trish; USC-Brookings Schaeffer Initiative for Health Policy; 2/4/2021)

Surprise Medical Bills Cost Americans Millions. Congress Finally Banned Most of Them. (Sarah Kliff and Margot Sanger-Katz, New York Times, 12/22/2020)

To End Surprise Medical Bills, New York Tried Arbitration. Health Care Costs Went Up (Rachel Bluth, NPR, 11/5/2019)

Episode Credits


Sayeh Nikpay, PhD, Tradeoffs Contributing Research Editor; Associate Professor of Health Policy and Management, University of Minnesota

Benjamin Chartock, Associate Fellow, Leonard Davis Institute of Health Economics; PhD Candidate, Wharton School

The Tradeoffs theme song was composed by Ty Citerman, with additional music this episode by Blue Dot Sessions.

This episode was produced by Ryan Levi, mixed by Andrew Parrella and produced for the web by Ryan Levi.

Additional thanks to:

Jack Hoadley, Zack Cooper, Loren Adler, the Tradeoffs Advisory Board and our stellar staff!