These awards are adding “tens of thousands of, or in some cases even more than one hundred thousand, dollars in excess costs” per claim, according to the study by Elevance Health. This consequence of a law that was supposed to drive down costs could raise health insurance premiums paid by employers and workers.

Here’s a look at what’s driving these unintended outcomes.

How the law works

The No Surprises Act, which took effect in 2022, was designed to shield patients from so-called surprise medical bills.

A common example occurs when a patient schedules surgery at an in-network hospital but unknowingly receives care from an out-of-network anesthesiologist, radiologist, pathologist or other specialist involved in the procedure. Before the law, those providers could send patients large balance bills for charges not covered by insurance.

Under the No Surprises Act, patients generally pay only their normal in-network cost sharing in these situations. The health plan and out-of-network provider must then negotiate payment.

If they cannot agree after a 30-day negotiation period, either party can initiate the law’s independent dispute resolution process. In this process, an independent arbitrator chooses either the insurer’s payment offer or the provider’s.

The law anticipated that arbitration would be used sparingly and that awards would generally land near prevailing in-network rates. Instead, some studies have found that the system is being abused by providers who often receive awards that are significantly higher than customary charges.

Study finds large awards

Elevance reviewed more than 7,300 payment disputes involving planned procedures such as spine surgery, plastic surgery and colonoscopies that occurred at in-network facilities but involved out-of-network providers. Providers prevailed in nearly 90% of disputed claims.

Even more striking were the payment amounts. The average arbitration award was nearly $40,000. By comparison, the average in-network claim amount for the same services was approximately $1,614, the average contracted price was about $766 and the comparable Medicare payment was roughly $645. Some awards were more than 100 times typical reimbursement levels.

Growing concerns for employers

The findings come as the federal dispute resolution system is already struggling under the weight of millions of cases, far more than regulators anticipated.

Critics argue that the arbitration process may be creating incentives for some providers to remain outside insurer networks because the dispute process can yield significantly higher reimbursements than negotiated contracts.

For employers that sponsor health plans, the concern is that higher claim costs eventually find their way into premiums.

While workers are being protected from surprise bills at the doctor’s office or hospital, the cost of those protections may increasingly appear in employers’ health plan expenses and future renewal rates.

Federal regulators have adopted new rules intended to limit misuse of the process and ensure that only eligible claims enter arbitration. Whether those changes will reduce disputes and bring awards closer to market rates remains to be seen.

The Departments of Labor, Health and Human Services and the Treasury have proposed regulations that would create a new category of “limited excepted benefits” for fertility treatments under the Affordable Care Act. If finalized, employers could begin offering these benefits in 2027. The proposal is intended to expand access to fertility care while giving employers more flexibility in designing benefit programs.

Like standalone dental and vision plans, excepted fertility benefits would be exempt from many ACA requirements and certain Employee Retirement Income Security Act rules that apply to traditional group health plans.

How the benefit would work

The agencies say the proposal is designed to give employers flexibility to offer fertility benefits for both women and men and to tailor coverage to their workforce’s needs.

Services that may be covered include:

• Diagnostic testing for infertility and reproductive health conditions
• In vitro fertilization
• Intrauterine insemination
• Fertility medications
• Cryopreservation and storage of eggs, sperm or embryos
• Treatment of conditions such as endometriosis, blocked fallopian tubes, diminished ovarian reserve, male factor infertility and other medically recognized infertility conditions

To qualify, a fertility benefit would need to meet several criteria:

• Traditional group health coverage must be offered, although employees would not have to enroll in it.
• The benefit must be under a separate policy, certificate or contract and could not be integrated into the primary group health plan.
• Substantially all benefits must relate to diagnosing, mitigating or treating infertility or infertility-related reproductive health conditions.
• Services generally must be provided by licensed medical professionals.
• The benefit would be subject to a combined lifetime maximum of $120,000 per participant and eligible beneficiary, indexed for medical inflation after 2028.
• Employers would have to provide a clear written notice describing the coverage and explaining that it is an excepted benefit.

