UnitedHealthcare: No Surprises arbitration system ‘needs to be reformed’

 UnitedHealthcare is joining the choir of insurers calling for an overhaul of the No Surprises Act’s arbitration system.

“The IDR process is not working, certainly not as Congress intended it, and it needs to be reformed,” Dan Kueter, CEO of the insurer’s employer and individual business, said on UnitedHealth Group’s second-quarter earnings call July 16.

Mr. Kueter said the independent dispute resolution process is “being exploited by select providers and select geographies,” adding about 50 basis points of incremental cost trend in 2026 and now accounting for at least 100 basis points of total commercial cost at the company.

According to the insurer, upwards of 40% of claims that enter the IDR process are ineligible, and roughly 60% of arbitration cases are brought by just five entities, a concentration Mr. Kueter said marks a shift from prior years. When arbiters side with out-of-network providers, the average payout is now 11 times what Medicare would pay, with some determinations reaching 30 times Medicare rates, he said.

Federal courts, meanwhile, have not been receptive to insurers’ ongoing arguments that the arbitration system is being gamed. On July 10, a federal judge dismissed with prejudice a lawsuit from Elevance Health’s Blue Cross Blue Shield of Georgia that accused billing company HaloMD and two physician groups of defrauding the insurer through the IDR process. Judge Thomas Thrash Jr. wrote that it was “highly plausible to infer that the Plaintiff engages in a consistent practice of submitting lowball offers to out-of-network providers in an effort to maximize its profits.” Elevance said it plans to appeal.

Judges in California and Texas dismissed similar insurer lawsuits against HaloMD in April and
May, ruling that judicial review of arbitration determinations is narrowly constrained. Last August,  UnitedHealthcare filed a lawsuit against Radiology Partners and its Arizona affiliate Sonoran Radiology, alleging the companies misused the IDR process by routing in-network claims through Sonoran to make them appear out-of-network and initiating arbitration on tens of thousands of claims.  

The litigation saga has unfolded as the IDR system continues to draw far more volume than regulators anticipated. More than 5 million disputes have been filed since the process launched in 2022, against the roughly 17,000 annual filings originally projected. Providers won 85% of disputes in 2024 at median payment determinations of 459% of the qualifying payment amount, according to a study published in Health Affairs.

The Trump administration finalized an overhaul of the process in late May that established a centralized disputes portal, created a federal payer registry and cut per-dispute administrative fees from $115 to $15, though insurers and employer groups are pressing for further action. On July 13, the Coalition Against Surprise Medical Billing, which includes industry trade group AHIP, launched a six-figure ad campaign opposing the No Surprises Act Enforcement Act, a bipartisan bill that would raise penalties on plans and providers that miss payment deadlines after arbitration.

NSA arbitration is one of several pressures UnitedHealthcare said is keeping commercial costs elevated. Mr. Kueter also cited rising provider coding intensity, particularly for office visits and emergency department care, along with specialty drug spending that includes anti-inflammatory medications and GLP-1s.

“Commercial costs are stubbornly high, rising above expectations, which we believe is consistent with what is being experienced across the sector,” UnitedHealthcare CEO Tim Noel said on the earnings call, adding that medical cost trends are running modestly above the 11% level the insurer previously reported. He said commercial margin recovery “will remain a focus area longer than originally anticipated” and extend past 2027.

UnitedHealth Group raised its full-year 2026 earnings outlook and posted nearly $5.5 billion in profit in the second quarter, up sharply from the same period last year. UnitedHealthcare’s earnings from operations were $3.9 billion, a 90% increase year over year, with an operating margin of 4.6% compared to 2.4% in Q2 of 2025. The insurer has nearly 30 million commercial members.

The pressure on employer health benefits costs is expected to intensify next year industrywide, with the medical cost trend for the commercial group market projected to hit 9%, or the highest in 17 years, per PwC.

https://www.beckershospitalreview.com/finance/unitedhealthcare-no-surprises-arbitration-system-needs-to-be-reformed/