The explosive growth in payment disputes between insurers and providers that go to arbitration — and the associated costs — are prompting a chorus of calls to overhaul the No Surprises Act.

Why it matters: Though there's mounting evidence the process for resolving contested claims is driving up health care costs, it's hard to see a resolution anytime soon.

Driving the news: The surprise billing law's dysfunction is affecting more than just providers and payers.

• A recent NBER working paper found that the law discouraged providers from participating in insurer networks in certain specialties and states, and "suggestive evidence" shows that insurers more likely to face arbitration disputes saw larger premium increases.
• The paper concludes this reveals "an unintended consequence of the NSA: The law's direct consumer protections may be accompanied by narrower networks and higher premiums."
• A Wells Fargo analyst note points out that the pace of arbitration filings seems to have "accelerated somewhat sharply" in June and July, causing them to increase estimated monthly costs associated with the process in 2026.

A coalition of 67 patient advocacy and employer groups and unions recently called on Congress to fix the No Surprises Act and ensure that premiums aren't driven up by "abuse of the arbitration process."

• Large insurers and benefit consultants are saying that the large volume of claims and high payouts that arbitrators award to providers will contribute to higher premiums next year.

The big picture: The No Surprises Act was passed in late 2020 with the intent of protecting patients from large, unexpected medical bills stemming from out-of-network care.

• These bills generally were for emergency care or care from an out-of-network provider working in an in-network hospital. Providers could "balance bill" patients for whatever their insurer wouldn't pay.
• Congress insulated patients by setting up an arbitration process for providers and insurers who couldn't agree on a payment amount.
• The number of disputed cases has far exceeded what was predicted, with providers winning roughly 85% of the time and frequently being awarded payouts multiple times the size of what they receive for in-network care.

The other side: Providers see the issue differently, arguing that insurers and their allies are feeding a fictional narrative of what's going on with the arbitration process.

• They say insurers' offers are often way too low, resulting in the disproportionately high provider win rate.
• A huge problem in their eyes is that insurers aren't paying up in a timely manner when they lose a case.

Americans for Fair Health Care, a group representing more than 70,000 providers, said insurers are committing a litany of abuses, including "depriving patients of access to in-network care by terminating provider contracts, slashing reimbursement, imposing patient cost sharing [and] denying NSA-covered services."

• "There's a reason providers are winning far more often than insurers. It's because, as courts have ruled, insurers are engaging in a consistent practice of making lowball offers," said Eric Berger, the executive director of the group.

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There are early signs that Congress is divided over what's working and what needs to be fixed.

• The original surprise billing debate divided members not by party, but by which health industry a lawmaker was sympathetic to.
• So far, the most prominent proposed change to the law would help providers' position and increase penalties for insurers that violate the No Surprises Act.

Details: Insurers and third-party analyses argue that the process has gone so far off the rails, it's not only causing premiums to rise but also encouraging providers to opt out of contracting with insurers.

• Arbitration "has replaced uncertain collections from patients with a federally administered payment mechanism that can generate near-guaranteed awards far above typical in-network rates," the Paragon Health Institute writes in a new analysis.
• "For certain provider types, this shift makes remaining out of network much more financially attractive than it was before the NSA."

Zoom in: The arbitration process itself is riddled with bad incentives and is ripe for an overhaul, insurers and some third-party experts argue.

• Last year, 69% of the claims that were submitted for arbitration were either out of scope of the No Surprises Act or didn't go through the correct procedure to be eligible for arbitration, according to a new analysis from Elevance Health's Public Policy Institute using data from affiliated plans.
• However, arbitrators only dismissed 36% of those cases. Elevance said it challenges all out-of-scope and ineligible cases. The analysis will be published next week.
• The institute recommends ending the arbitrator's role in deciding whether claims are eligible and paying them for dismissed disputes as well as those that go through the process, among other changes.

Berger said Elevance's numbers are "FAR out of the industry norm," pointing to CMS data showing that around 17% of disputes closed in 2025 were found ineligible.

• "It is also deeply ironic to critique providers for ineligible submissions when insurers have routinely withheld the very information needed to determine eligibility in the first place," he added.

Paragon also pitched addressing the incentives of the arbitrators, pointing out the inflationary incentives present for everyone involved.

• "Providers have strong incentives to pursue arbitration and seek large awards, [arbitrators] benefit from resolving more disputes, and insurers may be unable to improve their outcomes without increasing costs elsewhere in their networks," the Paragon report argues.

The bottom line: If there's anything everyone agrees on, it's that the millions of disputes going through arbitration are only a small fraction of the overall pool of potentially eligible cases.

• That means without intervention, the volume of disputes is likely to keep rising.

Curing disease is one of AI's most tantalizing use cases, fetching billions of venture capital dollars, but thus far it's generated more excitement than evidence.

• That's the thrust of a peer-reviewed paper published in Nature Reviews Drug Discovery, which calls the clinical impact of AI "disappointingly limited."

The big picture: The researchers find that while AI has gotten good at identifying drug candidates, it hasn't done much to prove those predictions will survive the complexity of human biology.

• Instead, AI-derived drugs still run into the same bottleneck as conventional drugs: proving efficacy in large, diverse patient populations, where failure rates are high and costs are astronomical.

Zoom in: This mostly boils down to data sets, an unsexy thing to devote resources to when you could instead be swinging for blockbuster treatments. In some cases, the data isn't robust enough. In most cases, it's just too messy.

• "We don't know how to clean this stuff up and categorize it for real ML/AI, and honestly, we don't even know if it can be," writes biotech journalist Derek Lowe when discussing the research paper.

State of play: Venture capitalists have invested more than $40 billion into AI biopharma this decade, per PitchBook, but there are precious few medicines that have moved beyond Phase 2 studies.

• Yes, drug development is a lengthy process. But, as the researchers note, "many AI proponents have claimed these timelines will be meaningfully shortened."

Yes, but: This isn't to say there are no current late-stage applications.

• The most notable may be a new Phase 3 trial by Moderna and Merck, which is using AI to choose tumor targets in cancer patients — and then treating them with an existing medicine.
• But, again, this is more about decision-making for specific individuals than it is wholesale drug development.

What they're saying: Axios reached out to some top biotech venture capitalists to get their thoughts. Two notable replies:

• Robert Nelsen, Arch Venture Partners: "We need more data for models of biology. We need regulatory reform to move faster. And when we have the cellular data and more population data, and eventually quantum computing, it will fundamentally disrupt the industry."
• Bijan Salehizadeh, NaviMed Capital: "The biggest costs are in the 'D' of R&D, where Phase 2 and Phase 3 costs are massive and inflated by CROs and baked-in inefficiencies and regulation. ... I'm afraid the AI applications in development will be surface level, focused on low-hanging fruit like biostats and data lock once a trial is enrolled and medical writing for FDA submissions.
• "[That's] not the big stuff of how to enroll a phase 2 or phase 3 program at hundreds to thousands of global sites and do all the nitty gritty of study startup, site negotiation, enrollment, and data monitoring."

The bottom line: AI advocates have pushed back hard on the past week's safety debate, arguing that slowing the frontier would delay life-saving medicines. Rhetoric, however, is no substitute for results.