The full 17-judge Fifth U.S. Circuit Court of Appeals ruled Tuesday that the government’s method for calculating the benchmark rate at the center of the No Surprises Act is partly unlawful, siding with the Texas Medical Association on two of its three challenges. Patients are not affected. The protection that keeps you from getting an out-of-network bill after an emergency room visit stays exactly where it was. What changed is the number insurers and doctors argue over once the patient is out of the picture.
That number is the qualifying payment amount — roughly, the median in-network rate for a service in a given area. When a patient is protected from being billed directly, the doctor and the insurer go to arbitration, and the arbitrator weighs each side’s offer against that benchmark. Set it low and the insurer pays less.
The court found insurers had been allowed to pad the calculation with “ghost rates” — contracted prices for services a provider never actually performs. Because nobody bothers negotiating a rate for work they don’t do, those numbers can sit at almost nothing. The government told insurers not to count rates of $0, but a contracted rate of $1 was permitted. The judges also found the government wrongly ordered insurers to leave out bonus, penalty and other incentive-based compensation, which the law requires the benchmark to capture. On the third question, the court agreed with the government: one-off single-case agreements, common in air ambulance billing, stay out of the calculation.
The math behind the fight explains why this matters. Providers or their representatives filed roughly 3 out of every 4 disputes in the second half of 2025, and won about 85% of them — roughly 6 out of every 7 cases that reached a decision. Awards came in above the insurer’s benchmark 87% of the time. In the fourth quarter alone, arbitrators issued 532,548 payment determinations, and 462,973 of those landed above the benchmark — about 7 in every 8. The judges pointed to those lopsided win rates as evidence the benchmark had been set too low.
The volume is enormous and growing. Nearly 1.4 million disputes were initiated in the second half of 2025, on top of close to 1.2 million in the first half — roughly 2.6 million in a single year. Providers collected close to $15 billion through the process in 2025, up from about $4.1 billion in 2024, nearly a fourfold jump.
The payouts themselves run well above ordinary rates. Doctors who win these determinations are often awarded three or four times the comparable in-network rate. In one case, a plastic surgeon received $440,000 for a breast reduction that normally runs $15,000 to $25,000 — roughly twenty times the going rate.
Insurers argue the win rates prove providers are gaming a system built for rare disputes. Doctors argue the opposite: that the win rates prove insurers were lowballing all along, and that a benchmark stuffed with prices for phantom services was never a fair yardstick. Tuesday’s ruling accepts the doctors’ version.
The court did not blow up the system on its way out. It vacated the methodology but said the agencies may let insurers keep using existing benchmark figures until new ones can be calculated, so arbitration can continue without interruption. The Health and Human Services, Labor and Treasury departments now have to rewrite the rules to match the statute, and could appeal.
For business owners, the exposure sits in the health plan, not the doctor’s office. Higher awards flow to insurers’ commercial books, and the companies are expected to pass those costs to employers and patients through premiums. Regulators finalized a rule this spring aimed at some of the arbitration process’s problems, including the volume of ineligible disputes clogging the queue, though insurers said it did not go far enough — non-initiating parties challenged the eligibility of 42% of disputes filed against them in the second half of 2025, better than 2 in 5.
The reform that would matter most is not another rule about who can file. It is getting the benchmark itself right, which is precisely what the court just ordered. A number built from prices for services that were actually delivered, including the bonus payments doctors really earn, gives both sides less reason to arbitrate in the first place. Fewer disputes means less administrative cost baked into premiums.
Whether the agencies produce that number quickly is the open question. Until they do, the arbitration machine keeps running on the old figures, and employers keep paying for the argument.
JBizNews Desk | New York
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