The Departments Issue Final IDR Operations Rule

On May 28, 2026, the Departments of Health and Human Services (HHS), Labor (DOL), and the Treasury (collectively, the Departments) and the Office of Personnel Management released a final rule governing “Federal Independent Dispute Resolution Operations” (Final Rule). The Federal Independent Dispute Resolution (IDR) process has been strained by dispute volumes far exceeding original expectations and overwhelmingly favoring provider offers.  These ongoing operational and policy challenges have increased plan and issuer costs and created opportunities for provider windfalls that put significant economic pressures on plans and issuers. The Departments originally proposed the rule in 2023, and stakeholders expected them to act quickly to finalize the rule to improve the processes under the No Surprises Act (NSA). However, since the proposed rule was published, issues with the IDR process have continued to increase and new solutions are needed to address these challenges. Of note, in large part, the Final Rule addresses neither the existing structural deficiencies of the IDR process or the underlying policy issues that have resulted in problematic practices by providers and their third-party intermediaries, including the submission of large volumes of disputes and offers in excess of billed charges. While the Final Rule seeks to make improvements to the process, additional changes are needed to create the balance between payers and providers Congress intended while continuing to protect patients from balance billing.

The Final Rule will generally be effective 60 days after the date of publication in the Federal Register, which is July 31, 2026.

Overview

The NSA established federal protections against surprise medical billing and created the Federal IDR process to resolve payment disputes between payers (plans and issuers) and providers (including facilities and providers of air ambulance services) for certain out-of-network services. Since implementation, the IDR process has experienced significant operational and administrative challenges, including high dispute volumes, ineligible claims concerns, processing delays, and IDR awards that are both unreasonable and unsustainable.

The Final Rule states that it aims to reduce delays, improve communication, and make the arbitration system more efficient by requiring insurers to provide clearer information upfront, formalizing the open negotiation process through the federal IDR portal, expanding and clarifying rules for batching similar claims, speeding up eligibility determinations, and creating a registry so providers can identify the correct health plans more easily. It also reduces the administrative fee from $115 to $15 per party per dispute. Overall, the Final Rule is intended to streamline dispute processing, reduce ineligible claims, and ensure faster and more consistent payment determinations, although we expect it will take some time for these changes to provide any meaningful relief to the overly strained IDR process, if at all.

The following highlights key provisions of the Final Rule. The Final Rule includes a number of different applicability dates for the various changes, which are noted below.  The Final Rule applies to plans, issuers, and Federal Employees Health Benefits (FEHB) carriers and their plans (collectively, plans and issuers). For additional questions about these or any other policies included in the Final Rule, please contact any of the authors or your Groom attorney.

Changes to Improve Communication Between Disputing Parties

Payer and Provider Communications

As background, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) mandates the adoption of electronic standards for certain health care transactions, including health care payment and remittance advice. All electronic remittance advices must comply with the Accredited Standards Committee (ASC) X12 835 transaction standard adopted by HHS, which mandates the use of Claims Adjustment Reason Codes (CARCs) and Remittance Advice Remark Codes (RARCs) to communicate remittance information. CARCs explain why a claim or service line was paid differently than it was billed. RARCs provide additional information for an adjustment already described in a CARC.

Currently, there are a set of approved RARCs that convey information related to the NSA, including which provisions apply to a claim, how cost sharing was calculated, and whether a payment for a claim was an initial or final payment. However, currently, plans and issuers may, but are not required to, use CARCs and RARCs for claims subject to the NSA.

The Final Rule now requires plans and issuers to provide standardized remittance and denial information using CARCs and RARCs. The finalized provision requires plans and issuers to use CARCs and RARCs to communicate information related to whether a claim for an item or service furnished by an entity that does not have a direct or indirect contractual relationship with the plan or issuer is subject to the NSA. The Departments will specify the manner and timeframe for using CARCs and RARCs in future guidance.

The Departments finalized the requirement to use CARCs and RARCs to improve transparency and address some of the common communication issues between disputing parties, including those stemming from a lack of clarity as to whether items and services are qualified IDR items and services covered by the NSA. This also includes using CARCs and RARCs to convey when the NSA does not apply. As such, the Departments expect that this change will reduce the number of ineligible disputes submitted to the Federal IDR process. The Final Rule does not require plans and issuers to use CARCs and RARCs on remittance advice for payments made directly to participants, beneficiaries, or enrollees.

