Businesses in New York State operate in one of the most difficult economic environments in the country. Burdened by high taxes — New York ranks no. 50 on the State Tax Competitive Index — and rising health care costs that are among the highest in the nation, it becomes harder each year for employers to grow, innovate, and create more jobs. 

Fortunately, Gov. Kathy Hochul’s fiscal year 2027 budget takes an important step toward reining in some of these costs for New York businesses by controlling runaway health care expenditures for everyone through reforming the state’s Emergency Medical Services and Surprise Bill Act.

How does NY's surprise billing law work?

Enacted in 2014, New York’s surprise billing law was designed to protect consumers from out-of-network emergency and surprise bills and establish an Independent Dispute Resolution, or IDR, process to resolve payment disputes between health plans and providers. While the law has shielded millions of patients from unexpected medical costs, persistent flaws in the IDR process are driving health care costs higher for employers.

Under current law, an independent arbiter will determine whether the provider’s fee or the plan’s payment is more reasonable. As part of the process, they consider what is charged for similar services in the same specialty in the same geographical area, and are required to consider the 80th percentile of billed charges — essentially what 80% of physicians in a particular region charge — when determining the final payment amount.

Reliance on the 80th percentile results in payments that tend to be significantly higher than the negotiated rates that insurers pay for in-network care or what Medicare reimburses. A few examples of case decisions highlight the problem:

A provider was inexplicably awarded $315,848 for a scheduled surgery that had been approved by the plan, with an out-of-network payment of $7,239. Despite the surgery being pre-authorized, the provider billed it as an emergency service and submitted the claim for IDR. The arbiter sided with the provider, requiring $308,575 in additional payment without providing an explanation for the decision. 

An out-of-network plastic surgeon that billed $67,500 for the closure of a surgical wound compared to the health plan’s in-network reimbursement rate of $2,146. After submitting the claim to IDR, the surgeon received $19,493 – more than 1,000% above what Medicare typically pays for this procedure.

An out-of-network provider billed $59,750 for remote neuromonitoring of a patient, which is $57,077 more than the plan’s in-network reimbursement of $2,673. Through IDR, they received $45,372.

Directing arbiters to focus on the 80th percentile drives costs higher and providers are free to set their fees at whatever level they wish. It only takes a handful of providers increasing their rates to cause reimbursement for routine procedures, such as a laparoscopic appendectomy, to become so skewed that payments can range from $4,404 in Queens to $25,000 on Long Island, even if the quality, acuity, or complexity of the care provided is comparable.

A 2019 report by the Department of Financial Services examining the IDR process found that the average payment amount decided through arbitration was 8% higher than the 80th percentile of charges, and a 2022 analysis found that the New York arbitration approach increased payments for nonemergency out-of-network services by 24%. 

These inflated payments ripple through the system, contributing to the out-of-control provider and hospital services that are driving up premiums for patients and making it more costly for businesses to provide health insurance.

New Yorkers are paying too much. Let's fix it

A federal survey on employer-sponsored insurance found that in 2024, New York’s businesses and consumers paid an average of $9,589 for single coverage — the highest in the U.S. and 13% above the national average. There is little employers can do to address the factors driving these premium increases, forcing tough cost-cutting changes to their plans such as increasing deductibles. That’s the last thing employers or employees need in this already challenging economic environment. 

After more than a decade, it is time to reevaluate New York’s Emergency Medical Services and Surprise Bill Act. Hochul proposes a series of thoughtful and targeted reforms, lowering the benchmark for arbiters to use 50th percentile and establishing a cap on payments, while continuing to safeguard consumers. These changes may seem technical, but to business owners trying to stay afloat in one of the most expensive states in the country, it’s meaningful progress.

Addressing the affordability challenge in health care won’t get solved overnight, but the governor’s proposal will make a real difference. If lawmakers want to help New York’s businesses, they should include these changes in the final budget.

Kyle Wallach is the director of government affairs at the Business Council of New York State. 

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