You had a doctor's appointment, and your physician ordered a few tests. You paid your deductible at the time you received care, and your insurance plan supposedly covered the rest of the cost. But months later, you receive a bill in the mail from the health care provider for the amount your insurance company didn't cover.
You have just experienced what's known as "balance-billing," or "extra billing." In some cases, it's called "surprise billing” if the patient had a specific reason to expect that there would be no balance-billing (such as visiting an in-network hospital but unwittingly being treated by an out-of-network anesthesiologist).
A balance bill can be a cause for alarm, especially when it is for a large amount of money and a patient isn't expecting it. Understanding how balance-billing works and when it is allowed and not allowed will help you know what to do if you ever receive an unexpected bill for medical services.
How Does Balance-Billing Work?
To understand what balance-billing is and how balance-billing works, it's essential to understand what it is not. Balance-billing is not the same thing as charging a patient a deductible, co-insurance or co-pay.
The deductible is the amount a patient needs to pay out-of-pocket before a health insurance plan starts to pay for covered services and providers. For example:
- A patient has an appointment with a dermatologist for an annual skin check.
- The patient's insurance plan has a $1,000 deductible.
- The price agreed upon by the insurance company and the dermatologist is $150.
- The patient needs to pay the $150 out-of-pocket.
- The amount is then deducted from their $1,000 deductible.
What Is a Co-Pay?
Once a patient has paid the full deductible for the year, they might still have to pay out-of-pocket. If the patient has already paid $1,000 to covered health care service during the year and then goes to see their dermatologist for an appointment, they won't have to pay the full $150 themselves. Yet they might be responsible for a co-payment. Co-pay amounts vary from policy to policy. Often, plans with lower monthly premiums have higher co-pay amounts.
What Is Co-Insurance?
Co-insurance appears similar to a co-payment, but there are a few distinct differences between the two. While a co-pay is a predetermined amount a patient pays toward medical care, such as $20 or $50 per visit, co-insurance is a percentage of the cost. A patient who has a plan with a 20% co-insurance will pay 20% of the costs of care out-of-pocket after they have paid their deductible, if there is one. The patient with a 20% co-insurance would be responsible for $30 of the $150 dermatologist bill.
How Much Will the Patient Pay?
Co-pays, deductibles and co-insurance payments are all agreed-upon, shared costs. When a patient signs up for a health insurance plan, they should understand what their co-pay, co-insurance and deductible will be from the beginning. The amount of the deductible and co-pays or co-insurance compared to the cost of the monthly premium helps patients choose health insurance plans that work with their budget and meet their health care needs.
A patient who only sees a doctor for preventative care services might choose a policy with a higher deductible and lower monthly premiums, while someone who needs ongoing medical treatment might opt for a lower deductible and lower co-pays but a higher monthly premium.
While patients can usually anticipate and plan for co-pays, deductibles and co-insurance, they usually can't plan for balance-billing. In many instances, balance-billing comes as a complete surprise to patients. A balance bill is issued when a provider charges a patient with the amount the insurance company doesn't pay. For example, the dermatologist charges the insurance company $300. The insurance company agreed to pay $150. If the doctor then charges the patient the remaining $150, the patient will receive a balance bill.
Is Balance-Billing Legal?
Unless there is an agreement to not balance bill or state law specifically prohibits the practice (which are quite rare), medical providers may bill patients for any amounts not paid by insurance. So-called surprise bills may be given more protections from certain states’ laws but are typically classified differently from “ordinary” balance bills, which are specifically contemplated to be from out-of-network providers and therefore not “surprise” bills.
For example, say a patient has seen a particular dermatologist for years. Changes to the patient's insurance, or even something as simple as the provider choosing to no longer participate in the network, will mean that the dermatologist is no longer in-network.
A patient has two options in that case:
- They can find a new, in-network dermatologist, to ensure against balance-billing, or
- They can continue to see their current dermatologist and risk balance-billing
Whether or not the insurance plan offers any coverage for the patient's out-of-network visits depends on the policy. Some plans will pay a portion of the cost of the visit while others will not.
If the patient's insurance plan does offer some coverage for out-of-network care, it might only agree to pay what's known as the usual, customary, and reasonable rate (commonly called “UCR” or “U&C”). UCR is based on what providers in a geographic area typically charge for a particular service. The insurance company may determine that UCR is $150, even though the doctor charges $400 for their services. The out-of-network dermatologist is not obligated to accept the health plan’s unilateral calculation of UCR as payment in full. They haven't agreed to anything with the insurance company. In that case, they might bill the patient for the remaining $250 balance.
If the dermatologist were in the insurance plan's network, the dermatologist would have to accept whatever contracted rate is agreed upon between the parties to the contract (commonly a percentage of billed charges, or a flat fee per service performed).
Coverage Isn’t Always So Straightforward
In some cases, a patient might see a provider who is part of a health insurance company's network but might receive services from that provider that are not covered by insurance. For example, a patient sees their dermatologist for an annual skin check. The dermatologist is in the insurance company's network. While at the appointment, the patient also receives Botox injections to reduce the look of some wrinkles. As a cosmetic treatment that isn't medically necessary, Botox is most often not covered by insurance.
