Balanced billing seems to be today’s version of a personal finance nightmare. If you have heard the horror stories and would like to avoid them, this is the reading for you.
This topic needs to be covered in a comprehensive way online, which is what brought me to writing this post. It appears that many individuals these days believe balanced billing is no longer happening, either because it is illegal or because insurance companies no longer will do it out of goodwill. Balanced billing, in some circumstances and in most states, is definitely illegal, but there is an exemption to the rule that you should be weary of; if the service is out-of-network then it can be balanced billed. No one wants to wake up in the hospital with a portion of the bill that your insurance’s coinsurance or copay didn’t help pay for.
What is Balanced Billing?
Balanced billing is when the insurance company pays a negotiated rate for the service you received, and refuses to pay the rest because it wasn’t in-network (instead of going to the contracted hospitals or doctors, the member went to a hospital or doctor that wasn’t contracted, which is called out-of-network). To go into more detail…
What is a Negotiated Rate?
The negotiated rate can normally be understood as the expected cost the insurance company has towards a certain service or coverage covered by your medical insurance policy. In most cases, insurance companies negotiate prices with their hospitals or physicians or with their contracted hospitals or physicians to keep costs down, and if the insurance member decides to go out-of-network to a hospital that has no negotiated rate, problems arise. One of these problems can be balanced billing.
An example of Balanced Billing
Broker Tip: Balanced billing happens to policies that allow out-of-network services. If you have a HMO, for example, then you cannot go out of network (except for emergency services where you are in a life-threatening situation), therefore you are not covered out-of-network, so you will have to pay 100% of the costs.
Let’s take Sarah, who has insurance company X’s preferred provider organization (PPO) insurance policy. She decides to go out-of-network because she would rather have the service done at a different hospital because of her personal preference (perhaps she heard the doctors were better), or she goes out-of-network because she didn’t know the hospital or doctor she went to is not contracted with company X. The medical service cost her $1000, and although she was supposed to only pay (after her deductible was met) 40% of the $1000 (assuming her plan had an out-of-network 40% coinsurance) which adds up to be $400, she ends up paying $520. Why did that happen?
Sarah went out-of-network, thus her service wasn’t contracted. Her service is contracted by company X’s policy’s in-network hospitals to cost $800, but Sarah’s out-of-network service cost $1000. What ended up happening is that Company X’s company paid for $800 for the service, meaning Sarah paid her 40% of $800 (.4 * 800 = 320), and Sarah paid for the amount Company X didn’t pay for because of balanced billing (the rate Sarah paid out-of-network minus the negotiated rate, $1000 – $800) which was another $200. Her coinsurance plus her balanced bill ended up being $520.
Broker Tip: The example above doesn’t state her exact policy nor network, so make sure that the service you receive or want to receive, hospital, physicians, and anything else that is being used to make the service happen is contracted with both your insurance carrier and your policy. The reason being; polices by the same insurance carrier can have different networks, and different networks have different contracted physicians (normally, it goes from a limited network of only a few contracted hospitals and physicians etc, to a medium network which is more comprehensive with more hospitals and physicians etc, and a full network which is normally everyone and everything that is contracted by the insurance carrier.) Do not think that because you are with company X that a physician contracted with company X is considered in-network for you; know who is in your network and who is not.
If you are saying to yourself right now; “Well, it was only a $120 difference, I can afford that!” you should reconsider the example. If instead, the service was increased by tenfold, and all else stayed the same percentage wise (company X having the contracted rate that was 20% less expensive than the actual rate) then Sarah will be paying 40% of $8000 ($3200) + $2000, $5200, instead of $4000 (40% of $10000). Now, is $1200 more important to you? In some cases that I have seen, however, they usually end up paying a considerable amount more because the contracted rate is much lower (say, 30%) and the service is much high (mid five figures). Those numbers can get startling!
How can I Avoid being Balanced Billed?
Hopefully by now, you don’t want to be balanced billed and you can see the value of not being balanced billed. I always try to lay this point across to anyone I am consulting regarding their health insurance, be it a friend, client, or prospective client, because it is very important. The way to avoid being balanced billed is to stay in-network, and do your research to make sure that everyone and everything is contracted with your company X on their policy you have purchased.
Broker Tip: If you are in a life-threatening situation, you are allowed to go out-of-network and you will not be balanced billed. It should cost the same as in-network emergency care. This is done so that when an insured individual has a major injury (life threatening) they don’t bleed to death calling their insurance carrier finding the nearest hospital that is in-network.
Broker Tip: This post is just chalk full of Broker Tips, but this is an important subject, so bear with me (or be stoked, whichever fits you better. I would take the latter!). Staying in network is normally going to cost you much less, even without considering balanced billing, because the coinsurance is generally much less (approximately half) on most plans.
I hope this post has helped you really comprehend what balanced billing is, when it applies, how it can affect you, and how to avoid it. Thank you for reading, and have a great day!
Have any questions? Feel free to contact me via my contact page or write a comment below.
Additional Disclaimer – Although I am an Insurance broker and a professional in the field, the Health Care laws are ever changing, especially in the age of the Affordable Health Care Act, and the laws, information, opinions, or understandings that I have wrote about may be obsolete by the time you come across them and I take no legal responsibility for what actions you may or may not take because of it. To keep yourself safe, please seek updated professional advice, because changes are happening and I would like to keep everyone safe from any misleading or dead information. Please check out the “Terms and Conditions” page for more information and/or bookmark my blog for upcoming changes and updates to the ACA. Thank you for reading, and have a great day!