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July 23, 2015
Balance Billing in Private Health Insurance Plans
What Is Balance Billing?
consumers to utilize in-network providers because those
Balance billing is when a health care provider bills a
providers have met the plan’s standards and give the plan a
consumer for charges (other than cost sharing) that exceed
discount. Thus, consumers typically have lower cost
the health insurance plan’s payment for a covered service.
sharing for covered services obtained in-network.
Consumers who seek care out-of-network likely have
Key Terms
higher cost sharing because out-of-network providers have
not agreed with the plan’s negotiated payment.
Charge: The dollar amount a provider sets for services rendered before
negotiating any discounts.
In addition to the higher cost sharing for out-of-network
services, a plan may pay only its usual, customary, and
Negotiated Payment: The maximum amount on which payment is
reasonable (UCR) fee for such services. Some plans may
based for covered health care services. The payment may be negotiated
not offer any out-of-network benefits and thus would not
by the health plan or the consumer.
pay for any charges associated with out-of-network
In-Network: The facilities, providers, and suppliers with which a health
services.
plan has contracted to provide health care services.
Why Does Balance Billing Occur?
Out-of-Network: The facilities, providers, and suppliers with which a
When a plan’s negotiated payment or UCR fee is less than
health plan has not contracted to provide health care services.
the provider’s charge for a given health care service, some
Premium: The amount paid for health insurance, often on a monthly
providers, if allowed under federal or state law, may bill a
basis.
consumer for the amount of that difference. This payment
differential is known as balance billing. In-network
Cost Sharing: Also referred to as out-of-pocket costs for the
providers often are contractually prohibited from balance
consumer. The amount an insured consumer pays for health care
billing health plan consumers.
services according to the terms indicated in the health plan. A plan’s
cost-sharing requirements may include deductibles, coinsurance, and co-
What Does Balance Billing Mean for Consumers?
payments.
Balance billing also can be attributed to the difficulty of
determining which provider is in a plan’s network. For
Coinsurance: The share of costs, figured in percentage form, an insured
example, providers may leave a plan’s network mid-year.
consumer pays for a health service.
Accordingly, provider directories available from the plan
Co-payment: A fixed amount an insured consumer pays for a health
may be out-of-date. Additionally, a physician group may be
service.
in-network while some individual physicians in the group
may be out-of-network. A physician also may be part of
Usual, Customary, and Reasonable (UCR) Fee: The amount
multiple practices, and those practices in turn may accept
determined by the plan to be paid for a medical service based on what
different insurance plans.
providers in the area usually charge for the same or similar service.
What Are Some Examples of Balance Billing?
How Does the Billing Process Work for Consumers
There are a number of scenarios that result in balance
with Private Health Insurance?
billing. The following are two illustrative balance billing
Many privately insured consumers are covered through
scenarios:
some type of managed care organization (MCO), such as a
health maintenance organization (HMO) or preferred
Illustrative Scenario One: An insured consumer chooses to
provider organization (PPO). MCOs contract with a wide
receive care from an out-of-network provider. In addition to
range of providers that consequently are regarded to be in a
the higher cost sharing, as a result of going out-of-network
plan’s network. These providers accept the plan’s
the provider balance bills the consumer for the remaining
negotiated payment in full for services to the plan’s
charge. (See Table 1 for an illustrative example of such a
consumers. This group of providers is in-network; providers
scenario.)
that have not contracted with the plan are out-of-network.
Illustrative Scenario Two: An insured consumer checks a
In addition to paying their health insurance premium,
health plan’s website to verify that a hospital was in-
consumers often are required to pay an amount for health
network and thus assumes that the health care services
care services (i.e., cost sharing) via coinsurance or a co-
received at the hospital will be included in the plan’s in-
payment.
network covered benefits. The consumer receives care from
an out-of-network physician at the in-network hospital. The
The cost-sharing amount often is dependent on the network
out-of-network physician who provided care during the
infrastructure. In general, health insurance plans want
service may bill the consumer for the remaining charges.