Areas under consideration

The agencies are seeking additional input that may shape the final regulations, including:

• Whether the lifetime cap should instead be an annual limit with rollover provisions.
• Whether the proposed $120,000 limit appropriately reflects the cost of fertility treatments.
• Whether employers should be allowed to charge employee premiums, contributions or cost sharing for the benefit, similar to dental and vision plans.
• Whether alternative notice requirements would better inform employees.
• How quickly employers and insurers could implement the new benefit structure.

The takeaway

The public comment period closed July 13, and final regulations could arrive by year-end, allowing employers to begin offering these benefits in 2027.

In the meantime, employers may want to review their current health plan designs, evaluate whether employees are seeking fertility treatments and assess how a standalone fertility benefit could support recruiting and retention goals.

If the rule is finalized, the new option could give employers another tool to provide meaningful family-building benefits while maintaining greater flexibility over plan design and costs.

While the programs are separate, employees who have access to preventive care, chronic disease management and wellness resources are often healthier when an injury occurs. This may lead to fewer complications, faster recoveries and lower claim costs.

Studies have found that an employee’s overall health can affect how quickly they recover from a workplace injury. Conditions such as diabetes, hypertension, obesity, depression and substance-use disorders can complicate treatment, slow healing and extend the time an employee remains away from work. Consider the following:

• The National Council on Compensation Insurance has found that workers’ compensation claims involving comorbidities generate roughly twice the medical costs of similar claims without those conditions.
• Harbor Health Systems, after reviewing over 7,000 workers’ compensation claims, found that underlying health conditions were associated with longer recovery, more temporary disability days, increased litigation and higher surgery rates.

How health insurance affects workers’ comp costs

Employees with health insurance are generally more likely to schedule annual checkups, undergo preventive screenings, fill prescriptions and seek treatment when medical issues first arise.

That access to care may reduce the severity of chronic conditions before they complicate a workplace injury. Claims involving underlying medical conditions frequently require additional treatment, longer disability periods and more coordination among physicians.

Those factors can increase the likelihood of disputes over treatment, causation or return-to-work decisions, which may contribute to higher litigation costs.

On the other hand, a worker whose diabetes or hypertension is well managed may recover more quickly than someone whose condition has gone untreated.

Access to health insurance may also reduce situations in which employees delay seeking treatment because of cost concerns. And when employees have health coverage for non-work-related illnesses and injuries, there may be less financial pressure to characterize a nonoccupational medical condition as work-related simply to obtain care.

How wellness programs fit in

Employee wellness programs do more than improve overall health. They may also improve workplace safety, which in turn affects workers’ comp claims and costs.

Programs that encourage physical activity, healthy eating, tobacco cessation, stress management and behavioral health support can improve employees’ overall health. Healthy workers are often more aware of their actions and may recover more quickly from workplace injuries.

Telehealth services, employee assistance programs and mental health resources may help employees address health concerns before they become more serious.

Fatigue is another consideration. Employees who are chronically tired, stressed or dealing with unmanaged medical conditions may be more likely to lose focus or make mistakes on the job. Wellness initiatives that promote better sleep, stress reduction and overall health may improve alertness and reduce accident risk.

An investment beyond employee benefits

Many employers view health insurance primarily as a recruitment and retention tool, but it’s really a crucial part of a broader workforce risk management strategy.

Over time, healthier employees may experience fewer workplace injuries, recover more efficiently when accidents occur and generate less costly workers’ compensation claims.

Diabetes afflicts more than 11% of the adult population, including about 6.3% of full-time workers and 9.1% of part-time workers. 

People with diabetes incur average medical expenditures of about $19,736 annually, with roughly $12,022 directly attributable to the disease, according to the National Institutes of Health. Out-of-pocket costs typically range from $3,300 to $4,600. Costs vary significantly based on whether complications have developed 

Those additional costs also drive group health insurance costs. On top of that, employees who are dealing with diabetes-related complications can also reduce productivity. 

Indirect costs

On average, diabetics miss 5.5 days more of work than other workers, according to Gallup estimates. That adds up to 45 million missed workdays, and productivity costs to U.S. employers of $4 billion.

