What Is Balance Billing and When Can a Healthcare Provider Charge You More?
Receiving a medical bill that is much higher than expected can be confusing, especially when you thought your health insurance would cover most of the cost.
One reason this can happen is balance billing.
Balance billing occurs when a healthcare provider bills you for the difference between what the provider charges and the amount your health insurance plan allows or pays. It most commonly happens when someone receives care from an out-of-network provider.
For example, imagine a healthcare provider charges $500 for a service, but your insurance plan's allowed amount is $300. If the provider is permitted to balance bill you, you could potentially be responsible for the $200 difference in addition to any deductible, copayment, or coinsurance that applies.
But here's the important part:
A provider cannot always charge you that difference.
Federal protections, including the No Surprises Act, limit balance billing in certain situations. Medicare and Medicaid beneficiaries also have separate protections against certain types of balance billing.
Understanding when balance billing is allowed—and when it isn't—can help you recognize an unexpected charge and know what steps to take.
What Exactly Is Balance Billing?
Balance billing refers to a provider charging you for the difference between the provider's billed amount and the amount your health plan considers payable or allowed.
CMS provides a simple example: if a provider charges $200 and the insurance plan's allowed amount is $110, the difference is $90. Under circumstances where balance billing is permitted, the provider may bill the patient for that difference.
This is different from ordinary cost-sharing.
Your health insurance may require you to pay a deductible, copayment, or coinsurance for covered services.
For example, if your plan requires 20% coinsurance on an allowed amount of $100, you may owe $20.
That $20 is not balance billing.
Balance billing is the additional amount a provider may charge above the plan's allowed amount when the provider is legally permitted to do so.
Why Does Balance Billing Usually Happen?
Balance billing is most commonly associated with out-of-network providers.
In-network providers have contracts with health insurance plans that establish negotiated payment rates.
Because of those agreements, an in-network provider generally agrees to accept the plan's negotiated amount for covered services and cannot simply charge the patient the difference between the provider's regular charge and the allowed amount.
Out-of-network providers don't necessarily have the same contractual agreement with your insurer.
As a result, their charges may be higher, and your insurance plan may cover a smaller portion of the cost.
However, even when a provider is out-of-network, federal law may protect you from balance billing in certain situations.
Balance Billing vs. Your Normal Out-of-Pocket Costs
It's easy to confuse balance billing with ordinary healthcare expenses.
Consider this example:
Your insurance plan has a $50 specialist copayment.
You visit an in-network specialist for a covered service.
You pay $50.
That's cost-sharing, not balance billing.
Now imagine an out-of-network provider charges $500 while your plan's allowed amount is $300.
If the service isn't protected by a federal or state balance-billing rule and the provider is permitted to bill you for the difference, you could potentially owe the additional $200.
That $200 is the balance bill.
Understanding this distinction can make your Explanation of Benefits easier to read because you can separate the amount your plan says you owe under your benefits from an amount a provider may be attempting to charge outside those normal cost-sharing rules.
When Can a Provider Legally Balance Bill You?
Whether balance billing is allowed depends on several factors, including:
- Your type of health coverage
- Whether the provider is in-network
- Where you received care
- Whether the care was an emergency
- Whether federal or state protections apply
- Whether you knowingly consented to receive certain out-of-network services
For people with most private health insurance, the No Surprises Act provides important federal protections.
For people enrolled in Medicare or Medicaid, different program rules apply.
This means you shouldn't assume that every out-of-network bill is automatically legal—or that every out-of-network charge is automatically prohibited.
The circumstances matter.
How the No Surprises Act Protects Patients
The federal No Surprises Act took effect January 1, 2022.
It protects people with most types of private health insurance from certain unexpected out-of-network bills.
The protections generally cover:
- Most emergency services
- Certain non-emergency services provided by out-of-network providers at in-network facilities
- Out-of-network air ambulance services
The law generally prevents patients from being charged more than the applicable in-network cost-sharing amount for services covered by these protections.
This is important because patients don't always have control over which healthcare provider treats them.
Emergency Care Has Special Protections
Imagine you have a medical emergency and go to the nearest emergency department.
You may not have the ability to research which doctors are in your insurance network before receiving treatment.
Under the No Surprises Act, most emergency services covered by the law must be treated as in-network, even when the emergency provider or facility is out-of-network. Prior authorization generally cannot be required for these protected emergency services.
The purpose is to prevent patients from being financially penalized simply because they couldn't choose an in-network provider during an emergency.
However, the law has specific requirements and exceptions, so not every healthcare situation involving an emergency is automatically identical.
