Landmark consumer victory protects consumers from surprise billing

There is no worse feeling than getting a large unexpected bill in the mail. And in the case of a surprise medical bill, it usually comes at the worst time - when you are home recovering from an illness or injury. But most of those bills will soon be a thing of the past.

Health care

Photo Credit: Sandro Porfirio via Unsplash

Insured Americans across the country can cheer for one of the most far-reaching consumer health laws in years. On December 27, President Donald Trump signed the bipartisan No Surprises Act – a law that will protect millions of consumers from unfair surprise medical bills from out-of-network providers. The federal action came after 32 states had already banned balance billing – when out-of-network medical professionals charge you the difference (the balance) between their fees and the maximum amount allowed by your insurance company.

The surprise billing problem 

One of the first things a consumer learns when they get private health insurance is that it is in their own financial best interest to choose an in-network provider to limit their out-of-pocket costs. Provider networks are a tool that health insurance plans use to be more competitive by keeping down their costs and therefore their premiums. It’s a give and take that should work for everyone. Creating provider networks allow insurance plans to gain cost-savings by guaranteeing a volume of patients to certain providers in exchange for a discounted, negotiated contract rate. Consumers get the benefit of lower copays and deductibles if they use their plan’s network of providers, labs and hospitals. 

But the problem arises when certain “ancillary” providers, notably anesthesiologists, radiologists, and emergency room physicians, don’t agree to participate in an insurer’s network. Because these providers have a steady flow of patients from the hospitals where they work, they have little incentive to join a network or negotiate their rates. Their customers are captive once they enter the hospital. This is where the surprise billing problem arises. The health plan pays part of the billed charge from the out-of-network provider, who then sends a bill for the remaining unpaid amount to the consumer – the balance bill. The practice is so common that there is a one in five chance that a consumer could be hit with a surprise medical bill after visiting a hospital or emergency room.  And when that happens, invoices for hundreds or even thousands of dollars land in patients’ mailboxes as an unwelcome surprise – and that’s how it got its name: surprise billing. 

Consumers get stuck with unfair bills

Patients complain to their insurers, their providers and their state regulators about these surprise bills. They argue that they have done their part – choosing an in-network hospital and an in-network provider, and yet they are receiving outrageous bills from out-of-network “ancillary” providers. For the most part, the consumer is stuck in the middle of the payment dispute between the provider and the health plan over the billed charges. Unfortunately because the services have already been provided, the bill stands and the consumer struggles to pay.

State battles for consumer protection

With consumers facing bills that often put them in debt, the state PIRGs and other advocates started to push for protection from surprise medical bills. The states have always been an important testing ground for innovative legislative solutions to consumer problems. And solving surprise billing was not going to be easy, with so much money at stake and two powerful lobbying groups fighting for their own interests – the heavily-financed, private-equity physician lobby and the health insurance plans. 

Consumer advocates focused on two key state policy solutions:

  1. Ban surprise billing, and 

  2. Settle payment disputes between providers and insurers in a way to prevent cost shifting and keep overall health care costs down. 

Our state-level victories include: 

In 2016, CALPIRG helped activate members to secure surprise billing protections in non-emergency settings and kept overall costs down by tying out-of-network payments to 125% of Medicare rates. 


In 2018, after advocating for and passing Oregon’s surprise billing protections for both emergency and non-emergency care, OSPIRG (Oregon’s PIRG) helped consumers understand their rights under the new law. 

In 2019, TexPIRG testified on behalf of its members in support of a bill before the state legislature and won passage of stronger consumer protections to ban surprise bills in both emergency and non-emergency situations. 

In 2020, MASSPIRG has testified and called for passage of law to protect consumers from surprise billing. The passage of the new law enhances the protections adopted on the federal level by including strong advance notice for consumers of the potential of out-of-network care when they schedule procedures. 