For employers, these costs may represent just the tip of the iceberg. The Centers for Disease Control estimates that more than 114 million adults in the U.S. — a third of the workforce — have undiagnosed diabetes or prediabetes. 

What can employers do?

With so much at stake, a robust workplace program to fight diabetes can generate a significant return on investment. 

The American Diabetes Association estimates that preventing or delaying the onset of diabetes in just one prediabetic employee can generate more than $50,000 in direct and indirect cost savings over five years.

The CDC recommends that employers design wellness programs that specifically target improvements in the following areas: 

• Exercise and activity levels
• Smoking cessation
• Hypertension reduction
• Blood cholesterol reduction
• High blood glucose reduction
• Weight/obesity

There also are a number of measures employers can take to help mitigate some of the costs to the organization.

Offer ongoing counseling with professional dieticians. Employees who regularly meet with dieticians who can help them set small, manageable goals for themselves, make significant and measurable health improvements, according to the HCCI. The research found that they lost 5.5% of their body weight and reduced blood glucose levels. 

Start a walking club. The American Diabetes Association’s “Stop Diabetes @ Work” program recommends that employers encourage company walking clubs to attend diabetes walk-a-thons like “Step Out: Walk to Cure Diabetes,” or host a community “Walk to Cure Diabetes.”

You can find resources, including posters, articles, training plans and walking guides, at www.diabetes.org.

Encourage self-assessment and screening. According to the CDC, 30% of people with diabetes aren’t even aware of it. Workplace screenings are easy and effective. Many employers provide incentives for workers to participate via reduced insurance copays, or even cash payments. 

All screenings should be confidential and employers should not penalize employees who have diabetes, as this could violate the Americans with Disabilities Act. 

Encourage smokers to quit. Diabetics who smoke have far higher medical costs on average than non-smoking diabetics or non-diabetic smokers. Discouraging tobacco use can pay off in the long run.

Originally viewed as an extension of wellness programs, LSAs are broader and more flexible. Rather than focusing solely on fitness or preventive care, these employer-funded accounts allow workers to use allocated funds for services tied to physical, emotional, financial and personal well-being.

For human resources and benefits managers, the appeal lies in personalization. Workers at different life stages often value different forms of support.

How LSAs work

An LSA is generally funded entirely by the employer. The company determines how much employees receive annually and what expenses qualify for reimbursement.

Unlike health savings accounts or flexible spending accounts, LSAs are not governed by strict federal rules that limit eligible expenses. That gives employers significant flexibility in designing programs that align with workforce needs and company culture.

Employers may structure the benefit as a yearly allowance or monthly stipend. Employees typically submit receipts or proof of purchase through a reimbursement platform administered internally or by a third-party vendor.

Eligible expenses vary widely by employer, but common categories include:

• Gym memberships, fitness classes and exercise equipment
• Mental health apps, meditation subscriptions and life coaching
• Financial planning, tax preparation and student loan assistance
• Childcare, elder care and fertility-related services
• Professional development courses and certifications
• Nutrition counseling and wellness coaching
• Home office equipment or commuting costs

Some employers also create broad “lifestyle” categories that allow employees to choose expenses they believe improve their well-being.

Advantages for employers

One of the primary advantages of LSAs is flexibility. Traditional benefits programs often take a one-size-fits-all approach, while LSAs allow staff to select benefits that matter to them.

Employers may also see advantages in recruitment and retention as workers increasingly evaluate employers based on overall well-being support. Offering flexible benefits can demonstrate that a company understands the varied pressures employees face inside and outside work.

One bonus for employers is that they only pay when an employee submits a reimbursement request for an approved expense. Many workers may never use the plan, and some may not use the full amount allocated to their account.

Administrative complexity may also be lower than that of tax-advantaged accounts because LSAs generally involve less regulatory compliance.

