How does surprise billing work?

Why seeing an out-of-network doctor can leave you with a big bill even if you’re insured.

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Elissa SuhSenior Editor & Disability Insurance ExpertElissa Suh is a disability insurance expert and a former senior editor at Policygenius, where she also covered wills, trusts, and advance planning. Her work has appeared in MarketWatch, CNBC, PBS, Inverse, The Philadelphia Inquirer, and more.

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Key takeaways

  • Surprise bills happen when an out-of-network provider directly bills a patient

  • Another name for surprise billing is _balance billing_

  • There is no federal surprise billing legislation

  • If you receive a surprise medical bill try calling your insurer or checking your state insurance website for help

Surprise billing is when an insured patient unexpectedly receives a medical bill from an out-of-network provider. Surprise billing is sometimes called surprise balance billing, or simply balance billing because the out-of-network provider essentially bills the patient directly for the difference, or balance, after the insurer has paid their part.

Patients are most likely to receive surprise bills for emergency visits, since they don’t have the time to check whether the doctor, physician, or ambulance is in the health plan’s network. A surprise medical bill can also result from nonemergency services, like when a patient receives care from someone who is out of their network without realizing it. (For example, you may visit an in-network hospital, but receive medical care from an out-of-network specialist.)

Although surprise billing can cost consumers thousands of dollars for a single emergency room visit, there is no federal legislation that limits surprise balance billing related to health insurance, and only a handful of states have their own laws in place to protect patients. Even under these laws, a patient still may not be covered in every situation.

How does surprise billing work?

Surprise billing happens when a provider outside of the plan’s network seeks direct repayment from the patient.

The way most health plans work is that the insurer contracts with health care providers, like physicians and hospitals, to create a network. When you want to see a doctor, you’ll most likely try to look for one in your health insurance network because it tends to cost less (the in-network doctors and the insurer have negotiated the pay rate ahead of time). Getting care from an out-of-network provider typically costs more — a little or a lot more, depending on your plan; some types of health plans like HMOs won’t cover anything if you see someone outside of the network.

Learn more about the four common types of health plans.

If you do end up seeing someone outside of the network, that’s when you might receive a surprise medical bill. The out-of-network provider will first collect money from your insurance company, but the out-of-network physician may charge a very high pay rate, and the insurer may not pay the whole amount. That’s when the out-of-network provider bills you directly for the difference, or balance.

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Here is an example of how a patient might receive a surprise medical bill:

Let’s say you go to the emergency room, and see a doctor, let’s say an anesthesiologist, that is out of your network. Most people don’t know whether their anesthesiologist is in-network, and they probably don’t have a choice once they’ve been accepted at the hospital. You may likely presume, because your hospital is in-network, that every provider who works there is also in-network, but that’s not correct.

After providing care, the anesthesiologist will write up a bill and send it to your insurer. The insurer will pay a “usual, customary, and reasonable” amount of the cost, which is less than the list price charged by the doctor. The anesthesiologist then bills you directly for the difference or balance.

Common situations when you receive a surprise bill

Surprise billing is most likely to occur when you seek emergency care, since you don’t have the time to research what physicians are in your network and you don’t know what type of care you’ll receive. Even if you go to a hospital ER that you know is in-network, you may end up receiving care from a physician that is not.

According to a 2017 study by Health Affairs, anywhere from 9% to 20% of emergency department visits resulted in a surprise medical bill. More specifically, air ambulance services and ground ambulance services are most likely to result in surprise medical billing according to the Brookings Institute.

Surprise billing is not illegal. The previous example illustrates how you may end up paying a lot in health care costs for out-of-network care, even for emergency services, which are a considered an essential health benefit. This is because while the ACA requires your insurance company to cover emergency services (limiting copays, for example), it does not prevent out-of-network providers from billing you directly.

Learn more about the Affordable Care Act (ACA).

Some states have laws in place to curb the occurrence of large surprise bills. For example, there may be protections for people who have health insurance from an HMO, or a payment standard for how much insurers should pay out-of-network providers, or a way to handle billing disputes. Surprise billing legislation varies by state and may not cover every situation. They may cover billing for emergency care at a hospital, for example, but not for other types of health care services.

What do I do if I receive a surprise medical bill?

If you received a surprise medical bill you should check your state insurance website to see if they offer any resources to help you negotiate or open a payment dispute. If your state does not have protections in place against these charges, you may still be able to negotiate the costs. You can reach out to your insurance company and request that they cover more of the bill or call the medical provider that charged you to work out a repayment plan, or to settle or reduce the charge.

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