The Surprise Bill: How Out-of-Network Charges Became America's Most Hated Healthcare Problem — and How Congress Finally Acted

Surprise billing was not a new phenomenon when it entered the national conversation in the mid-2010s. Out-of-network billing had been a feature of the American healthcare system for decades — a predictable consequence of a system in which insurance networks are narrow, physician staffing is complex, and patients in emergency situations have no ability to verify the network status of every provider who touches them. What changed in the 2010s was the scale, the visibility, and the political salience of the problem — driven by the growth of private equity-backed physician staffing companies that had discovered out-of-network billing as a highly profitable business strategy.

The Anatomy of a Surprise Bill

To understand how surprise billing became a crisis, it helps to understand the mechanics of how it happened. A patient with commercial insurance goes to an in-network hospital for an emergency appendectomy. The hospital is in-network; the surgeon is in-network; the operating room is in-network. But the anesthesiologist who puts the patient under is employed by a staffing company that has chosen not to participate in the patient's insurance network. The patient never meets the anesthesiologist before the procedure; they have no opportunity to verify network status; and they have no realistic alternative — you cannot shop for an in-network anesthesiologist in the middle of an emergency.

Weeks after the procedure, the patient receives a bill from the anesthesiology group for the difference between what the group charges and what the insurance company paid. The group charges $5,000; the insurance company pays $800 (its allowed amount for out-of-network anesthesia); the patient owes $4,200. This is the balance bill — the amount the provider charges above what the insurer pays. In states without balance billing protections, the patient has no legal recourse. They owe the money.

Emergency medicine was particularly vulnerable to surprise billing because of the nature of emergency care: patients cannot choose their emergency department, cannot verify the network status of the physicians who treat them, and have no ability to seek care elsewhere. Emergency physicians employed by out-of-network staffing companies could bill patients at whatever rate they chose, knowing that the patients had no alternative and no recourse.

The PE Connection: How Surprise Billing Became a Business Model

The surprise billing crisis of the 2010s was not simply a product of the insurance network system — it was actively engineered by private equity-backed physician staffing companies that had identified out-of-network billing as a highly profitable strategy. Companies like Envision Healthcare and TeamHealth discovered that by keeping their physician groups out of insurance networks, they could bill patients and insurers at rates far above what in-network contracts would allow.

The strategy worked because of a fundamental asymmetry in the healthcare market: hospitals needed physician staffing companies to staff their emergency departments, and patients had no choice about which emergency department they went to. A PE-backed staffing company could negotiate favorable contracts with hospitals — or threaten to pull out of a hospital's ED — while simultaneously refusing to join insurance networks and billing patients at whatever rate the market would bear.

A 2019 analysis by the Health Care Cost Institute found that emergency physician charges had increased by 89% between 2010 and 2016 — far outpacing inflation and the growth in physician compensation. The analysis found that the increase was concentrated in markets where PE-backed staffing companies had significant market share, suggesting that the pricing strategy was deliberate and systematic rather than a product of general healthcare inflation.

The State Response: A Patchwork of Protections

In the absence of federal action, states began enacting surprise billing protections in the early 2010s. New York enacted the first comprehensive surprise billing law in 2014, establishing an independent dispute resolution process for out-of-network bills and prohibiting balance billing for emergency care. California, Texas, Florida, and several other states followed with their own versions of surprise billing protections.

The state laws varied significantly in their scope and effectiveness. Some states prohibited balance billing entirely for emergency care; others capped out-of-network charges at a percentage of Medicare rates; still others established dispute resolution processes without capping charges. The patchwork of state laws created a complex compliance environment for national insurance companies and physician staffing companies, and left patients in states without protections — roughly half the country — without any recourse against surprise bills.

State laws also had a fundamental limitation: they could not regulate self-funded employer health plans, which are governed by ERISA and exempt from state insurance regulation. Approximately 60% of Americans with employer-sponsored insurance are covered by self-funded plans — meaning that state surprise billing protections did not apply to the majority of commercially insured patients.

The Road to the No Surprises Act

Federal surprise billing legislation had been introduced in Congress repeatedly since the early 2010s, but had failed to advance due to disagreements about how to resolve disputes between insurers and out-of-network providers. The core dispute was over the benchmark rate — the amount that insurers would be required to pay out-of-network providers. Insurers wanted a low benchmark (Medicare rates or a percentage thereof); providers wanted a high benchmark (median in-network rates or higher). The difference between these positions was worth billions of dollars annually, and both sides spent heavily on lobbying.

The political breakthrough came in 2019 and 2020, when a series of high-profile patient stories — amplified by investigative journalism from ProPublica, The New York Times, and Kaiser Health News — created irresistible political pressure for action. The stories were devastating: a man billed $17,850 for a 20-minute emergency room visit; a woman billed $109,000 for a helicopter ride she did not request; a child billed $18,000 for treatment at an in-network hospital by an out-of-network physician. The stories were not unusual — they were representative of a system that was generating millions of surprise bills every year.

The No Surprises Act was enacted as part of the Consolidated Appropriations Act of 2021, signed by President Trump on December 27, 2020. The law took effect January 1, 2022. Its core provisions prohibited balance billing for emergency care, prohibited balance billing by out-of-network providers at in-network facilities, and established an independent dispute resolution process for resolving payment disputes between insurers and providers.

Implementation, Litigation, and the 2026 Landscape

The No Surprises Act's implementation has been contentious. Provider groups — led by the American Medical Association, ACEP, and the PE-backed staffing companies — challenged the IDR process in court, arguing that the regulations implementing the law improperly tilted the process toward insurers by instructing arbitrators to begin with the qualifying payment amount (the insurer's median in-network rate) as a presumptive benchmark. The providers won several early court victories, and the Biden administration revised the IDR regulations multiple times in response to court orders.

The IDR process has been overwhelmed by the volume of disputes. In its first year of operation, the IDR system received approximately 490,000 dispute submissions — far more than the government had projected. The backlog of unresolved disputes grew to hundreds of thousands of cases, with resolution times stretching to a year or more. Both insurers and providers complained about the process, though for opposite reasons: insurers argued that arbitrators were awarding rates above the qualifying payment amount too frequently; providers argued that the process was too slow and too tilted toward insurers.

By 2026, the No Surprises Act has materially reduced the incidence of surprise bills for commercially insured patients. A 2025 KFF analysis found that the law had eliminated approximately 9 million surprise bills per year — a significant achievement. But gaps remain: the law does not cover ground ambulances (a major source of surprise bills), does not cover patients with Medicaid or Medicare Advantage in all circumstances, and does not address the underlying cost pressures that drove the surprise billing crisis in the first place.