Are independent dispute resolution services for out-of-network medical payment amounts taxable in Texas?

Plain-English summary

A company managed independent dispute resolution for out-of-network healthcare providers under the federal No Surprises Act. It checked whether disputes qualified, evaluated insurer offers, prepared supporting material and a settlement proposal, and managed arbitration over the amount payable. The Comptroller ruled that this work supervises, handles, investigates, and settles payment for insurance claims, making it a taxable insurance service under Texas sales tax law. The result did not depend on the company itself paying claims or holding an insurance adjuster license.

What this means for you

The letter concerns disputes over an insurer’s payment amount after a claim, and the specific work the vendor performed for providers. Its outcome turns on those services, even when a separate certified entity makes the final arbitration choice.

Common questions

Q: Did the company have to pay claims to be taxable?
A: No. Its analysis, submission, and management of the payment dispute fit the claims adjustment or processing definition.

Q: Was the underlying dispute about whether the medical claim should be paid?
A: No. The letter describes a dispute over the out-of-network payment amount.

Q: Did working for healthcare providers remove the insurance-service classification?
A: No. The rule also covers services for others pertaining to insurance policies.

Citations and references

• Tex. Tax Code § 151.0039(a) — defines taxable insurance services, including claims adjustment or processing.
• Tex. Tax Code § 151.0101(a)(9) — lists insurance services among taxable services.
• 34 Tex. Admin. Code § 3.355(a)(8) — the letter quotes “Any activities to supervise, handle, investigate, pay, settle, or adjust claims or losses.”

Source

• Official Texas STAR letter
• Texas STAR letters search

Original ruling text

July 10, 2026

RE: Private Letter Ruling No. 20260212163448

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters. [ENDNOTE 1] We are responding to your request dated Feb. 9, 2026, and supplemental information received on April 14, 2026. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on the taxability of independent dispute resolution (IDR) services your client provides pursuant to the Federal No Surprises Act.

Facts Presented

** (Taxpayer) operates in the health technology and health payment dispute resolution spaces, specializing in independent dispute resolution (IDR) under the Federal No Surprises Act (NSA) and related laws. The NSA limits the amount patients must pay for out-of-network services and instead requires insurers to pay healthcare providers directly at an out-of-network rate.

A healthcare provider will first bill the insurer for payment on a claim for services rendered. The insurer will respond with a payment or a notice of denial. If a state law mandates a reimbursement rate (or otherwise has a system to resolve a payment dispute), the insurer must pay that amount. Otherwise, insurers can choose the amount of their initial payment.

If a healthcare provider and insurer disagree on the out-of-network rate, both parties enter negotiations. If negotiations fail, either party may initiate arbitration of the dispute, which begins the IDR process. The IDR process does not constitute an appeal of a claim denial. Instead, it serves as a forum in which providers may dispute the amount payable for a claim, not whether a claim should be paid.

Taxpayer manages the full lifecycle of the IDR process on behalf of out-of-network healthcare providers who dispute out-of-network rates from an insurance provider. Taxpayer’s dispute resolution process begins when an out-of-network provider submits a claim through its portal or interface. Taxpayer’s program verifies whether a particular dispute is eligible for IDR under federal and state rules. Taxpayer has sole authority over its client to determine which claims, if any, it submits to IDR. See Dispute Resolution Services Agreement dated Nov. 20, 2025.

Taxpayer analyzes insurer offer reimbursement amounts, uses internal and historic data to craft a dispute strategy, and prepares and organizes required supporting documentation. Taxpayer works with its customers to gather all pertinent documents supporting the provider’s claims. Taxpayer then submits a proposal for settlement and manages the arbitration process on behalf of the provider, including negotiation support, ongoing reporting, analytics, and monitoring of trends across claims.

During this time a certified IDR entity presides over the dispute and chooses either the Taxpayer’s or insurer’s offer.

Taxpayer receives payment for its services based on a set percentage of the net settlement amount. Taxpayer also receives compensation if a non-prevailing ruling by an arbitrator occurs. See Dispute Resolution Services Agreement dated Nov. 20, 2025.

Taxpayer asserts it does not perform claims adjustment or claims processing, because it does not handle, settle, or pay claims.

Question, Ruling, and Analysis

Our restatement of your question is shown below, followed by our response and analysis.

Question: Are Taxpayer’s independent dispute resolution (IDR) services taxable?

Ruling: Yes, Taxpayer’s IDR services fall within the definition of an insurance service in Section 151.0039 (Insurance Service) as insurance claims adjustment or claims processing defined under Rule 3.355(a)(8) (Insurance Services) and are taxable.

Analysis: Texas imposes a sales tax on each sale of a taxable item in this state. Section 151.051 (Sales Tax Imposed). The term “taxable item” includes tangible personal property and taxable services. Section 151.010 (Taxable Item). Insurance services are included in the list of specifically enumerated taxable services in Texas. Section 151.0101(a)(9) (Taxable Services).

An insurance service means insurance loss or damage appraisal, insurance inspection, insurance investigation, insurance actuarial analysis or research, insurance claims adjustment or claims processing, or insurance loss prevention service. Section 151.0039(a) (Insurance Service). Insurance claims adjustment or claims processing means “[a]ny activities to supervise, handle, investigate, pay, settle, or adjust claims or losses.” Rule 3.355(a)(8).

Insurance services are taxable when performed on behalf of an insurance carrier, its insured, its policyholders, or others pertaining to a policy or policies of insurance. Rule 3.355(b). Prior Comptroller guidance does not limit “insurance claims adjustment” to services provided by persons described by the definition of “adjuster” in Texas Insurance Code, Section 4101.001 (Definitions). See also Star Accession No. 8803L0870A01 (Mar. 21, 1988) (“[t]he statute or rule does not require the person performing [insurance claims adjustment or claim processing] services to be licensed as an adjustor or private investigator.”). Furthermore, Attorney General Opinion JM-1016 found that claims adjustment or claims processing services are taxable insurance services, whether those services occur before or after a medical service settlement. See Star Accession No. 8902A0923A03 (Feb. 13, 1989)

Taxpayer works directly with medical service providers when the provider and an insurer disagree on the out-of-network rate to be paid for the medical services provided for an insurance claim and initiates arbitration for resolution. Taxpayer analyzes, researches, and organizes all required documentation, submits a proposed settlement amount, and manages the arbitration process on behalf of the medical service provider.

Taxpayer’s activities are performed on behalf of a medical service provider to resolve a disputed amount related to an insurance claim. This constitutes the supervising, handling, investigating, and settling of payment for an insurance claim under the definition of insurance claims adjustment or claims processing provided by Rule 3.355(a)(8). Taxpayer’s services are therefore taxable insurance services. Sections 151.0039 and 151.0101(a)(9) and Rule 3.355(b).

Comptroller’s Decisions and STAR documents cited can be found on the Comptroller’s State Tax Automated Research (STAR) system. The Texas Tax Code, Texas Administrative Code, and the STAR system are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 20260212163448.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE

________

[1] Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.