Provider Enforcement Takes a Hit: What NSA IDR Litigation Means for Health Plan Sponsors

Seyfarth Synopsis: Recent litigation is reshaping the No Surprises Act (NSA) federal Independent Dispute Resolution (IDR) landscape in ways that matter directly to group health plan sponsors and their claims administrators. While the U.S. Departments of Health and Human Services, Labor, and the Treasury (the “Departments”) have finalized operational rules for the federal IDR process (the “Final Rule”), the more significant story may be the litigation over who can enforce IDR awards, how much weight may be given to the qualifying payment amount (QPA), and whether disputed or potentially ineligible awards must be paid while challenges continue. Most recently, the Second Circuit joined the Fifth Circuit in holding that the NSA does not give out-of-network providers a private right of action to sue in court to enforce IDR awards. That development may reduce one category of provider litigation risk in certain jurisdictions, but it does not eliminate administrative enforcement exposure, operational pressure, or fiduciary questions for ERISA plan sponsors when vendors ask for direction on whether to pay contested awards. And, this issue is being litigated in other jurisdictions.

Background

The No Surprises Act (enacted as part of the Consolidated Appropriations Act, 2021) was designed to protect patients from “surprise” balance bills arising from unavoidable encounters with out-of-network providers (think, emergency room services, non-emergency services delivered by out-of-network providers at in-network facilities, and air ambulance services). When payors and providers cannot agree on the out-of-network rate through open negotiation, the dispute is resolved through a “baseball-style” arbitration process in which an independent IDR entity selects one of the two submitted offers as the final payment amount.

In practice, the federal IDR process has generated a flood of litigation and disputes over both the rules governing how IDR entities select payment amounts and the mechanisms available to enforce or challenge IDR outcomes. Those disputes affect how plans, issuers, TPAs, ASO carriers, and IDR vendors evaluate disputed awards, respond to provider demands, and allocate responsibility for payment, appeals, and administrative enforcement risk. For more background on the NSA and the IDR process, feel free to click here.

Recent Appellate Decisions Narrow Provider Enforcement Theories

Most recently, the Second Circuit dismissed an IDR enforcement case brought by an out-of-network provider, holding that the NSA does not create an express or implied private right of action for out-of-network providers to sue in court to enforce IDR awards. The provider had alleged that the insurer failed to timely pay more than $3 million in IDR awards, while the insurer alleged fraudulent billing practices and overpayments. The Second Circuit concluded that Congress placed NSA enforcement authority with federal agencies and state regulators, rather than authorizing providers to bring collection actions directly under the statute.

The Second Circuit’s reasoning tracks the Fifth Circuit’s recent decision and likewise held that the NSA does not provide a private right of action to enforce IDR awards. Together, these decisions are important for plan sponsors because they may limit providers’ ability to convert unpaid or disputed IDR awards into routine federal collection litigation under the NSA. The decisions do not, however, mean that payors can ignore IDR awards. They leave intact the NSA’s administrative enforcement framework and do not resolve all state-law, contract, fraud, ERISA, or agency-enforcement theories that may arise in a particular dispute.

Separately, the Fifth Circuit has continued to limit agency efforts to elevate the QPA above the other statutory factors that certified IDR entities must consider, while upholding certain QPA calculation and disclosure rules. The result is a divided but increasingly developed litigation environment: courts are scrutinizing agency rules that alter the statutory payment framework, while also reading the statute narrowly when providers attempt to create direct judicial enforcement rights that Congress did not expressly provide.

CMS Audits Forthcoming?

As questions continue to mount over arbitrator bias and conflicts of interest in the No Surprises Act IDR process, CMS is launching comprehensive audits of certified dispute resolution entities. The enhanced oversight may represent the next phase of the government's effort to address operational challenges, improve accountability, and restore confidence in the federal IDR system.

