Imagine that you receive a medically necessary surgery from an out-of-network specialist. You pay your co-insurance or co-pay and your health insurance authorizes the surgery agreeing to pay the remaining cost. Then, a month later, you receive a bill from the specialist for the difference between what they charged and what your insurance company paid them. The specialist charged an above-average rate and the health insurance did not cover all of the charge. Now you are stuck with a massive bill that you never saw coming. To make matters worse, you are threatened with being placed in debt collections by the specialist if you do not pay! This is called balance billing, or sometimes extra billing, and is not only legal but also common in 37 states.
Balance billing is really a dispute between physicians and health insurance plans but it is the patient that gets stuck in the middle of it and ends up financially responsible. The main cause of the dispute is that the physician, usually an out-of-network physician, does not have any contract with the health plan and thus, is not bound by a pre-negotiated charge for the service. The health insurance companies usually pay a rate that is a little higher than the Medicare rate for the particular service. Then the unsatisfied physician will bill the patient to recover the difference for the service performed. Many physicians do not like the low reimbursement rates of the various health insurance plans and choose to be out-of-network.
The Affordable Care Act does not require all healthcare plans or managed care organizations to cover non-emergency balance billing amounts nor does it prohibit balance billing for non-emergency services. However, this does not give a free reign for providers because not all kinds of balance billing are allowed in the United States. Balance billing beneficiaries of TRICARE is prohibited. The Centers for Medicare and Medicaid Services (CMS) also prohibits balance billing of all qualified Medicare beneficiaries and Medicaid members. Furthermore, balance billing is not allowed for emergency out-of-network service under the 2010 patient protection amendments to the Public Health Service Act. And for virtually all in-network providers, i.e. providers who have contracts with managed care organizations, there are provisions in their contracts that prohibit them from balance billing the patient. Yet, this still allows balance billing of patients with private health insurance by out-of-network providers. Consequently, some states have tried to address this gap with legislation.
Thirteen states led by New York, Maryland, and California have enacted statutes prohibiting balance billing by out-of-network providers. Under the patient-protection oriented state laws of Maryland, New York, and California, providers cannot balance bill patients and this restriction applies across the board to all situations including in-network, out-network, HMOs, and PPOs. The District of Columbia and the Commonwealth of Virginia only prohibit balance billing of in-network HMO patients but allow balance billing for patients with out-of-network health plans and PPO plans.
When these disputes occur, a lot of patients end up taking their frustrations on their health insurance company. Therefore, some health insurance companies, like Aetna, seek to protect their members by taking legal action against the out-of-network providers who balance bill, especially when it involves unreasonable and uncustomary charges for a particular service.
Patients would be wise in making efforts to avoid unexpected bills by making sure beforehand that their specialist does not balance bill. Patients should also keep up-to-date with the state laws regarding balance billing. In the event that balance billing occurs and is not prohibited in a given state, patients should avoid debt collection by negotiating with the provider.