What Is Out-of-Network Reimbursement?

Out-of-network reimbursement refers to the financial process where a health insurance plan provides payment for healthcare services received from providers who do not have a direct contract with the insurer. When a patient opts for an out-of-network provider, they typically pay the provider directly for services rendered. Subsequently, the patient submits a claim to their insurance company, which then evaluates the charges and, if covered, issues the reimbursement payment directly to the patient rather than the healthcare provider.

Understanding Out-of-Network Coverage

An “out-of-network” provider has not entered a contractual agreement with a health insurance company. In contrast, “in-network” providers contract with insurers, agreeing to provide services at pre-negotiated, discounted rates for insured members. Using an out-of-network provider typically results in higher costs for the patient because the insurer has not negotiated pricing. The provider can charge their full, standard fees, which are often higher than discounted in-network rates.

Health insurance plans vary significantly in their coverage for out-of-network services. Some plan types, such as Health Maintenance Organizations (HMOs), generally do not offer coverage for out-of-network care, except in emergency situations. Other plans, like Preferred Provider Organizations (PPOs) and Point of Service (POS) plans, often include benefits for out-of-network providers, though usually with higher out-of-pocket costs for the patient.

The Reimbursement Process

Initiating an out-of-network reimbursement claim requires specific documentation from the healthcare provider. The most crucial document is a “superbill” or an itemized statement, which serves as a detailed invoice of the services received. This superbill must contain essential information for insurance processing, including the patient’s contact details, the provider’s name, practice location, state license number, National Provider Identifier (NPI), and Employer Identification Number (EIN).

Beyond administrative details, the superbill must accurately list services using Current Procedural Terminology (CPT) codes, describing medical procedures. It should also include International Classification of Diseases (ICD-10) codes, representing the patient’s diagnosis and validating medical necessity. The superbill must specify the date(s) of service, the charges for each service, and any payments already made by the patient.

Once all necessary documentation is collected, the patient can submit the claim to their insurance company. Submission methods include online portals, mail, or fax. It is advisable to keep copies of all submitted forms and communication for personal records.

After submission, the insurance company will review the claim to determine coverage and the eligible reimbursement amount. Patients can expect to receive an Explanation of Benefits (EOB) document, which details how the claim was processed, the amount covered, and any remaining patient responsibility. The processing timeline can vary, ranging from a few weeks to up to 90 days, with potential delays if information is missing or incorrect. Reimbursement is issued to the patient via direct deposit or a check.

Factors Affecting Reimbursement Amounts

Several financial terms influence the actual reimbursement amount. The “allowed amount,” also known as the Usual, Customary, and Reasonable (UCR) rate, is the maximum amount the insurance company determines it will pay for a specific healthcare service in a given geographical area, which is often less than the provider’s billed charge. If the provider’s charge exceeds this allowed amount, the patient is responsible for the difference.

Before the insurance company begins to pay for out-of-network services, the patient typically must meet an “out-of-network deductible.” This is a predetermined amount the patient must pay out-of-pocket annually, and it is usually separate from and often higher than any in-network deductible. Until this higher deductible is satisfied, the patient is responsible for the full cost of eligible out-of-network services.

After the out-of-network deductible has been met, “out-of-network co-insurance” applies. This represents the percentage of the allowed amount that the patient is still responsible for paying. For example, if a plan has 30% out-of-network co-insurance, the patient pays 30% of the allowed amount, and the insurer covers the remaining 70%. This co-insurance percentage is typically higher for out-of-network care compared to in-network services.

Patients also have an “out-of-pocket maximum,” which is the most they will have to pay for covered services in a policy year. Once this limit is reached through deductibles, co-insurance, and co-payments, the insurance plan covers 100% of allowed amounts for the remainder of the year. Expenses incurred from out-of-network providers may not always count towards the in-network out-of-pocket maximum, and some plans have separate, higher out-of-pocket maximums for out-of-network care.

“Balance billing” occurs when an out-of-network provider bills the patient for the difference between their full charge and the amount the insurer’s allowed amount, plus the patient’s deductible and co-insurance. While federal protections exist against surprise balance billing in certain emergency situations or when receiving care at an in-network facility from an out-of-network provider, patients are generally responsible for this additional amount when voluntarily choosing an out-of-network provider.