Federal Courts Fortify No Surprises Act Against Insurer Challenges

By Angela Gray

DALLAS, TX – May 27, 2026 – A federal court in Texas has delivered another significant blow to insurer attempts to undermine the No Surprises Act, dismissing a lawsuit by Blue Cross Blue Shield of Texas that sought to overturn arbitration awards. The ruling is the fourth time in just six weeks that a federal court has rejected such a challenge, creating a powerful judicial firewall that reinforces the law’s protections for patients and the financial resolutions between providers and insurers.

In a decisive victory for healthcare providers and dispute resolution firm HaloMD, Judge Robert W. Schroeder III of the U.S. District Court for the Eastern District of Texas dismissed with prejudice all seven claims brought by BCBS Texas. The insurer, a division of the Chicago-based Health Care Service Corporation (HCSC), was attempting to use the courts to relitigate payment disputes that had already been settled through the Independent Dispute Resolution (IDR) process mandated by the No Surprises Act.

A Pattern of Judicial Rejection

Judge Schroeder’s 18-page ruling found that BCBS Texas was engaging in an impermissible “collateral attack” on the arbitration system. The court determined that the insurer was attempting to relitigate issues already decided by the IDR entities, a move that would undermine the finality and binding nature of the process. The judge noted that the legal principle preventing such attacks “is even more clearly applicable where, as here, Plaintiff is attempting to relitigate issues previously decided by the IDR entities.” This same logic was applied to disputes falling under a similar state-level process established by Texas Senate Bill 1264.

This ruling does not stand in isolation. It is the latest in a rapid succession of judicial affirmations of the No Surprises Act's IDR framework. In the preceding weeks, federal courts in California, Florida, and Pennsylvania handed down nearly identical dismissals in similar cases brought by insurers, many of which also involved HaloMD. This emerging pattern suggests a broad consensus among federal judges that the courthouse is not the appropriate venue for insurers to seek a second chance after an unfavorable arbitration award.

“The court got this case exactly right,” said Justin Carangelo, General Counsel and Chief Compliance Officer of HaloMD, in a statement. “The NSA forecloses judicial review of IDR awards. This is the fourth federal court to reject attempts to weaken the NSA in the last six weeks. Insurers engaged in similarly wasteful litigation should assess whether continuing to do so is an intelligent use of resources.”

The Battle Over the No Surprises Act

Enacted to shield Americans from the shock of massive, unexpected medical bills, the No Surprises Act took effect on January 1, 2022. The landmark legislation protects patients who receive out-of-network care, often unknowingly, at in-network facilities. It holds patients responsible only for their standard in-network cost-sharing, removing them from the middle of payment disputes between providers and insurers.

At the core of the law is the Independent Dispute Resolution process. When an out-of-network provider and an insurer cannot agree on a fair payment for services rendered, either party can initiate this 'baseball-style' arbitration. A certified, neutral IDR entity reviews submissions from both sides—including the insurer's median in-network rate, known as the Qualified Payment Amount (QPA)—and selects one party's offer. By design, these determinations are final and binding, with very narrow avenues for appeal, ensuring disputes are resolved efficiently.

However, major insurance carriers have repeatedly challenged the process, both in court and through regulatory lobbying. Insurers argue that some IDR entities have not given sufficient weight to the QPA, leading to what they claim are inflated payment awards that could drive up overall healthcare costs. These lawsuits represent a strategy to challenge the finality of the awards and reshape the implementation of the law in their favor.

Tens of Millions in Unpaid Awards at Stake

While the legal victories fortify the No Surprises Act, they also highlight a pressing financial issue for healthcare providers: a massive backlog of unpaid claims. According to HaloMD, the court's decision does not resolve the tens of millions of dollars that BCBS Texas and its parent company, HCSC, allegedly owe to providers for care that has already been delivered to patients.

“Left unresolved by today's decision, in HaloMD's view, is the growing backlog of past-due payments under the No Surprises Act that BCBS Texas and parent company HCSC owe to healthcare providers for care already provided to patients,” stated Patrick Velliky, Chief External Affairs Officer of HaloMD. “HaloMD maintains HCSC has failed to pay tens-of-millions-of-dollars in legally binding awards.”

This issue extends far beyond a single insurer or state. Across the country, healthcare providers, from small independent physician groups to large hospital systems, report significant delays in receiving payments determined through the IDR process. The administrative and legal hurdles thrown up by insurers have created a cash-flow crisis for many, threatening their financial stability and ability to serve their communities. For these providers, the recent court rulings are a welcome sign that legally mandated payments, long held up by litigation, may finally be released.

Solidifying Protections for Patients and Providers

The consistent rejection of insurer lawsuits by federal courts carries profound implications for the entire healthcare ecosystem. By upholding the binding nature of IDR awards, the judiciary is reinforcing the core intent of the No Surprises Act: to create a predictable and final system for resolving payment disputes while protecting patients. These rulings effectively close a potential loophole that insurers were attempting to exploit, which could have swamped the courts with disputes and rendered the arbitration process toothless.

For patients, this judicial trend means the protections they were promised under the law are being actively defended and strengthened. The finality of the IDR process is crucial to keeping patients out of billing conflicts. For healthcare providers, these decisions offer a bulwark against what they see as delay tactics by powerful insurers, providing more certainty that they will be fairly compensated for their services in a timely manner.

As the legal dust settles, the message from the courts appears clear: the mechanisms established by the No Surprises Act are to be respected. While debates over healthcare costs and reimbursement levels will undoubtedly continue in regulatory and legislative arenas, the strategy of using collateral lawsuits to challenge binding arbitration awards is proving to be a losing battle for insurers.