The Final Rule Still Matters — But Mostly as Operational Backdrop

Against that litigation backdrop, the Final Rule seems to be an effort to improve administration of the federal IDR process rather than resolve the core legal disputes. The rule addresses operational issues such as administrative fees, payor disclosures, open negotiation, batching, eligibility review, and the federal IDR portal. Those changes may affect claim workflows and vendor responsibilities, but they do not mitigate the litigation risk surrounding QPA weighting, award enforcement, or disputed eligibility determinations. Subsequent implementation guidance issued in August 2026 largely clarified applicability dates, including implementation through the new IDR Gateway, rather than altering the substance of the Final Rule.

The Final Rule became effective on August 3, 2026, although several provisions are subject to phased implementation and applicability dates under subsequent agency guidance.

1. The administrative fee drops from $115 to $15. The per-party administrative fee was decreased by 87% for disputes initiated on or after June 11, 2026.
2. New disclosure and remittance-code requirements. As of August 3, 2026, plans and issuers must provide additional information at the time of initial payment or denial, and use specific Claim Adjustment Reason Codes (CARCs) and Remittance Advice Remark Codes (RARCs) on remittances to non-contracted providers.
3. A new federal IDR registry is coming. Plans and issuers must obtain a plan-specific registration number for use in open negotiation and IDR proceedings, with implementation tied to the Departments' IDR Gateway rollout.
4. Open negotiation moves into the federal portal. The 30-business-day open negotiation period remains; however, to start the open negotiation period, one party must submit a written open negotiation notice and supporting documentation to the other party (with a copy to the Departments) via the federal IDR portal. The responding party must respond within 15 business days of open negotiation initiation. Plans and issuers can’t require providers to use proprietary payor portals instead.
5. Batching rules revised. The line-item cap was increased from a proposed 25 to 50 per batched dispute. The rule also clarifies how to satisfy the “similar condition” criterion, retains the same-plan requirement, shortens the cooling-off period for batched disputes to 30 business days, and eliminates the ability to resubmit improperly batched disputes.
6. Eligibility determinations stay with IDR entities. Eligibility disputes will remain with IDR entities as the Departments did not implement a departmental eligibility review process as suggested under the 2023 proposed rules. IDR entities now get an extra two business days (five total) to make eligibility decisions, and non-initiating parties must respond to IDR initiation and flag any eligibility objections within three business days.

Employer Takeaways

• IDR litigation has not yet been eliminated. The recent appellate decisions take away providers’ private right of action under the NSA to enforce IDR awards in the Fifth Circuit and Second Circuit, but they shift greater emphasis to administrative enforcement, vendor contract terms, claims procedures, and fiduciary decision-making. At the same time, the District of Maryland has reached the opposite conclusion, a provider appeal raising the issue remains pending in the Third Circuit, and courts in other circuits have not yet issued decisions on this issue.
• Confirm vendor roles and escalation protocols. Plan sponsors should confirm with TPAs, carriers, and IDR vendors who is responsible for evaluating contested awards, responding to agency inquiries, preserving objections, and recommending whether awards should be paid, challenged, or escalated.
• Review services agreements. Employers should review administrative services agreements and related vendor materials to determine whether they clearly allocate responsibility for NSA compliance and IDR support.
• Document fiduciary decisions on contested awards. Where vendors ask plan fiduciaries to provide direction on whether to pay an IDR award that may be ineligible, inflated, duplicative, or otherwise disputed, fiduciaries should document the basis for the decision, including the relevant plan terms, vendor recommendations, litigation posture, enforcement risk, and potential participant impact.
• Litigation readiness. Lower administrative fees under the Final Rule may increase dispute volume, new disclosure and remittance-code requirements will require vendor coordination, and the federal IDR registry and portal changes may require updates to internal escalation protocols.

The Seyfarth Employee Benefits team is continuing to track ongoing developments affecting the NSA and federal IDR process. If you have questions about how recent regulatory and litigation trends may affect your health plan operations or vendor arrangements, please contact us.