Two visits for the same thing can produce very different bills depending on one fact: whether the provider was in your plan's network. This explainer covers why that is, what balance billing means, and the federal protections against surprise medical bills that took effect in 2022 under the No Surprises Act.
The definitions come from the HealthCare.gov glossary. The description of the No Surprises Act follows the consumer pages of the Centers for Medicare & Medicaid Services (CMS) and the Department of Labor's Employee Benefits Security Administration.
Why the network changes the price
A plan's network is the set of doctors, hospitals, pharmacies and other providers it has contracted with. Part of each contract is price: the provider agrees to accept a set amount from the plan, plus your cost sharing, as full payment for a covered service. That agreement is what makes in-network care predictable.
An out-of-network provider has no such agreement. Depending on the plan type, the plan may pay less toward that provider's care, may not pay at all except in an emergency, or may apply a separate, higher deductible and out-of-pocket limit. The plan types explainer sets out the general pattern for HMOs, PPOs, EPOs and POS plans.
The allowed amount
The allowed amount is the most a plan will pay for a covered service. It may also be called the eligible expense, payment allowance or negotiated rate. For in-network care, it is the agreed price, and your coinsurance is calculated from it.
For out-of-network care, the plan still sets an allowed amount, but the provider has not agreed to accept it. If the provider charges more, the difference is where balance billing comes from.
Balance billing
Balance billing is when a provider bills you for the difference between what it charged and the plan's allowed amount. An in-network provider is not allowed to do this for covered services; the contract rules it out. Outside the situations protected by federal or state law, an out-of-network provider may be able to.
A balance bill is not cost sharing, so it does not count toward your deductible or out-of-pocket maximum. That is why, before 2022, a single out-of-network bill could cost more than everything else in a person's year of care.
An illustrative comparison
Illustrative example: made-up numbers, not a real plan or provider
Imagine a planned, non-emergency procedure at a provider's own office. The person has already met their deductible, and their plan has 20 percent coinsurance in network and 40 percent out of network. The provider's list price is $2,000, and the plan's allowed amount is $1,200.
- In network: the person pays 20 percent of $1,200, which is $240. The provider accepts the rest from the plan. Total for the person: $240.
- Out of network, in a situation not protected by law: the person pays 40 percent of $1,200, which is $480, and may also be billed the $800 gap between the $2,000 list price and the $1,200 allowed amount. Total for the person: up to $1,280, and the $800 does not count toward their out-of-pocket maximum.
The numbers are invented for easy arithmetic. Real plans and providers differ, and some plans would not cover this out-of-network care at all.
The No Surprises Act
The No Surprises Act is a federal law that protects people from many surprise medical bills. Its main protections apply to group health plans and health insurance coverage for plan years beginning on or after January 1, 2022. CMS describes the core idea simply: in the situations the law covers, you can only be asked to pay your in-network cost sharing, and you cannot be balance billed.
Three effects follow in those situations:
- your cost sharing is limited to what you would pay in network;
- the provider or facility cannot bill you for the balance;
- what you pay counts toward your in-network deductible and out-of-pocket maximum.
Where the protections apply
Emergency services
If you get emergency care, your plan must cover it as if it were in network, without requiring approval in advance, even if the hospital or doctor is out of network. Out-of-network emergency providers and facilities cannot balance bill you. Protection can also extend to some care after you are stabilised, unless you give written consent to give it up.
Non-emergency care at in-network facilities
If you go to an in-network hospital, hospital outpatient department or ambulatory surgical center, some of the people who treat you may be out of network: for example, an anesthesiologist or a radiologist you did not choose. For those situations, the law limits you to in-network cost sharing and bans balance billing, subject to the notice-and-consent rule below.
Air ambulance
Out-of-network air ambulance services are also covered by the protections: you pay in-network cost sharing and cannot be balance billed.
People without insurance or not using it
If you do not have insurance, or choose not to use it for a service, providers generally must give you a good faith estimate of the expected charges in advance. If the final bill is much higher than the estimate, CMS describes a process for disputing it.
Notice and consent
For some non-emergency care at in-network facilities, an out-of-network provider can ask you to sign a notice and consent form that gives up your balance billing protections. You are never required to sign it, and you can choose a provider in your plan's network instead. Certain providers, such as those giving emergency medicine, anesthesia, pathology, radiology and laboratory services, cannot ask you to give up your protections at all.
If you are handed a form like this before a procedure, it is worth reading slowly. Signing it means agreeing that the provider can bill you more than in-network cost sharing.
What is not covered
The law is broad but not complete. Points CMS notes on its consumer pages include:
- Ground ambulances are not covered by the federal balance billing ban, though some states have their own rules.
- Non-emergency care at out-of-network facilities you choose is outside the protections.
- State laws can add protections, and in some cases they apply alongside the federal rules.
Checking a bill
When a bill arrives that looks higher than expected, a few comparisons help. First, check the explanation of benefits from your plan, which shows the allowed amount, what the plan paid and what it says you owe. Then compare that with the provider's bill. If the provider is asking for more than the plan says you owe, ask both of them why.
If you believe you have been billed in a way the No Surprises Act does not allow, CMS runs a help desk for questions and complaints about surprise bills; its current contact details are on the CMS medical bill rights page. Your plan's appeal process is another route: an appeal is a request for your plan to review a decision to deny a benefit or payment.