Healthcare finances often involve complex terminology and unexpected charges, leading to significant confusion for patients. Understanding medical billing is the first step toward managing unexpected costs. One financially impactful practice is balance billing, where a healthcare provider seeks payment from a patient for the portion of the bill that the patient’s insurance plan did not cover. This effectively shifts the financial burden of a provider’s full charge directly to the individual.
Defining the Core Concept
Balance billing is the practice where a healthcare provider attempts to collect the difference between the total amount charged for a service and the amount the insurance company ultimately pays. For instance, a doctor might charge $500 for a procedure, but the insurer’s payment, combined with the patient’s copay, deductible, and coinsurance, only totals $350. The resulting $150 shortfall is the balance the provider bills the patient.
The core of this issue lies in the concept of the “allowed amount,” also known as the negotiated rate. This is the maximum amount an insurer agrees to pay for a specific service. In-network providers have a contract to accept this allowed amount as payment in full, minus the patient’s specific cost-sharing responsibilities.
When a provider is not bound by a contract, they can charge their full, non-discounted rate, which is often much higher than the allowed amount. The patient’s insurer will pay based on its determination of a reasonable amount, but the provider is then free to bill the patient for the remaining “balance.” This difference is an additional, often substantial, charge beyond the standard co-payment or deductible.
Understanding Network Status and Billing
The primary cause of balance billing is the use of an out-of-network provider, who has no contractual agreement with the patient’s insurer to limit their charges. An in-network provider agrees to a specific, discounted rate, preventing them from billing the patient for the difference between that rate and their standard charge. Conversely, an out-of-network provider can charge the patient for the entire remaining balance after the insurer has paid its portion.
This issue frequently becomes a “surprise bill” when patients have little control over the provider choice. Emergency situations are a common example, as an individual cannot choose the specific hospital or emergency room physician during a medical crisis. The patient may receive care at the closest facility, which could be out-of-network for their plan.
Surprise balance bills also occur in non-emergency settings when ancillary services are provided by out-of-network specialists working at an otherwise in-network facility. For example, a patient may choose an in-network hospital for surgery, but the anesthesiologist, radiologist, or pathologist providing services may be an independent contractor who is out-of-network. The resulting bill for these services often comes as an unexpected expense because the patient did not choose these specific specialists.
Federal Protections Against Surprise Bills
Federal legislation has been introduced to protect consumers from these unexpected out-of-network charges. The No Surprises Act (NSA) provides new consumer protections against balance billing, with most provisions taking effect on January 1, 2022. This law shields patients from having to navigate billing disputes between their insurer and an out-of-network provider in specific instances.
The Act applies to two key scenarios where patients are vulnerable to surprise billing. The first is for most emergency services, regardless of whether the facility or provider is in-network. The second is for non-emergency services provided by out-of-network practitioners at an otherwise in-network facility, such as a hospital or ambulatory surgical center. These services often include those provided by ancillary specialists like radiologists or anesthesiologists.
Under the protections of the NSA, patients receiving care in these covered situations are only responsible for the cost-sharing amount they would have paid if the provider were in-network. This limits the patient’s financial responsibility to their in-network deductible, copayment, or coinsurance. The law prohibits the out-of-network provider from balance billing the patient for any amount beyond that in-network cost-sharing.
Steps to Take When Receiving a Bill
Receiving a potentially improper balance bill requires a prompt response from the consumer. The first action should be a detailed review of the Explanation of Benefits (EOB) document sent by the insurance company. This document outlines the charges, the allowed amount, and the patient’s calculated responsibility, which helps determine if the charges are appropriate.
The patient should immediately contact their insurance company to verify the provider’s network status and confirm coverage for the services received. If the bill appears to violate the No Surprises Act, the patient should contact the provider’s billing department to dispute the charge, specifically citing the federal protections. Providers cannot legally balance bill for certain emergency or ancillary services covered by the NSA.
If the provider insists on payment for a bill that falls under the NSA’s protections, consumers can file a complaint with the federal government. The Centers for Medicare & Medicaid Services (CMS) operates a dedicated No Surprises Helpdesk to assist with and investigate potential violations. Filing a complaint with the state’s department of insurance or a similar regulatory body is also an option, as many states have their own consumer protection laws.