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After briefly describing the federal legal framework fostering the growth of binding arbitration, this paper identifies controversies surrounding arbitration as well as arguments supporting and opposing its use. The paper describes the use of arbitration among certain types of collectively bargained employee health plans regulated under the Employee Retirement Income Security Act of 1974 (ERISA), by health maintenance organizations (HMOs) in California, and by a large employer operating a self-insured ERISA health plan. Evidence cited by the California Supreme Court that the largest HMO in California operated its mandatory arbitration program in an unfair way is presented, along with the HMO's subsequent efforts to identify problems with its arbitration program and correct them. Proposals introduced in the California legislature to further regulate arbitration or to ban predispute arbitration agreements with health plans are described as well as their possible preemption by federal law. A protocol developed by leading associations involved in alternative dispute resolution, law, and medicine is also described. After describing the treatment of arbitration by proposed laws and regulations under consideration by Congress and the U.S. Department of Labor for employee health plans, the paper concludes by raising some of the federal policy issues presented by arbitration.

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