While these provisions are effective upon the effective date of the Final Rule, the Departments intend to establish an applicability date through guidance for the use of specified CARCs or RARCs. The Departments stated that they intend to issue guidance on the DOL and HHS websites within six months of publication of the Final Rule. The Departments acknowledge that, after guidance is issued identifying the specific CARCs and RARCs required to be used, plans and issuers will need additional time to implement the CARC and RARC requirement. In light of this, the Departments committed to establishing an appropriate applicability date, which is anticipated to provide regulated entities no less than four months to come into compliance.

GROOM INSIGHT: Operationally, plans and issuers should expect to make updates to remittance workflows and, if necessary, coordinate with third party administrators (TPAs) and vendors. In line with existing guidance outlined in FAQ Part 55, the Final Rule allows providers to request an extension of the time period to initiate open negotiations if the plan or issuer fails to provide CARCs and RARCs. Plans and issuers should monitor the guidance released and be ready to incorporate the new codes into their systems. This policy is intended to facilitate communication between plans or issuers and providers, thereby reducing the number of ineligible disputes submitted to the Federal IDR process and allowing certified IDR entities to focus resources more efficiently. Providing a CARC or RARC in a remittance advice that clearly and accurately identifies an item or service as being eligible or ineligible for the Federal IDR process could prevent ineligible disputes from incorrectly proceeding to the Federal IDR process. Thus, it is important that plans and issuers carefully update their operational systems, as this will be part of the record to document eligibility for each claim. 

Qualifying Payment Amount (QPA) Disclosures

The Final Rule clarifies the information plans and issuers must disclose regarding the QPA. Specifically, the Final Rule clarifies that information about the QPA must be shared where the recognized amount is not based on the QPA. In the case of air ambulance services, plans and issuers must disclose the QPA and certain information about the QPA when cost sharing is calculated based on the lesser of the QPA or the amount billed by the provider of air ambulance services. The Departments similarly finalized a requirement that, in the case of emergency and applicable non-emergency services, information about the QPA must be disclosed when the recognized amount is based on the lesser of the QPA or the amount billed by the provider or facility.

The Departments also finalized the proposed rules’ provision interpreting “days” as “business days” for the purpose of the required disclosures. The Final Rule also requires that the QPA disclosures include the registration number assigned to the plan or issuer.

The provisions of the Final Rule related to disclosure of information about the QPA apply to disclosures required to be provided on or after the effective date of the Final Rule. The relevant changes regarding the disclosure of the registration number will be applicable, once the Federal IDR Registry (described below) is operational. 

Federal IDR Participation and Documentation

Changes to Support Meaningful Open Negotiation

The Departments finalized proposals to establish more structured requirements around the open negotiation period that precedes Federal IDR initiation. The Final Rule imposes new notice requirements and establishes a process for tracking open negotiation through the Federal IDR portal in anticipation of initiation of a Federal IDR process dispute. The Final Rule requires that parties utilize standardized open negotiation notices and formal response notices that must be submitted through the Federal IDR portal. The Departments also finalized specific required content elements and standardized forms that must be used for these notices. 

Once the Final Rule becomes effective, all of the communication for the open negotiation notices is conducted through the Federal IDR portal.  As such, parties cannot require that the other party submit notices through proprietary portals to initiate open negotiation. The Final Rule also finalizes the proposal that the 30-day open negotiation period begins on the day the party first submits the open negotiation notice to the Federal IDR portal. Further, the party in receipt of the open negotiation notice must provide a written notice in response to the other party and the Departments through the Federal IDR portal, no later than the 15th business day of the 30-business day open negotiation period. The Final Rule does not require that parties use the Federal IDR portal for further communication related to negotiation beyond the initiation of open negotiation and the submission of the open negotiation response.

These changes will apply to disputes with open negotiation periods beginning 90 days after the Departments issue guidance announcing that the functionality supporting these provisions has become available.

