Arizona Battles Rising Healthcare Costs Fueled by Out-of-Network Billing Disputes

Arizona residents are facing a surge in healthcare costs, driven by a loophole in the federal No Surprises Act that allows out-of-network providers to exploit the Independent Dispute Resolution (IDR) process. Whereas the No Surprises Act successfully shielded patients from unexpected bills, a significant number of providers are intentionally staying out of network to leverage the IDR system for higher payments, impacting insurance premiums and access to care.

The No Surprises Act and the IDR Backdoor

In 2022, Congress passed the No Surprises Act to protect patients from exorbitant, unexpected medical bills from out-of-network providers. The law initially worked as intended, preventing patients from being blindsided by large bills. However, a provision within the Act created an unintended consequence: the Independent Dispute Resolution (IDR) process.

When an out-of-network provider and an insurer cannot agree on a payment amount, the dispute goes to IDR. A third party then selects one of the submitted amounts. Nationally, providers have been winning a substantial majority of these disputes, often receiving payments significantly higher than in-network rates.

Arizona: A Hotspot for IDR Disputes

Arizona is particularly affected by this trend. In the first half of 2025, providers won 88% of IDR disputes nationally, with payment amounts routinely exceeding in-network rates by 400% to 600%. Arizona ranks second only to Texas in the volume of IDR disputes filed, accounting for nearly 9% of all disputes nationwide. Over 216,000 IDR disputes were filed in Arizona in 2023 and 2024 alone.

The financial impact is substantial. Nationally, IDR has added an estimated $5 billion to healthcare costs since 2022, with Arizona bearing a disproportionate share of that burden. A single radiology company is responsible for approximately 40% of all IDR disputes in the state.

Impact on Arizonans

The rising costs are directly impacting Arizona families. In 2026, ACA marketplace premiums in Arizona increased by roughly 29% for silver-tier plans. An unsubsidized family of four now faces an average monthly premium of $2,189, often exceeding mortgage payments. This has led to a 17% decrease in enrollment.

A recent Gallup survey reveals that roughly one-third of Americans are cutting back on daily expenses to afford healthcare, and nearly half of middle-income households are delaying major life decisions due to healthcare costs. These financial strains have broader economic consequences, impacting workforce mobility, and growth.

Legislative Efforts to Address the Issue

Arizona legislators are taking steps to address the problem. Representative David Livingston introduced HB 2211, which proposes that any IDR offer exceeding 300% of Medicare rates or the qualified payment amount would be considered a “clearly excessive fee,” potentially leading to disciplinary action, including license revocation, for providers. The bill also aims to hold insurers accountable by requiring timely payment of arbitration awards.

Similar efforts are underway in other states. In Idaho, Senate Bill 1319 seeks to require freestanding emergency rooms to accept in-network market rates, demonstrating a growing recognition that some providers are exploiting patient protection laws for profit.

Looking Ahead

Addressing this issue requires a multi-faceted approach. Arbitration decisions should be anchored to prevailing in-network rates, and providers should be encouraged to contract with insurers serving their communities. States like Arizona must establish guardrails to prevent a small number of actors from inflating costs for everyone.

As Dr. Richard Popiel, a healthcare delivery expert and part-time Scottsdale resident, stated, “Arizona’s economy is booming, but healthcare affordability is becoming a competitive vulnerability. I’m glad Arizona’s legislators recognized the problem. Now it’s time to finish the job, for patients, for employers, and for the long-term health of our state’s economy.”