While an unprecedented number of Americans currently have some type of health insurance thanks in part to the Affordable Care Act, individuals are spending more than ever on out-of-pocket health care costs these days. In fact, 2017 statistics show that Americans spend an average of over $10,000 on health care per person. These huge costs are showing up in devastating ways in American bank accounts and households. Many find themselves declaring bankruptcy because of medical debts, and nearly a third of adults have delayed seeking any type of medical care because they have been concerned about the cost.
These fears are certainly not ill-founded. Medical billing has become a huge source of surprises. Even individuals who have high-quality health insurance or who have budgeted accordingly for upcoming tests and procedures may find themselves surprised several months later by a rogue bill from a provider or hospital that shows up in their mailboxes. One source of these unwelcome surprises is balance billing, a practice that is frequently used by health care providers who are trying to recoup some of the extra costs of their services.
What Is Balance Billing?
While there are many sources of surprise medical bills, balance billing may be one of the most commonly seen, especially among those who have health insurance. Sometime called surprise balance billing, this practice refers to a provider, hospital or other health care organization billing a patient for the difference between what a health insurance policy would cover and the original charges, not all of which were covered.
Although advocates of this practice state that balance billing helps to compensate high-quality health care providers, critics state how harmful and confusing these surprise bills can be. Plus, it can keep patients from seeking quick health care because they may not know how much their total out-of-pocket costs may be.
When Does Balance Billing Happen?
Balance billing does not happen with every single medical bill. Sometimes, one’s insurance company will contract a specific rate with a hospital or provider and will only charge individuals the copayment, coinsurance or deductible of that prorated charge. Many times, the additional amount that was originally charged by the health care organization will simply go away with the organization covering the additional amount. However, there are certain times when individuals will receive a bill for the additional amount.
Balance billing most frequently occurs when individuals see out-of-network providers or visit out-of-network clinics or hospitals for medical services. It rarely if ever occurs with in-network services. In particular, those receiving unexpected health care services, such as in an emergency department or an urgent care facility that is not in the city in which they live, may be more apt to see these unexpected bills.
In addition, balance billing can occur even for patients who are being seen in in-network facilities. For example, someone may be seeing his usual provider who is covered under his insurance policy, but this provider may order lab work or testing that will be provided by an out-of-network provider. This is most frequently the case for laboratory testing, radiology and pathology. It can also be seen with anesthesiologists who provide care during a surgery, by neonatal practitioners and by intensivists who provide life-sustaining care in critical care units. Balance billing may also pop up following ambulance rides, when using a medical concierge service or when purchasing durable medical equipment, such as a wheelchair, braces or a hospital bed for home use.
How Does Balance Billing Work?
Even patients who try to budget carefully for their upcoming health care bills may find themselves surprised by balance billing. They may think that they have taken all coinsurance and deductibles into account and have figured in out-of-network providers, but they may fail to recognize that discounts are not taken into account and that coinsurance amounts may be different for out-of-network services.
For example, for a $10,000 bill from an in-network hospital, the insurance provider will first negotiate a better rate with the hospital, taking the bill down to $8,000. With an 80 percent coinsurance rate, the individual will end up paying $1,600, and the insurance company will cover the other $6,400.
However, with this same $10,000 bill at an out-of-network hospital, the insurance company may not negotiate a discounted rate, and the coinsurance rate may go down to only 60 percent. However, insurance will only cover 60 percent of the customary rate of $8,000 even though it has not negotiated this new rate. With this example, the insurance provider would cover $4,800, leaving the individual with the other 40 percent, which would be $3,200. However, this patient may surprised to receive a balance bill for the additional $2,000 that the hospital still needs to collect, leading to a complete cost to the patient of $5,200.
Is Balance Billing Legal?
Balance billing is never legal when patients are seeing an in-network provider or visiting an in-network hospital that is covered by their insurance plans or by Medicare or Medicaid when using those services. In these circumstances, the insurance company has a clause in the agreement with the service provider that states that balance billing is not allowed. These companies must accept the negotiated rate from the insurance provider.
However, there are some instances when balance billing is legal, and patients must be aware of these to avoid costly and unexpected bills. First, balance billing is legal when one is seeing an out-of-network provider or a provider that does not have a contract or agreement with Medicare or Medicaid. Second, balance billing is also legal when one is receiving services that are not covered by the health insurance plan even if he is receiving them from an in-network provider. One of the best examples of this occurs with surgeries provided for cosmetic reasons rather than for medical necessity.
Which States Have Laws about Balance Billing?
In addition to these basic laws about balance billing, some states have begun adopting specific laws to limit the adverse effects to their constituents. California, Connecticut, Florida, Illinois, Maryland and New York all have comprehensive laws for HMO and PPO plans that prohibit balance billing for out-of-network care at in-network facilities as well as in emergency departments. In addition, 19 other states have less comprehensive laws regarding balance billing that provide financial protection following air ambulance transportation, give patients the right to arbitration in certain circumstances or provide other types of protection to patients who are receiving necessary health care from out-of-network providers when they have no other choice of provider.
While the changes in these rules are great news for many consumers, they do not apply to everyone. For example, most of these laws only apply to state-regulated health insurance plans rather than to those regulated by federal law, which is what many employees of large companies have.
What Can Patients Do to Reduce Surprise Balance Billing?
Clearly, the biggest way that individuals can reduce balance billing is to choose their health care providers and hospitals with care. This will help them avoid out-of-network costs in most instances. However, this is not always possible as some individuals must seek emergency care when they are away from home. Others may assume that a laboratory would be in-network if tests are ordered by an in-network provider. Therefore, here are a few tips for avoiding balance billing that may work in some cases.
- Check thoroughly with the insurance company to ensure that the desired health care facility and provider is listed as in-network.
- Check with the insurance company for approved in-network laboratories or radiology centers to which one can take orders for testing.
- Ensure that referrals are made to in-network providers.
- Know applicable state laws regarding balance billing that tell patients their rights.
What Can Patients Do to Reduce the Burden from Surprise Balance Bills?
Even after doing all of this preliminary preparation, some patients may still find themselves with balance bills that are perfectly legal. However, they do not necessarily have to feel stuck with these large bills. These steps may help some patients lower their bills or find better payment plans that work with their finances.
- Check for coding errors or billing errors, which could add up to hundreds or thousands of dollars in some cases.
- File an appeal with the insurance company. If this claim is denied, many patients may be able to follow up with a formal appeal to the state insurance regulator.
- Communicate with the provider or hospital, and ask for negotiated terms. Patients may be able to negotiate lower prices based on fair medical prices or typical in-network charges.
- Request a payment plan, or apply for financial aid with the health care organization.
It can be scary enough to receive medical treatment without having the worry of surprise medical bills hanging over one’s head. Thankfully, patients or their advocates have some simple ways to appeal charges and negotiate new rates if they are willing to take some extra time to work on the situation rather than pay the bill immediately.
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