GROOM INSIGHT: These changes will require payers to reevaluate their process for responding to open negotiation notices. Payers will not be able to require providers to submit notices through other portals or emails, as is current practice today. The goal of bringing the entire process, including open negotiation, into the IDR portal is to help document timelines, maintain records of negotiation communications, ensure timely responses, and ensure parties are communicating with the right contacts. Payers will likely need to update their processes to ensure they adequately track negotiation timelines and notice submission in the Federal IDR portal. While this change in policy may limit certain abuses (i.e., IDR initiation without any communication in negotiation), the Final Rule does not address substantively the need for “good faith” negotiation under the statute.

Changes to Initiation of Federal IDR Process

The Departments finalized the proposal to establish more structured requirements around the Federal IDR initiation process. Under the Final Rule, the initiating party must submit a written notice of IDR initiation to the non-initiating party and the Departments through the Federal IDR portal.  The non-initiating party must also provide a response to the notice of IDR to the initiating party and the Departments through the Federal IDR portal. The Departments also finalized required content elements and standardized forms that must be used for these notices. These changes will apply to disputes with open negotiation periods beginning 90 days after the Departments issue guidance announcing that the functionality supporting these provisions has become available.

The proposed rule included a provision that would permit the Departments to conduct an eligibility review in certain extenuating circumstances, such as when the volume of disputes outpaces the capacity of certified IDR entities to timely process eligibility determinations. The proposal was meant to help facilitate timely payment determinations or the effective processing of disputes. The Departments did not finalize this in the Final Rule, citing improvements to the timelines in which IDR entities are conducting these reviews since the provision was proposed in 2023.

Changes Related to IDR Entity Selection

The Departments finalized amendments to the process for selecting a certified IDR entity when the parties fail to jointly select a certified IDR entity. The Final Rule provides an alternative result for a notice of IDR initiation response and IDR entity selection received on the third business day following IDR initiation in an effort to incentivize both parties to provide the notices of IDR initiation response and IDR entity selection earlier, in the hopes that the parties have greater opportunity to accept or object to the other party’s selection. If a party submits a notice of IDR initiation response or notice of IDR entity selection to the other party on the third business day after the date of IDR initiation, and the other party fails to respond to the alternative preferred certified IDR entity on the same day, the parties will have failed to jointly select a certified IDR entity. In the event disputing parties fail to jointly select a certified IDR entity, the Departments will proceed to random selection, and both parties will be notified of the Departments’ selection not later than six business days after IDR initiation. If a party submits a notice of IDR initiation response or notice of IDR entity selection to the other party on the first or second business day after the date of IDR initiation, and the other party fails to respond to the alternative preferred certified IDR entity by the third business day after the IDR initiation, the alternative preferred certified IDR entity will be considered jointly selected by the parties.

The changes are aimed at mitigating alleged gaming by allowing sufficient time for both parties to meaningfully engage in the process. These changes will apply to disputes with open negotiation periods beginning 90 days after the Departments issue guidance announcing that the functionality supporting these provisions has become available.

GROOM INSIGHT: In the preamble, the Departments note the issuance of bi-monthly IDR reports to provide greater transparency and information about the volume of disputes received and resolved in the Federal IDR process as a tool to help parties with the IDR process. The Departments state that they do not intend to release information at the individual certified IDR entity level. The Departments explain that this information could result in gaming of the system whereby initiating parties select certified IDR entities based on provider win rates or incentivize certified IDR entities to render determinations that would gain them more disputes, impeding fair, unbiased, and impartial determinations. As such, plans and issuers should plan to utilize the data currently available when engaging in the certified IDR entity selection process. Additionally, plans and issuers should monitor and track their own experience with the certified IDR entities to help inform their selection.  

Federal IDR Registry

The Departments finalized the proposal to require plans and issuers subject to the Federal IDR process to register through a Federal IDR registry. Required registration data includes identifying information for the plan and designated contacts. Plans and issuers are required to update this information within 30 days of any changes, annually confirm that the registration and information is accurate, and ensure that TPAs clearly identify the plans they represent. Importantly, the rule states that delegation to a TPA or service provider does not relieve the plan or issuer of compliance responsibility. Upon submission of the required information, each plan and issuer would be assigned an IDR registration number. 