The dermatologist can't bill the patient the difference for the part of the visit was medically necessary, since the service was contracted as part of the network arrangement. They can, however, send a patient a bill for the Botox if the insurer doesn't cover it.
Say, for example, a patient needs to go to the emergency room at a hospital in their insurance company's network. The patient might receive treatment from a provider at the hospital who is not in the network. Hospitals are commonly staffed by physicians who have no relation to the network and therefore arbitrarily may or may not participate in the network.
For example, an anesthesiologist or radiologist may provide services at a hospital but not be in-network with a patient's insurance plan. The physician can bill the patient for their services at whatever amount they want. In such a case, the patient would receive claims from both the facility (the hospital) and the physicians (the radiologist and anesthesiologist), and only the facility bill is treated as in-network.
The bills from the radiologist and anesthesiologist may be balance-billed after the health plan pays its allowable amount for out-of-network physician claims. For those physicians’ claims, there is no contract that prohibits them from balance-billing — although there may be state law protections since the patient visited an in-network hospital with the specific expectation of not being balance-billed.
When Balance-Billing Is Not Allowed
There are two instances when a hospital or provider is not allowed to send a patient a balance bill.
First, some states have passed laws that limit balance-billing or surprise bills. Twenty-five states have laws that partially or fully protect patients from surprise bills. Note that many of these rules apply only to patients who have commercial health insurance, not self-insured employer-sponsored plans; the reason for that is that states cannot regulate self-insured plans sponsored by private employers, and states have been hesitant to place billing restrictions on medical providers themselves.
Second, providers who are in-network with a particular insurance company are generally required by most states, as well as their applicable contracts, to accept the rates the health plan has promised to pay.
What to Do If I Receive a Balance Bill?
One of the first things to do if you receive a balance bill from a health care provider is to confirm that the bill is legitimate. Billing departments do make mistakes from time to time, and they could have sent you a statement by mistake.
There are tens of thousands of medical billing codes, making it very easy for a medical coder to type in the wrong numbers and bill a patient for a procedure or service they didn't receive. Some estimate that up to 80% of all medical bills contain errors. Take these steps to protect yourself:
- Read over your bill carefully and check that the services you received are accurate, ensure your name, contact information, birthdate and insurance information are correct and verify the date or dates of service.
- If your bill is not itemized, you have the right to ask for an itemized invoice that lists every service and charge.
- After you've confirmed that the bill is for you or someone in your family and is for services you received, the next step is to verify that the provider has a right to send you the bill. In the case of an out-of-network provider you saw willingly, the answer is usually yes. The provider also has a right to bill you for services you received that aren't covered by insurance, such as Botox or other cosmetic treatments.
- If the bill is for services you received from an out-of-network physician while at an in-network provider, things get a bit more complicated. If you are in one of the 25 states that have laws regarding surprise or balance-billing, review the laws in your state to understand what your responsibilities are. Some states limit out-of-network providers at in-network hospitals from balance-billing. Others require a provider to fully disclose the out-of-network status to patients before they can send a balance bill.
Communicating with the provider and your insurance company is vital when you receive a balance bill. You shouldn't have to pay an invoice you are not legally responsible for paying. But you also do not want to avoid paying a bill, have it go to collections and damage your credit. In some cases, your insurance company might be willing to step in and work with the provider to reduce the charges or convince the provider to accept the in-network rates.
If you have verified that the bill is legitimate and accurate, you can either appeal to your health plan to obtain a justification for why the health plan has not paid it, and your health plan may be willing to assist with a resolution with the provider, under certain circumstances.
What If the Bill Is Bogus?
There are some cases when balance-billing is not legitimate, and you shouldn't be expected to pay the bill. In those cases, you might need to go to court to challenge the bill. Challenging a balance bill in court can be as expensive as the bill itself. Fortunately, there are ways to reduce the cost of a court challenge.
Negotiating a Balance Bill
Can you negotiate a balance bill? Yes — almost always. One way to do it is to simply call the provider. Many providers are willing to either create a payment plan for patients who have high medical bills or even simply write off a portion of the bill.
It is a best practice to contact the provider as soon as possible upon receiving a balance bill. Putting off communication can make a provider less likely to negotiate with you.
What If the Provider Won’t Negotiate?
The Phia Group, LLC, offers a service called Patient Defender, which helps protect a plan's members from balance bills. As part of Patient Defender, The Phia Group places a law firm on retainer for your health plan. The law firm represents plan members and challenges balance-billing when needed. Patient Defender can be added to any health plan type.
Learn More About Patient Defender
Balance-billing can put a financial strain on the members covered by your company's health insurance plan. One way to protect your employees from the challenges of balance-billing is to make sure you have protections in place should the issue ever come up.
With Patient Defender, plan members have legal counsel at their fingertips should they get a surprise or balance bill from a provider. Patient Defender helps employers, too, as it allows them to contain the costs of insurance plans while they continue to support and protect the people covered by those plans. To learn more about Patient Defender and other services available from The Phia Group, LLC, contact us today.