Potential drawbacks

Despite their flexibility, LSAs come with challenges:

• Because the accounts are taxable, employees generally must pay income taxes on reimbursements they receive. Employers must also decide how the benefit will be taxed and reported through payroll.
• Cost control can also become an issue if programs are not carefully structured. Employers need clear guidelines on eligible expenses, reimbursement limits and documentation requirements.
• Another challenge is communication. Employees may not fully understand how the program works or what qualifies for reimbursement. Without education and regular reminders, participation rates may lag.

Regardless, LSAs are increasingly being viewed as a way to provide more personalized employee support that complements traditional health and wellness benefits.

The tactic, called “lasering,” entails applying a higher deductible or exclusion to a specific individual or condition, like heart failure or cancer. Instead of the normal attachment point applying uniformly across the group, the insurer carves out higher-risk individuals and shifts more financial responsibility back to the employer.

The trend is accelerating as more employees and dependents generate extremely costly claims tied to cancer treatments, specialty drugs, complex surgeries and chronic illnesses. According to a recent analysis by Sun Life, claims exceeding $1 million increased 29% between 2024 and 2025 and have surged 61% over the last four years.

That growth is reshaping the stop-loss market and creating new challenges for employers that self-fund their health plans.

How lasering works

Under a traditional stop-loss arrangement, an employer may absorb the first $100,000 or $150,000 of an employee’s claims before stop-loss coverage begins reimbursing expenses above that threshold. The stop-loss carrier reimburses the employer’s plan, not the employee.

But with lasering, a stop-loss carrier may impose a $500,000 deductible on an employee undergoing cancer treatment, instead of the same attachment point used for all other workers on the plan.

There are several types of stop-loss lasers:

Standard lasers — Apply a higher attachment point to all claims associated with a specific individual.

Contingent lasers — Apply only to claims tied to a specific diagnosis or condition, such as cancer or diabetes.

Limited contract basis lasers — Restrict the time frame during which certain claims are covered.

Exclusion lasers — Remove a specific individual from stop-loss coverage entirely.

What’s behind the trend

Stop-loss carriers say the growing use of lasering is being driven by rising claims severity and improved predictive analytics.

Advanced claims modeling tools now allow insurers to analyze medical histories, pharmacy utilization and treatment trends with far greater precision. As a result, insurers are requesting more detailed claims information during underwriting and using that data to identify participants likely to generate catastrophic claims.

Employer effects

For employers, lasering may reduce stop-loss premiums, but it can also create substantial financial risks if a lasered employee incurs major expenses. Employers may unexpectedly assume hundreds of thousands of dollars in additional costs for a single claimant.

As a result, some self-insured employers may have to set aside more in reserves and consider increasing employee cost-sharing to account for the added risk.

Also, employers and brokers are increasingly negotiating for “no new laser” provisions during renewals. These provisions limit an insurer’s ability to add new lasers during or after renewal based on emerging claims.

There are other ways to prevent or reduce the need for a laser. We can help you understand your options, workforce demographics, medical claims history and potential financial liability.

The IRS updates HSA contribution limits annually, along with minimum deductibles and out-of-pocket maximums for high-deductible health plans. HSAs help employees save for medical expenses and are only available to those enrolled in qualified HDHPs.

Understanding these amounts now can help you get an early start on human resources planning for next year.

Here are the changes coming in 2027:

HSA annual contribution limit

HDHP minimum annual deductible

HDHP annual out-of-pocket maximum

What to do

If you sponsor an HDHP for your staff, review the plan’s minimum deductible and out-of-pocket maximum when preparing for the 2027 plan year.

If you allow employees to make pre-tax contributions to an HSA, you should also update your plan communications to reflect the new amounts.

The many benefits of HSAs

An HSA is a special bank account for your employees’ eligible health care costs. They can contribute to their HSA through pre-tax payroll deductions, deposits or transfers. As the balance grows over time, they can continue to save it or spend it on eligible medical expenses.

Employers can also contribute to the accounts, but the annual contribution limit applies to all employee and employer contributions combined.

The money in the HSA belongs to the employee and is theirs to keep, even if they switch jobs. If their new employer offers qualified HDHPs, they can continue to fund the account.

Funds roll over from year to year and can earn interest. Many plans also have investment options to help savers grow the account further.