The goal of the registry is to help providers accurately identify plans and issuers and their contact information, reduce the number of ineligible disputes initiated within the Federal IDR process, and reduce the number of disputes incorrectly initiated against the wrong plan or issuer. Once the registry is available, plans and issuers are required to register in the system within 90 business days. 

Implementation Timing

In general, the provisions relating to improving Federal IDR participation and documentation are effective 90 days after the Departments have issued guidance announcing the operational functionality to support the changes. However, the Final Rule notes that the Departments anticipate that all functionality associated with these provisions will be available 24 months after the effective date of the Final Rule. The Departments state that they will be implementing these provisions on a rolling basis and will issue guidance announcing when the functionality supporting each requirement becomes available and the corresponding applicability date.

GROOM INSIGHT: In March of this year, HHS announced that, in the latter half of 2026, the Federal IDR process will transition from single-use web forms to a new IDR Gateway. The IDR Gateway is meant to provide a secure, centralized platform that parties can use to manage disputes. We expect the IDR Gateway to operationalize many of the policies outlined in the Final Rule.

Federal IDR Administrative and Certified IDR Entity Fee

The Final Rule outlines the establishment of the administrative fee amount that HHS will collect to carry out the Federal IDR process each year. The Final Rule updates estimates of the total administrative fees paid and expenditures to be made by the Departments to carry out the Federal IDR process. The Departments increased their estimate of the total number of administrative fees paid annually from approximately 691,000, as specified in the 2023 proposed rules, to approximately 6.9 million. The Departments also updated the expenditures they estimate they will make in carrying out the Federal IDR process from approximately $100.2 million, as specified in the 2023 proposed rules, to approximately $119.4 million to reflect the costs of carrying out the Federal IDR process at the current volume of disputes and take into consideration the costs of implementing the provisions in the Final Rule. The Departments also state that the changes outlined in the Final Rule with respect to the administrative fee will make the Federal IDR process more accessible for small and rural providers and for low-dollar claims, thus increasing the number of disputes initiated and administrative fees paid.

Taking all of this into account, the Departments lowered the administrative fee to $15 per party per dispute, rather than the current fee of $115 per party per dispute. This new fee is applicable to disputes initiated on or after five business days after the publication of the Final Rule in the Federal Register.

The Final Rule codified existing guidance that provides that, if either party fails to pay the certified IDR entity fee by the time the offer is due, that party’s offer would not be considered received.  Further, if a party fails to submit an offer or a party’s offer is not considered received due to non-payment of the certified IDR entity fee, the non-prevailing party continues to be responsible for payment of the certified IDR entity fee. Similarly, the Final Rule also codified existing guidance related to closure of a dispute for non-payment of the administrative fee and stipulates that, if the initiating party fails to pay the administrative fee within two business days of the date of preliminary selection of the certified IDR entity, the dispute would be closed due to nonpayment and neither party would be responsible for the administrative fee.

The Departments, however, did not finalize the proposals regarding the timing and manner of administrative fee collection or the reduced administrative fees for low-dollar and ineligible disputes. The Departments proposed a reduced administrative fee amount for low-dollar disputes to address access concerns by certain interested parties that regularly provide services with low-dollar values. The Departments also proposed reduced administrative fee amounts for non-initiating parties in cases of ineligible disputes, as well as pursuing Federal debt collection of the administrative fee from parties that do not pay as required.

GROOM INSIGHT: While a lower administrative fee may be welcomed by some, there is some concern that this policy may actually exacerbate the problem of ineligible claims being submitted because the lower administrative fee may incentivize providers to submit more disputes and could potentially counteract some of the provisions aimed at decreasing the number of ineligible disputes.  This is because cost may no longer serve as a barrier to enter the IDR process for lower-value claims. Notably, the Departments did not address any of the fee collection issues that incentivize IDR entities to find in favor of eligibility of claims for the IDR process (i.e., the fact that the IDR entity only receives its fee upon a determination that the request for IDR is valid under the NSA). 

