Balance billing occurs when providers bill a patient for the difference between the amount they charge and the amount that the patient’s insurance pays. The amount that insurers pay providers is almost always less than the providers’ “retail price.” Some providers will bill the patient for the difference, or balance; this is called balance billing. [Note that “surprise” balance billing is a specific type of balance billing, addressed in more detail below.]
Providers that are in-network have agreed to accept the insurance payment as payment in full (less any applicable copays, deductible, or coinsurance), and are not allowed to balance bill the patient. However, balance billing is allowed if the provider is not in your insurance network (as described below, there are varying state rules that apply in certain circumstances, and new federal legislation is expected to protect consumers in certain circumstances as of 2022).
Some insurance plans (usually PPOs and POS plans) cover out-of-network care, but the medical provider has not signed any sort of agreement with the insurer in that case. If the insurer covers out-of-network care, they will pay the provider based on the insurer’s reasonable and customary rates (keeping in mind that the patient will be responsible for the out-of-network deductible and coinsurance, which is typically quite a bit higher than in-network cost-sharing). But at that point, the provider can bill the patient for the difference between what was billed and what the insurer paid. They do not have to write off the difference the way an in-network provider would.
Surprise balance billing: Federal relief likely coming in 2022
This is all fairly straightforward in situations where the patient chooses to see an out-of-network provider, with the understanding that out-of-pocket costs will be significantly higher and that balance billing is likely.
However, it’s a very different scenario when patients seek care at an in-network facility, and later find out that they were also treated by one or more out-of-network medical providers, or when patients receive emergency care and don’t have any choice in terms of where they go or who treats them.
These scenarios can result in “surprise balance billing,” which is frustrating and costly for patients — particularly in cases where their insurance simply doesn’t cover out-of-network care at all, and the provider “balance bills” the entire bill. States have been slowly working to address this issue, but state laws don’t apply to self-insured health plans (which account for the majority of employer-sponsored coverage) and some states haven’t yet tackled the issue. Relief is likely on the horizon, however, with new federal legislation that will protect consumers from most surprise balance billing starting in 2022. But that legislation is not yet a sure thing, as President Trump has indicated that he’s not entirely happy with it in the form that Congress has passed.
The federal legislation was incorporated into the Consolidated Appropriations Act, 2021, which Congress passed with overwhelming bipartisan support in December 2020. This is a massive piece of legislation that has been widely referred to as a COVID-19 relief bill (it does contain a substantial amount of COVID relief measures), but which also appropriates government funding for the first nine months of 2021, addresses climate change, and tackles surprise balance billing — among many other things.
The surprise balance billing provisions in the legislation are designed to hold consumers harmless in nearly all scenarios that would otherwise result in surprise balance bills — ie, all emergency situations, and situations in which services are received from out-of-network providers at in-network facilities — as of January 2022.
Although air ambulance charges are addressed by the legislation, ground ambulance charges are not (Sarah Kliff and Margo Sanger-Katz explain more about this here; most ground ambulance services are provided by local governments as opposed to private entities). But the legislation does include a provision to create a commission to study ground ambulance charges in an effort to incorporate consumer protections for these services into a future piece of legislation.