There are several benefits for employees who have an HSA:

• The money an employee contributes to an HSA is not subject to income taxes, which reduces their overall taxable income.
• They are not taxed on withdrawals.
• If employees contribute to their HSA with after-tax money, they can deduct their contributions on Form 1040 at tax time.
• Employees can tap the funds for any approved out-of-pocket medical expenses.
• They can also grow the account tax-free by investing the funds, like a nest egg for medical expenses in retirement.

HSA-eligible expenses

• Payments for services or medicine that count toward health plan deductibles, copayments or coinsurance.
• Dental or vision care, including orthodontics, eye exams and corrective lenses.
• Medical devices.
• Certain over-the-counter medicines, such as pain relievers, allergy medication, cold and flu medicine or menstrual products.
• Vitamins and health supplements, if recommended by a medical or health professional to treat or prevent a specific disease or condition.

A new bill in Congress aims to change that. The Every Dollar Counts Act, introduced by Rep. Greg Murphy (R-North Carolina), would require health insurers to apply out-of-pocket spending on covered prescription drugs toward a patient’s deductible and out-of-pocket maximum regardless of where the drugs were purchased. 

Murphy, a physician and longtime critic of insurers and pharmacy benefit managers, said the legislation is designed to remove barriers that discourage patients from using lower-cost prescription drug options.

Direct-to-consumer drug platforms have gained traction by bypassing some traditional distribution channels and offering discounted pricing, particularly for certain brand-name medications. The issue has drawn additional attention following the White House-backed launch of TrumpRx earlier this year, which seeks to negotiate lower drug prices directly with manufacturers. 

Supporters of the legislation argue that the current system can effectively force patients to “pay twice.” Even if a worker saves money by purchasing a medication through a low-cost online platform, those expenditures often do not help satisfy the plan deductible unless the drug is purchased through a plan-approved pharmacy or pharmacy benefit manager network. 

For employers, the proposal highlights a growing tension in prescription drug benefits. On one hand, allowing employees to use lower-cost purchasing options could reduce out-of-pocket expenses and improve medication adherence. Employees who can afford their medications are more likely to stay on treatment and avoid costlier health complications later.

On the other hand, some employers and health plans may worry that the bill could weaken cost-management strategies tied to network pharmacies, formularies and benefit design. Plans often use deductibles, copayments and preferred pharmacy arrangements to steer participants toward negotiated pricing and control overall drug spending.

The debate could shape how workers access lower-cost medications and how health plans balance affordability with efforts to manage overall drug spending.

Behavioral health services can deliver a projected return on investment of more than 500%, with employers seeing about $6.07 returned for every $1 spent, according to an analysis by ComPsych, a company that specializes in organizational mental health and absence management services. The cost returns from behavioral health services are derived from reduced absenteeism and presenteeism, improved productivity and reduced medical spending.

While group health plans are required by law to cover mental health services just as they do physical health services, the shortage of therapists coupled with soaring demand has made it difficult for enrollees to access psychologists on a regular basis. Providing additional behavioral health services can help bridge that gap.

Where the savings come from

Besides the services offered through group health plans, employers have additional options such as:

Employee assistance programs — Typically provide a set number of free counseling sessions along with referrals for ongoing care.

Tele-counseling and virtual therapy — Access to licensed therapists via video, phone or messaging.

In-person therapy networks — Expanded provider networks or preferred access to local clinicians.

Mental health apps — Programs focused on stress, anxiety, sleep and mindfulness.

Caregiver support — Help managing elder care, childcare or family responsibilities.

Mental health days or expanded leave policies — Time off specifically for mental well-being.

The financial impact is driven by several factors that tie directly to workplace costs:

• Lower medical spending — Early intervention can reduce emergency room visits, hospitalizations and prescription drug use (this accounts for about one-third of ROI).
• Fewer disability claims — Treating mental health conditions before they escalate can prevent or shorten disability leaves (this accounts for about 15% of ROI).
• Reduced absenteeism — Employees who receive care are less likely to miss work.
• Improved productivity — Workers who are mentally well tend to be more focused and engaged on the job (this accounts for about half of ROI).