Changes Related to IDR Dispute Eligibility

Batching and Bundling Standards

The Final Rule makes a number of revisions impacting what constitutes “batched qualified items and services.” Of note, the Final Rule allows up to 50 qualified IDR items and services to be considered jointly as part of one payment determination. Currently, there is no limit on the number of items or services that can be batched, but the preamble states that, based on data from April to September 2025, the average line items per batched dispute was seven. The Final Rule also newly allows anesthesiology, radiology, pathology, and laboratory qualified items and services furnished to one or more patients and billed under the same or similar codes to be batched. The Departments note that they intend to release clarifying guidance regarding the batching provisions. The changes to batched disputes are applicable for disputes with open negotiation periods beginning 90 days after the effective date of the Final Rule.

The Final Rule also includes a number of technical changes to the definition of bundled payment arrangement. The Departments finalized the definition of the term “bundled payment arrangement” as an arrangement under which: (1) a provider, facility, or provider of air ambulance services bills for multiple items or services furnished to a single patient under a single service code that represents multiple items or services (for example, a diagnostic related group (DRG) code); or (2) a plan or issuer makes an initial payment or notice of denial of payment to a provider, facility, or provider of air ambulance services under a single service code that represents multiple items or services furnished to a single patient (for example, a DRG code). The definition of bundled payment arrangements under the Final Rule allows disputes to be bundled by a single CPT, DRG, or HCPCS code, provided the dispute otherwise complies with such definition. The Departments also finalized the proposal to remove language stating that a bundled payment arrangement is subject to the rules for batched disputes. The changes regarding bundled payments become applicable on the effective date of the Final Rule.

Federal IDR Process Eligibility Review Timeframe

The Departments finalized a longer time period for IDR entities to make eligibility decisions in recognition that eligibility determinations have proven to be complex, time-consuming, and resource-intensive for certified IDR entities. To address these issues, the Departments are finalizing a requirement that certified IDR entities determine eligibility within five business days of final certified IDR entity selection and notify both disputing parties and the Departments. Currently, certified IDR entities must determine eligibility within three business days of final certified IDR entity selection. To support eligibility determinations, conflict of interest reviews, or payment determinations, the Departments are finalizing a requirement for parties to submit additional information to the certified IDR entity within five business days of the request for additional information, and in the event that a party fails to provide the requested information, the certified IDR entity will proceed with their determination without the requested information if possible or close the dispute if it is not possible to proceed. These changes will apply to disputes with open negotiation periods beginning 90 days after the Departments issue guidance announcing that the functionality supporting these provisions has become available.

The Departments’ had proposed a departmental eligibility review process to address extenuating circumstances, such as when the volume of disputes outpaces the capacity of certified IDR entities to timely process eligibility determinations, whereby the Departments could facilitate timely payment determinations or the effective processing of disputes.  However, the Departments did not finalize this proposal because certified IDR entities have increased their rate of making eligibility determinations and closing disputes since the 2023 proposed rules were published.

GROOM INSIGHT: As we noted in a recent Groom Publication on the NSA, in June of 2025 HHS sought to provide greater opportunity to challenge eligibility when the eligibility was based on erroneous or potentially fraudulent submissions.  That process relies on the IDR entity itself agreeing to reopen the case, and many plans and issuers have had limited response to requests to reopen. The Final Rule does not contain any provision designed to achieve more accurate eligibility determinations or to curb the efforts of certain providers to file high volumes of initiation notices to effectively overwhelm plans and issuers, thus gaining what amounts to default judgments on potentially ineligible claims.

Takeaway

The Final Rule makes a number of changes that should help drive some efficiencies in the Federal IDR process, although it will take time for all of the new provisions to be fully implemented and for plans and issuers to notice any meaningful change, if at all. However, given the biggest challenges that now plague the process – gamesmanship of the process (particularly with respect to IDRs for ineligible items and services and a similar level of improper payment determinations) – additional action beyond the Final Rule is needed for the Federal IDR process to promote Congress’ clear intent of driving down the cost of health care.  Until the structural issues and misaligned incentives are addressed, plans and issuers should anticipate ongoing issues associated with a high volume of IDR initiations and continued unreasonable payment determinations by the IDR entities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.