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Balance Billing in Private Health Insurance Plans
Table 1. Illustrative Example of Balance Billing
the states’ role as the primary regulators of health
(20% coinsurance for in-network services and 40%
insurance, federal requirements may overlap. However,
coinsurance for out-of-network services)
federal laws often establish federal minimum requirements
while generally giving states the authority to enforce and
In-Network
Out-of-Network
expand those requirements.
Provider
Provider
What Are Some State Approaches to
Provider
$50,000
$50,000
Balance Billing?
Charge
Approaches to address balance billing vary from state to
Plan’s
$30,000
No negotiated discount
state, may differ depending on the type of plan, and may
Negotiated
because provider is out-
make distinctions between emergency and nonemergency
Payment
of-network
situations.
Plan’s Usual,
N/A
$35,000
One of the most comprehensive state approaches to balance
Customary, and
billing is in New York. In April 2014, New York enacted
Reasonable
the Emergency Medical Services and Surprise Bills law.
(UCR) Fee
The law bans balance billing for out-of-network emergency
Plan Pays
$24,000
$21,000
care. For out-of-network nonemergency services, the law
requires plans to let consumers see out-of-network
(80% of plan’s
(60% of plan’s reasonable
providers at in-network costs when an in-network provider
negotiated payment)
and customary fee)
is unavailable. New York also established an independent
Consumer Pays
$6,000
$14,000
arbitration process to review balance billing discrepancies.
(20% of plan’s
(40% of plan’s UCR fee)
Furthermore, the law includes additional provisions related
negotiated payment)
to provider network disclosure. MCOs in New York now
are required to provide comprehensive contact information
Balance Billed
N/A
$15,000
in their provider directory lists and update those lists
Amount
(provider charge minus
regularly. According to the law, health care providers must
plan’s UCR fee)
provide consumers with plan and hospital affiliation
information at the time of the appointment for
Total Amount
$6,000
$29,000
nonemergency services.
Paid by
(coinsurance)
(coinsurance plus balance
Consumer
billed amount)
How Does Federal Law Address Balance Billing?
Source: CRS illustrative example.
Federal law does not prohibit balance billing in the private
health insurance market. The Patient Protection and
Notes: Coinsurance rates for in-network and out-of-network
Affordable Care Act (ACA; P.L. 111-148, as amended)
services may vary by plan type. Some plans do not offer out-of-
addresses cost-sharing issues as they relate to emergency
network benefits and thus do not pay for charges associated with
health services obtained out-of-network for all non-
out-of-network services.
grandfathered private health insurance plans. In an
emergency situation, consumers do not need to obtain prior
What Is the Relationship Between Balance Billing
authorization, regardless of whether the provider is in-
and Surprise Medical Bills?
network or out-of-network.
Balance billing often is cited as a reason for surprise
For out-of-network emergency situations, health plans must
medical bills. A surprise medical bill is any bill for which a
pay the greatest of the following three amounts: the amount
health plan paid less than a consumer expected. However,
not every balance bill is a surprise medical bill. While a
the plan would pay in-network; an amount that is calculated
using the same method the plan uses to determine payments
variety of circumstances may make a consumer vulnerable
for out-of-network services, excluding co-payments or
to unexpected medical expenses, surprise medical bill
scenarios generally are a result of not understanding a
coinsurance; or the amount Medicare would pay for the
plan’s provider network and inadvertently using out
service. Nonetheless, a consumer may be required to pay, in
-of-
addition to the in-network cost sharing, the balance bill.
network services.
Who Has Jurisdiction over Balance Billing?
Bernadette Fernandez, Specialist in Health Care
Private health insurance is regulated primarily at the state
Financing
level. Individual states have established standards and
IF10263
regulations overseeing the business of insurance. Despite
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Balance Billing in Private Health Insurance Plans
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
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https://crsreports.congress.gov | IF10263 · VERSION 5 · NEW