An out-of-network provider is a medical professional or facility that has not entered into a contract with a patient’s specific health insurance company to provide services at a pre-negotiated rate. Health insurance networks are collections of doctors, hospitals, and specialists who have agreed to the terms and pricing structure set by the insurer. When a provider is outside this network, they are not bound by the contracted rates that apply to in-network providers.
Defining Network Status
The difference between in-network and out-of-network status centers on a legal agreement between the provider and the health plan. An in-network provider accepts a negotiated rate, often called the “allowed amount,” as payment in full for a covered service. This allowed amount is a discounted price the provider agrees to accept, and they are required to write off any difference between their standard fee and this negotiated rate.
Conversely, an out-of-network provider has no such contract or obligation with the patient’s insurance plan. They can charge their full, non-negotiated price, which is known as the “billed charge.” If the insurance plan offers coverage for out-of-network care, it determines its own allowed amount, typically based on what it deems a usual, customary, and reasonable fee. Since the provider is not obligated to accept the insurer’s payment as full, they may charge the patient for the entire difference between their billed charge and the amount the insurer pays.
Patient Costs Associated with Out-of-Network Care
Seeking care from an out-of-network provider generally results in substantially higher out-of-pocket costs for the patient. Many insurance plans, especially Health Maintenance Organizations (HMOs) and Exclusive Provider Organizations (EPOs), may refuse to cover out-of-network services entirely, except in emergency situations. Plans that do offer coverage, such as Preferred Provider Organizations (PPOs), typically impose much higher cost-sharing requirements for out-of-network services.
Patients often face higher annual deductibles for out-of-network care, which must be met before the insurance company begins to pay. After the deductible is met, the patient’s co-insurance—the percentage of the cost they must pay—is usually much greater than it would be for an in-network visit. For example, an in-network co-insurance might be 20%, while the out-of-network co-insurance could be 40% or 50%.
The most significant financial risk is the practice known as balance billing. This occurs when the out-of-network provider bills the patient for the remaining amount after the insurance company has paid its portion of the allowed amount. Since the provider has no agreement to write off the difference, the patient is responsible for the full gap between the provider’s total billed charge and the insurance payment.
Legal Protections Against Surprise Billing
Federal legislation protects consumers from the most financially devastating aspects of out-of-network billing, particularly when the patient cannot choose the provider. The No Surprises Act (NSA), which took effect in 2022, was designed to ban many instances of “surprise billing.” The Act prevents providers from balance billing patients in specific, unavoidable situations.
The first scenario covered by the NSA is emergency services, regardless of whether the hospital or provider is in-network or out-of-network. In an emergency, the patient is only responsible for the same co-payment, co-insurance, or deductible amount that they would have paid for an in-network provider. This protection extends to services received after stabilization, unless the patient provides written consent to waive the protection.
The second major protection covers non-emergency care received at an in-network facility when the patient is unknowingly treated by an out-of-network provider. This frequently occurs with ancillary services, such as an out-of-network anesthesiologist, pathologist, or radiologist working at an in-network hospital. In these cases, the provider cannot balance bill the patient; they can only charge the patient the in-network cost-sharing amount.