What About an Out-of-Network Provider at an In-Network Hospital?
This is another situation where patients can be protected.
You may intentionally choose an in-network hospital but unknowingly receive services from an out-of-network anesthesiologist, radiologist, assistant surgeon, or another provider.
The No Surprises Act generally protects patients from balance billing for certain non-emergency services provided by out-of-network providers at participating in-network facilities.
For example, you may schedule surgery at an in-network hospital.
You selected the hospital because your insurance company confirmed that it participates in your plan.
You may not personally choose the anesthesiologist who participates in the procedure.
If that anesthesiologist is out-of-network, federal protections may prevent the provider from charging you the full out-of-network balance in circumstances covered by the law.
Can You Ever Agree to Pay More?
There are situations where an out-of-network provider may ask you to waive certain No Surprises Act protections.
This generally involves a notice and consent process.
CMS explains that a provider or facility may give an eligible patient a notice explaining that the provider is out-of-network and that the patient may be giving up certain billing protections by consenting to receive care from that provider.
If you sign such a form, you may be agreeing to pay more than your normal in-network cost-sharing.
That's why you should never treat a notice and consent form as ordinary paperwork.
Read it carefully before signing.
If you don't understand what you're agreeing to, ask questions or contact your insurance company.
What About Medicare and Medicaid?
If you have Medicare or Medicaid, the rules are different from the federal No Surprises Act protections that apply to most private insurance.
CMS specifically notes that the No Surprises Act does not apply to people with coverage through programs such as Medicare and Medicaid because these programs already have protections against certain high medical bills.
For Medicare beneficiaries, providers who participate in Medicare generally have specific rules regarding what they can charge beneficiaries.
Medicaid programs also have rules limiting what participating providers can charge enrolled members.
Therefore, if you have Medicare or Medicaid and receive a bill that appears to charge you beyond what you should owe, don't automatically pay it.
Review the bill and contact your plan or program to understand whether the provider is allowed to charge the amount.
What About Ground Ambulance Bills?
One important exception to remember involves ground ambulance services.
The No Surprises Act generally does not provide the same federal balance-billing protections for ground ambulance services that it provides for certain emergency care and air ambulance services.
State laws may provide additional protections.
This means that if you receive a large ground ambulance bill, you should check both your insurance coverage and applicable state protections.
Don't assume that the federal No Surprises Act automatically limits the amount you can be charged.
How to Reduce the Risk of Balance Billing
While federal protections cover many situations, it's still helpful to take steps before receiving planned care.
Whenever possible, confirm that your provider and facility are in-network.
Ask whether other healthcare professionals will be involved.
For scheduled procedures, ask whether specialists such as anesthesiologists or radiologists may provide services.
Contact your insurance company if you aren't sure whether a provider participates in your plan.
You can also ask whether your planned service requires prior authorization.
These steps don't eliminate every billing problem, but they can reduce the likelihood of an unexpected charge.
Balance Billing Doesn't Always Mean Your Insurance Failed
It's also important to understand that receiving a large medical bill doesn't necessarily mean your insurance company made a mistake.
Your plan may legitimately require you to pay a deductible, copayment, or coinsurance.
The issue is whether the amount you're being charged is consistent with your insurance benefits and any applicable balance-billing protections.
Before disputing a bill, determine whether the charge represents:
- Your normal cost-sharing
- An out-of-network cost
- A balance bill
- A billing error
- A service your insurance denied
These are different situations and may require different solutions.
Conclusion
Balance billing happens when a healthcare provider attempts to charge you for the difference between what they billed and what your insurance plan allows or pays.
It is most commonly associated with out-of-network care, but federal protections mean that providers cannot always pass those additional charges on to patients.
The No Surprises Act protects people with most private health insurance from certain surprise out-of-network bills, including most emergency services and certain non-emergency services provided at in-network facilities.
Medicare and Medicaid beneficiaries have separate protections against certain balance billing.
If you receive an unexpected bill, d
contact your insurance company, and ask the provider to explain any amount that doesn't appear to match your coverage.
Knowing what balance billing means can help you recognize when a charge may be legitimate—and when you may have the right to challenge it.
Understand Your Healthcare Bills With Confidence
Healthcare billing can be complicated, but understanding terms like balance billing, in-network, out-of-network, cost-sharing, and allowed amounts can make it easier to recognize what you're actually responsible for paying.
If you have questions about your health insurance coverage or want help understanding how your plan handles healthcare costs, schedule a consultation.
For more health insurance education and resources, visit Belle Vida Insurance.