Self-funded employers pay the price for IDR problems

Employers are being squeezed by the independent dispute resolution process under the No Surprises Act, according to a new report that uncovers millions in additional costs.

The NSA protects patients from unexpected out-of-network medical bills while providing a federal process for payers and providers to negotiate reimbursement rates. The law has been effective at its first goal, but a growing body of literature indicates the federal IDR process isn't working as intended.

A study out of Georgetown University last month found the IDR process generated $22 billion in extra healthcare costs over just four years, including $15.6 billion in awards to providers that exceeded comparable in-network rates.

The latest report from the ERISA Industry Committee found that self-funded employers are bearing the brunt of these costs.

For the report, ERIC interviewed large self-funded employer plan sponsors anonymously. Employer-sponsored insurance covers about 154 million nonelderly Americans, with 67% of covered workers enrolled in self-funded plans. Employers with these plans pay claims from their own funds, rather than purchasing insurance plans from payers.

Notably, the Employee Retirement Income Security Act, or ERISA, governs self-funded plans. Self-funding also means employers are the direct payer of applicable IDR awards.

One large self-funded employer told ERIC that IDR-related payments nearly doubled to more than $6 million in the first half of 2026 alone, compared to the entire previous year. This company expects those payments to exceed $12 million by the end of this year.

For another self-funded employer, between 1-3% of its annual healthcare trend was specifically for IDR awards. Another projects IDR payouts to equal 5-6% of total healthcare spend in 2026.

Employers are doling out more to the federal IDR process because of a swelling volume of disputes -- much higher than even the federal government expected to manage. That number continues to grow, with the Georgetown study finding a 77% increase in disputes from 2024 to 2025.

 For an individual self-funded employer, that can translate to thousands of disputes to manage. In fact, the large self-funded employer interviewed by ERIC reported handling roughly 2,000 disputes annually.

And as research continues to show, providers have won a majority of those cases at rates much higher than the employer would have paid for in-network care. One employer said that award amounts through the first half of 2026 exceeded the original billed value by more than 4.5 times.

Employers agreed that IDR outcomes are hard to predict and mitigate, with one company leader saying decisions are "functionally random." Many also reported lacking full visibility into which providers are driving their disputes, how those are handled by third-party administrators and whether their assets are being protected.

Employers are left to absorb these costs, effectively constraining their budgets for wages and other benefits, or alter their offerings to employees, researchers said. This would mean higher premiums, higher deductibles or narrower provider networks, they explained.

"Our member companies work tirelessly to be good stewards of employees' health care dollars and protect them from unnecessary costs," James Gelfand, president and CEO of ERIC, said in a press release. "An arbitration process with no basis on real prices, no brakes, and no way to appeal is making that job impossible. This report gives Congress the opportunity to hear directly from the employers funding this system, not just the industries profiting from it."

The CMS recently finalized a rule to address major challenges payers and providers experience with the IDR process, including high administrative costs and decentralized communications. However, payers and groups like ERIC say the changes are more of a band-aid than relief.

ERIC is advocating for IDR process reform, including storing the qualifying payment amount as the benchmark rate for awards. The QPA is a health plan's median in-network contracted rate for the same or similar services in a specific region, adjusted for inflation. Provider groups challenged the use of the QPA as the biggest factor in IDR awards, winning a legal case that shifted the weight during deliberations.

ERIC also calls on Congress and federal regulators to tighten arbitrator oversight and create an appeals mechanism to dispute awards.

Congress is monitoring the federal IDR process as dispute volumes continue to grow and accusations of industry gaming mount.

Jacqueline LaPointe is an Executive Editor at Xtelligent Healthcare Media, covering revenue cycle management, healthcare payers, health policy and health IT since 2016.