What Is Balance Billing in Health Insurance?

Medical billing and health insurance can often present unexpected financial challenges for patients. One such issue that can lead to significant out-of-pocket costs is balance billing. This practice involves a healthcare provider charging a patient for the difference between the provider’s fee and the amount paid by their insurance, even after the insurance has processed its portion of the claim.

Defining Balance Billing

Balance billing occurs when a healthcare provider charges a patient the remaining balance of a medical bill after the patient’s insurance company has paid its share. This happens when the provider’s charge exceeds the amount the insurance company is willing to pay, known as the “allowed amount” or “negotiated rate.” For instance, if a provider charges $6,000 for a procedure and the insurance company’s allowed amount is $3,500, the provider might bill the patient for the remaining $2,500. In-network providers agree to accept the insurer’s allowed amount as full payment and are prohibited from balance billing.

This practice differs from standard patient cost-sharing responsibilities such as deductibles, copayments, and coinsurance. A deductible is the amount a patient pays out-of-pocket before insurance coverage begins. A copayment is a fixed amount for a specific service, while coinsurance is a percentage of the service’s cost paid after the deductible is met. Balance billing, however, is an additional, unexpected charge that arises when an out-of-network provider does not have a contractual agreement with the patient’s insurer to accept a negotiated rate.

Circumstances Leading to Balance Billing

Balance billing most commonly occurs when patients receive care from out-of-network providers. If a healthcare provider is not part of a patient’s insurance network, they have not agreed to the insurer’s negotiated rates and can bill the patient for the difference between their charges and what the insurer pays. This situation can arise even when patients believe they are receiving care at an in-network facility.

Emergency care scenarios are frequent causes of surprise balance bills. Patients in an emergency often have no control over where they are treated or by whom. They might be taken to an out-of-network hospital, or an out-of-network provider, such as an emergency room physician or an anesthesiologist, may treat them at an in-network hospital. In such urgent situations, patients cannot choose an in-network provider, leading to unexpected charges.

Ancillary services performed at an in-network facility can also lead to balance billing. For example, a patient might receive care at an in-network hospital, but the radiologist reading their X-rays or the pathologist analyzing lab work could be out-of-network. These specialists often bill separately from the hospital, and without a contract with the patient’s insurer, they may balance bill for their services. This can happen unknowingly to the patient, who assumes all services at an in-network facility are in-network.

Patient Protections Against Balance Billing

Significant protections against balance billing have been enacted to shield patients from unexpected medical costs. The No Surprises Act, a federal law specifically designed to address this issue, took effect for most health plans and providers on January 1, 2022.

The No Surprises Act generally bans balance billing for most emergency services, preventing patients from being charged more than their in-network cost-sharing amounts for out-of-network emergency care. This protection extends to services received from out-of-network providers at in-network facilities, such as when an out-of-network anesthesiologist treats a patient at an in-network hospital. The Act also prohibits balance billing for out-of-network air ambulance services.

Under the No Surprises Act, patients are protected from balance bills for specific ancillary services, including emergency medicine, anesthesiology, pathology, radiology, and neonatology, when provided by out-of-network providers at in-network facilities. These providers cannot ask patients to waive their balance billing protections for these services. The Act’s protections do not apply to ground ambulance services or when patients voluntarily choose an out-of-network provider for non-emergency services with proper notice and consent.