A complete solution requires federal action

Despite victories in the states, it wasn’t enough. There were still many states that offered no consumer protections. And even those with a surprise billing protection law weren’t protecting their entire insured population.  Approximately 60 percent of people with employer-sponsored insurance are enrolled in plans that are regulated under federal law. State protections against surprise billing could only reach consumers insured by state-regulated health plans. It was clear a federal solution was the only way to protect all insured Americans. 

U.S. PIRG joined with others to lead a consumer campaign: No Surprises: People Against Unfair Medical Bills. Our members wrote to Congress to urge passage of a federal law. Private-equity-backed physician staffing firms came out in full force to fight a federal solution to surprise billing, using a shill organization named Doctor Patient Unity and spending over $58 million dollars in one year alone. 

But the obvious need for a solution was embraced by senators and representatives on both sides of the aisle. Consumers’ voices were heard above the din of private interests. And in the waning days of the 116th Congress, a compromise bill, the No Surprises Act, made it to President Trump who signed the bill on December 27, 2020. 

Consumer protections go into effect in 2022

The implications of the No Surprises Act are significant.

It expands surprise billing protections to millions of people living in the 18 states that have no state surprise billing law.

It expands protections to an estimated additional 135 million people who are covered by employer self-funded plans.

It will take a year to write the regulations which will clarify exactly how the 300+ pages of law will be implemented. U.S. PIRG will be working to make sure those regulations are written in a way to prevent loopholes and ensure the intent of the law is retained. Here are the main wins which make this such an important consumer protection law. 

Wins for the consumer

  • Providers, health care facilities and air ambulances are banned from sending a surprise medical bill

  • Patients pay what they would pay as if the service or provider was “in network”

Wins for containing overall health care costs

  • Ban on balance billing applies to all the providers and services for which we’ve seen the most egregious out of network billing practices: anesthesiologists, radiologists, and emergency room physicians.

  • If the out of network  provider and the health plan cannot agree to an out of network payment amount within 30 days, the legislation sets up an arbitration system that could put downward pressure on charges causing the average out-of-network physician rate to drop by 15 to 20 percent.

  • Guardrails to prevent overuse of arbitration 

    • Loser pays arbitration costs.

    • The party who initiated arbitration cannot use arbitration for similar claims between the same provider and insurer for 90 days

    • Arbitrators may consider the previous behavior of the parties – did they show a “good faith” effort to enter into a network agreement? 

  • Guardrails to prevent any potential inflationary impact of arbitration

    • Baseball arbitration: each party makes a best offer; the arbitrator chooses either one

    • Arbitrator is instructed to consider certain factors including the median in-network rates paid by the insurer when selecting between the two amounts offered by the disputing parties 

    • The federal law defers to any state law payment standard for state regulated plans.  For example, in California, the state surprise billing law says the payment disputes must be settled without arbitration and be paid at 125% of Medicare rates. This state law would apply to disputes with state-regulated plans. The federal arbitration process would apply to any plan not regulated by the state. 

It took years of work first at the state legislative level, and then in Congress before this important consumer protection legislation was finally won. It was because patients shared their stories and consumer groups advocated on their behalf. And legislators listened to what consumers, not special interests, wanted. But the regulations still need to be written to ensure these protections are implemented. And U.S. PIRG will continue to push and prod so that none of the hard-fought provisions are lost in a regulatory loophole, so by the time January 2022 comes along, consumers experience the full promise of this landmark consumer law. 


PHOTO CREDIT: Sandro Porfirio from Unsplash


Patricia Kelmar

Senior Director, Health Care Campaigns, PIRG

Patricia directs the health care campaign work for U.S. PIRG and provides support to our state offices for state-based health initiatives. Her prior roles include senior policy advisor at NJ Health Care Quality Institute, associate state director at AARP New Jersey and consumer advocate at NJPIRG. She was appointed to the Ground Ambulance and Patient Billing Advisory Committee in 2022 and works with patient advocates across the U.S. Patricia enjoys walking along the Potomac River and sharing her love of books with friends and family around the world.