What Is OON Insurance and How Does It Work?

Understanding Health Insurance Networks

Health insurance plays a significant role in managing the costs associated with medical care for many individuals and families. It generally works by pooling resources from many people to cover the expenses of those who need medical services. A core concept within health insurance is the “network” of providers.

An insurance company establishes a network by contracting with a specific group of doctors, hospitals, pharmacies, and other healthcare facilities. These providers agree to offer services at negotiated, discounted rates to the insurer’s members. When individuals receive care from providers within this established network, their out-of-pocket costs are typically lower due to these pre-arranged agreements.

Understanding Out-of-Network Care

Out-of-network (OON) care refers to medical services received from a healthcare provider who does not have a contract with your specific health insurance plan. These providers have not agreed to the discounted rates negotiated by your insurer.

A provider might be considered OON for several reasons. They may not have sought a contract with your insurance company, or they might not have reached an agreement on terms and reimbursement rates. Health plans, such as Health Maintenance Organizations (HMOs) or Exclusive Provider Organizations (EPOs), often do not cover non-emergency care from OON providers at all, except in emergencies. Preferred Provider Organizations (PPOs) and Point of Service (POS) plans, however, typically offer some coverage for OON services, though usually with higher out-of-pocket costs for the patient.

Costs Associated with Out-of-Network Services

Receiving care from an out-of-network provider often leads to significantly higher financial responsibility for the patient. One key concept in this context is “usual, customary, and reasonable (UCR) charges.” UCR refers to the amount an insurance company determines is acceptable for a specific medical service or procedure within a particular geographic area, based on what providers typically charge. Your insurer will generally only pay a percentage of this UCR amount for OON services, leaving you responsible for the remainder.

A major financial risk with OON care is “balance billing.” This occurs when an OON provider bills the patient for the difference between their total charge for a service and the amount the insurance company actually pays. Unlike in-network providers who agree to accept the insurer’s payment (plus your cost-sharing) as full payment, OON providers are not bound by such agreements and can bill you for the remaining balance. For example, if a procedure costs $20,000, and your insurer’s allowed amount is $15,000, an OON provider could bill you for the remaining $5,000 after the insurer pays its share.

Deductibles, co-insurance, and out-of-pocket maximums also apply differently to OON care. You will likely have a separate, higher deductible for OON services, and you may need to meet this even if you have already satisfied your in-network deductible. Co-insurance percentages are also typically much higher for OON care, meaning you pay a larger percentage of the allowed amount after your deductible is met. Furthermore, while in-network plans have federal limits on out-of-pocket maximums, OON out-of-pocket maximums can be significantly higher or even unlimited, depending on the plan.

The No Surprises Act, which took effect in January 2022, offers some protections against balance billing in specific situations. This federal law bans surprise bills for most emergency services and for non-emergency services provided by OON providers at in-network facilities. Under this act, patients are only responsible for their in-network cost-sharing amounts in these protected scenarios. However, the Act does not cover all situations, and balance billing can still occur for non-emergency services from OON providers at OON facilities.

Managing Out-of-Network Medical Bills

Proactive steps can significantly reduce the financial impact of out-of-network care. Before receiving any non-emergency services, it is prudent to verify a provider’s network status directly with your insurance company. Many insurers provide online portals or phone numbers for this purpose, and it is wise to get any coverage confirmations in writing. Understanding your specific OON benefits, including deductibles, co-insurance, and any separate out-of-pocket maximums, is also crucial.

If you receive an unexpected out-of-network bill, especially after emergency care or treatment at an in-network facility, the No Surprises Act may offer protection. You should review the bill carefully to ensure it complies with these protections, as errors can occur.

Negotiating with the provider’s billing office is often an effective strategy for reducing OON medical bills. You can explain your situation, reference what your insurance plan would have paid an in-network provider (the market rate), and inquire about a discount for prompt payment or a payment plan. Providers may be willing to accept a lower amount, especially if it avoids lengthy collection processes.

If negotiation does not yield a satisfactory outcome, you have the right to appeal the insurance company’s decision. The appeals process typically involves an internal review by the insurer, and if denied again, an external review by an independent third-party organization. Gathering all relevant documentation, such as itemized bills, explanation of benefits (EOB) forms, and medical records supporting the necessity of care, strengthens your appeal. Seeking assistance from a patient advocate or healthcare attorney can also be beneficial in navigating complex appeal processes.