Lawmaker proposes overhaul to fix broken medical arbitration system

Rep. Frank Pallone Jr., D-N.J., one of the authors of the No Surprises Act, has proposed the Lower Premiums, Faster Payments Act to reform the Independent Dispute Resolution (IDR) mechanism established by the law. Under the current baseball-style arbitration model, a concentrated group of providers, largely those with private equity backing, now dominate the dispute filings.

In 2025 alone, 2.5 million disputes were submitted, with two-thirds originating from just 10 provider networks, Pallone’s data shows. Pallone said, “Prior to the law, millions of Americans were on the hook for surprise bills and caught in the middle of payment disputes. Today, I’m pleased to say patients no longer receive these outrageous bills, but unfortunately the arbitration process is clearly not working.” This is creating backlogs and delayed payments, he said.

His bill would replace the current benchmark with the median in-network rate and mandate insurers pay claims within 30 days of submission. The legislation could become a priority should Pallone become chairman of the House Energy and Commerce Committee next year. This is expected to happen should the Democrats win the House, according to The Hill.

The existing IDR system has already cost the industry an estimated $22.4 billion, driven by excessive dispute volumes and awards frequently surpassing standard in-network rates. The New York State Employee Plan directly linked arbitration outcomes to a 10% premium hike, a trend Pallone highlighted as evidence of inefficiency. Both providers and insurers acknowledge the process needs overhaul, though each side blames the other for its failures.

Earlier this year, the Centers for Medicare & Medicaid Services (CMS) proposed updates to the IDR framework, finalizing them in June. The American Hospital Association (AHA) endorsed the changes, which improved communication among payers, providers, and certified IDR entities, tightened deadlines, and permitted batching up to 50 items or services in a single dispute. The rule also cut administrative fees. Yet critics argue these adjustments fail to tackle the root problem: providers winning disputes at disproportionately high rates and receiving awards well above expected costs.

The insurer coalition AHIP acknowledged the CMS reforms as progress but warned they fall short of curbing pricing concerns. The system has contributed to higher premiums, according to Pallone.