Even when employers exclude productivity, the return on investment remains strong based on health care and disability savings alone, according to ComPsych.

Clinical improvements translate to workplace gains

The same research found that employees who engage in counseling and related services see meaningful improvements in common conditions like depression and anxiety. Those clinical gains directly affect workplace outcomes.

Workers who feel better are more likely to stay on the job, avoid extended leaves and maintain consistent performance. That can lead to fewer disruptions for employers and lower overall benefit costs.

Access and engagement remain key

While many employers offer behavioral health benefits, utilization is often lower than expected. Stigma, lack of awareness and limited access can all stand in the way.

Expanding access has become easier in recent years, particularly with the growth of telehealth and digital tools. Many employees now prefer a mix of in-person and virtual care that allows them to fit treatment into busy schedules.

Employers that see the strongest results tend to focus on more than just offering benefits. They also actively promote them and work to normalize their use.

Strengthen behavioral health ROI

To get the most value from behavioral health investments, employers can:

• Promote benefits regularly so employees know what is available.
• Train managers to recognize signs of stress and guide employees to resources.
• Offer a mix of in-person, virtual and self-guided care options.
• Integrate mental health with broader well-being programs, including financial and caregiving support.

Employers that step in to guide workers through this transition can improve retirement outcomes, reduce benefit costs and strengthen employee trust. When older employees understand their Medicare options, they are more likely to retire on time, avoid costly mistakes and feel supported by their employer.

The risks of not helping

Employees approaching retirement often receive little more than COBRA paperwork and general instructions. This lack of guidance can lead to employees making costly errors such as missing key enrollment deadlines.

Two of the most common and expensive mistakes involve late enrollment penalties that apply for the rest of an enrollee’s life:

• Medicare Part B (medical insurance): If employees do not enroll when first eligible and lack qualifying coverage, they may face a lifetime premium penalty that increases their monthly cost permanently. The penalty is 10% of the standard premium for every full 12-month period the employee was eligible but didn’t enroll or have qualifying coverage.
• Medicare Part D (prescription drug coverage): Delaying enrollment without creditable drug coverage can also trigger a permanent penalty added to premiums. The penalty is 1% of the baseline premium for each month the person didn’t have Part D coverage.

In addition, some employees remain on employer plans longer than necessary, increasing costs for themselves and the organization.

How Medicare works with employer coverage

Medicare decisions are not one-size-fits-all. Whether an employee should enroll at age 65 depends largely on their employment status and employer size.

Employees working for companies with 20 or more employees can often delay Part B without penalty if they remain covered under the employer’s plan.

Those at smaller firms may need to enroll in Medicare at 65, as Medicare typically becomes the primary payer.

Employees must also coordinate coverage if they have a spouse on the plan or contribute to a health savings account, which they must stop prior to Medicare enrollment.

How employers can support the transition

You don’t need to provide individualized advice to help your older workers. You can easily create an education strategy that will go a long way toward improving outcomes. Make sure to:

Start early. Introduce Medicare basics as early as age 60, with more detailed education between ages 62 and 64.

Offer workshops and webinars. Discuss enrollment deadlines, coverage options and how Medicare interacts with employer plans.

Provide decision-support tools. Help employees evaluate whether to stay on the employer plan or transition to Medicare.

Send timely reminders. Notify employees as they approach their initial enrollment window (three months before and after age 65).

Connect employees with experts. Offer access to third-party Medicare advisers for one-on-one guidance.

Integrate into offboarding. Include Medicare education in retirement planning materials and exit communications.

Benefits to your organization

Medicare is one of the most important financial and health decisions employees will make, and failing to support them during the transition can lead to unintended consequences. Employees may delay retirement due to uncertainty about health coverage, driving up employer health plan costs as well as their own costs for life. Others may make poor coverage decisions.

When older employees understand their Medicare options, they are more likely to retire on time, avoid costly mistakes and feel supported by their employer. With the right guidance, employers can turn a confusing and stressful process into a well-managed transition that benefits everyone involved.