What Is Out-of-Network Coverage & How Does It Work?

Health insurance plays a significant role in managing medical costs. Most insurance plans establish a network of healthcare providers, including doctors, hospitals, and other facilities that have agreements with the insurer. While receiving care from these in-network providers is common, many policies also cover services obtained outside this established network. Understanding how out-of-network coverage operates is important for policyholders. This article clarifies the specifics of out-of-network benefits and their impact on your financial responsibilities.

Understanding Out-of-Network Care

A healthcare provider or facility is considered “out-of-network” when they do not have a direct contract with your health insurance plan. This means the provider has not agreed to accept the insurer’s pre-negotiated rates for services. In contrast, an “in-network” provider has such an agreement, typically resulting in lower costs for the insured individual.

Insurance companies establish networks primarily to manage costs and ensure a certain level of quality for their members. In-network providers agree to discounted rates, which benefits both the insurer and the policyholder through reduced out-of-pocket expenses. When you receive care from an in-network provider, your insurer usually pays a larger portion of the bill, and the provider accepts the negotiated rate as full payment, minus your cost-sharing.

Out-of-network care generally means your insurance will cover a smaller percentage of the service cost, or none at all. Health Maintenance Organization (HMO) and Exclusive Provider Organization (EPO) plans typically offer no out-of-network coverage, except in emergencies. Preferred Provider Organization (PPO) and Point of Service (POS) plans usually offer some out-of-network coverage, but at a higher cost to the patient. This difference stems from the absence of a contractual agreement between the out-of-network provider and your insurer regarding pricing.

Individuals might seek out-of-network care in several situations. These include emergencies where the nearest facility is not in-network, the need for specialized care unavailable within the network, or a desire to maintain continuity of care with a trusted provider. Travel or living in a rural area with limited in-network options can also necessitate out-of-network care. In emergencies, federal laws protect patients from balance billing by out-of-network providers in in-network facilities, ensuring they are only charged in-network cost-sharing amounts.

Financial Aspects of Out-of-Network Services

Receiving services from an out-of-network provider often has more substantial financial implications than in-network care. A key difference is the out-of-network deductible, which is typically separate from and higher than your in-network deductible. This higher amount must be satisfied before your insurance plan begins contributing to the costs of out-of-network services.

After meeting your out-of-network deductible, you will typically be responsible for a higher coinsurance percentage. Coinsurance represents your share of the costs for a covered healthcare service, calculated as a percentage of the allowed amount. For out-of-network care, this percentage is usually greater than for in-network services, meaning you pay a larger portion of the bill. For example, while in-network coinsurance might be 20%, out-of-network coinsurance could be 40% or 50%.

The “allowed amount” is a central concept in out-of-network billing, also known as the “eligible expense” or “payment allowance.” This is the maximum amount your insurance plan will pay for a covered healthcare service. For out-of-network providers, this amount is determined by the insurer based on what is considered usual, customary, and reasonable (UCR) for similar services in a specific geographic area. However, out-of-network providers are not bound by these allowed amounts.

This can lead to “balance billing.” An out-of-network provider can bill you for the difference between their total charge and the allowed amount your insurer pays, in addition to your deductible and coinsurance. For instance, if a provider charges $500 and your insurer’s allowed amount is $300, the provider can bill you for the remaining $200 after the insurer pays its share based on the $300 allowed amount.

Most health insurance plans include an out-of-pocket maximum, which limits the total amount you pay for covered services in a year. However, balance-billed amounts generally do not count towards this limit for out-of-network care. This means you could still be responsible for substantial balance bills from out-of-network providers even after reaching your out-of-pocket maximum for in-network services.

Submitting a Claim for Reimbursement

When you receive services from an out-of-network provider, you may need to pay them directly at the time of service and then seek reimbursement from your insurance company. The process begins with gathering specific documentation from your provider. This includes an itemized bill, often called a “superbill,” detailing services rendered, date of service, diagnosis codes (ICD-10), procedure codes (CPT), and the provider’s tax identification number.

Next, acquire a claim form from your insurance company. Many insurers use a standardized form, such as the CMS-1500, or provide their own proprietary form online or through customer service. This form is used by healthcare providers to submit claims, but policyholders can also use it for reimbursement.

Completing the claim form involves transferring information from your superbill, including patient details, provider information, dates of service, and the specific diagnosis and procedure codes. You will typically need to attach the itemized superbill and proof of payment to the completed claim form before submission.

Claims can usually be submitted by mail or, if available, through an online portal. After submission, the insurance company will review the claim to determine the allowed amount and your reimbursement. Processing time for health insurance claims can vary, typically from a few days to several weeks. Upon completion of the review, the insurance company will send you an Explanation of Benefits (EOB), detailing the services, amount charged, allowed amount, what the insurer will pay, and your remaining responsibility.