You have insurance (and perhaps even a ‘Cadillac’ insurance plan) and go to a hospital or even a doctor to get treated for an illness. Maybe you even checked the hospital with your insurance company beforehand to make sure that it was ‘in-network’ and you were covered, or that your insurance would cover any out of network care. Recovery is ongoing and you’re getting back to life as usual when, three months later, an enormous bill comes from the hospital, catching you completely off-guard. After all, your insurance agreed to cover the cost of your care.
If this has happened to you, you’re not alone. According to the Kaiser Family Foundation, 1 in 6 insured Americans received a surprise medical bill in 2017.
In this post, we’ll go over what balance billing and surprise billing are, how to identify when it might be happening to you, state and federal laws and regulations, and finally what you can do if it happens to you.
Surprise Billing and Balance Billing
Surprise billing and balance billing are related and often used interchangeably, but can be slightly different.
Balance billing occurs when a hospital bills a patient the difference between their list prices and the amount that the patient’s insurance company paid for their care (reminder – hospital list prices are almost always massively inflated and insurance companies negotiate significant discounts with hospitals). We’ll dive more deeply into this below.
Surprise Medical Billing
Surprise medical billing usually occurs when a patient is surprised by having visited an out of network provider (often even when they went to a hospital that was in-network) and thus has a much larger out of pocket bill than expected. It’s unfortunately common practice for hospitals to sub-contract departments, portions of departments, or even individual physicians to third party companies. These companies may or may not be in network for your hospital plan.
While this may sound far-fetched and unlikely, it’s unfortunately becoming increasingly common. According to a Vox story, as many as 20% of ER visits result in an out of network medical bill. Because this often occurs after a patient visits an in-network hospital (so they think they’re covered), this can be both confusing and frustrating.
Understand Your Medical Bill
The first step to combating balance billing and surprise medical billing is to understand your medical bill. Many of these bills often seem as if they’re intentionally designed to be confusing or misleading (while that may be the case, it’s much more likely that they were designed by a bureaucratic process that failed to consider the patient’s point of view).
We’ve written a great guide to understanding your medical bill here.
However, at a high level, your bill is broken down into the following items:
Chargemaster Rate or List Price – this the rack rate charge for all of the services provided. We dig into this more in-depth in our guide, but it’s completely disassociated with reality and often at an exorbitant markup to actual costs (as much as 10x or more).
Insurance Discount or Contractual Discount – if you have insurance, your insurance company will have negotiated a rate that’s significantly less than the chargemaster rate. Here you’ll see the savings they’ve negotiated.
Insurance Payments – this is the amount that the insurance company pays for your services. Sometimes hospitals like to bundle Insurance Discount and Insurance Payment into one line item to make things a little more confusing.
Patient Balance – this is the amount that the hospital claims that you, the patient, owe.
To recap, the formula for the above is
(Chargemaster Rate) – (Insurance Discount) – (Insurance Payments) = Patient Balance
Balance Billing occurs when the hospital doesn’t apply the insurance discount, improperly inflating the amount that you owe (and since the insurance discount can often be up to 80% of the total charged amount, this can be an enormous amount). In this instance, the hospital is attempting to charge you the amount they agreed to discount.
Surprise Medical Billing also removes the insurance discount, but in this case, it’s because you inadvertently were treated by someone out of network, so the insurance company did not have a pre-negotiated rate, and the hospital or medical provider is trying to collect their full chargemaster rate.
Laws and Regulations Surrounding Balance Billing and Surprise Medical Billing
As of early 2019, at least 24 states have laws and regulations protecting consumers from being balance billed or surprise medical billed, and a number of other states appear to have legislation on the way. The Commonwealth Fund has a good overview of state laws and regulations on balance billing.
Within the States that have consumer protections, comprehensiveness varies significantly. Most laws prevent balance or surprise billing for emergency care but only a few cover non-emergency care at in-network hospitals. Even fewer have a process set up to actually address cases of balance or surprise billing.
At the Federal-level, the government is debating legislation to address Balance Billing. Three pieces of legislation were introduced in the Fall of 2018 though nothing has yet been passed.
One thing to keep in mind, however, is that these federal laws and regulations may not cover employer insurance plans. It all depends on if the plan is self-insured or uses third party insurance. If self-insured, your plan falls under the Employee Retirement Income Security Act of 1974 (ERIS) regulations, which are vague when it comes to balance billing. If your work health insurance plan happens to be self-insured, the best thing to do is to reach out to the benefits department of your employer and see if someone there can help you.
Due to the uneven legislation throughout the U.S. addressing Balance Billing, your experience will vary to those of other patients around the country. If your state protects consumers from Balance Billing, then we recommend researching your respective state’s laws on the subject before calling your hospital.
How to Correct Balance Billing
Once identified you’ve that you’ve been balance billed (or even if you suspect that you’re in a situation where you might be balanced billed), you can then take these next steps to address it.
Out of Network
As a reminder, when you’re out-of-network, your insurance company has not pre-negotiated rates with the medical provider who treated you. This makes it harder to get help from your insurance company (though it’s still possible as we’ll see below).
Your first step is to research relevant state laws and regulations on balance billing (you also might want to run a Google search for “[your state] balance billing laws” since this is a hot topic that many states are passing laws about).
It might also be helpful to call your insurance company directly to walk through your EOB and hospital bill to get another opinion on whether or not you’re being balance billed (since it can be confusing). An insurance company rep can help you to understand whether or not you’re being balance billed (though they may not be able to interpret balance billing laws of your individual state.
If your state regulates balance billing and your situation falls under those regulations – call the hospital and explain the situation – that you believe you’re being balance billed in a way that isn’t allowed by the state. It’s important to note that its best to remain polite and professional – the person on the other end of the line is not the one who billed you – and you want them to be motivated to help you solve the situation.
If your state doesn’t yet have laws regulating balance billing or your situation doesn’t quite fall under those regulations – there’s still hope (though it’s a little more complicated). Call your insurance company, explain the situation, and ask if they’ll make an exception to your situation to treat as an “in-network situation”. This means that the insurance company will cover your procedure the same way it would if you had gone to an “in-network” medical provider. The insurance company should also work with the hospital to convince them to stop billing you for the difference in exchange for paying more.
Getting this done can be complicated and nuanced and require a lot of back and forth amongst you, the hospital, and your insurance company. Some insurance companies are better at managing this themselves – though you should be prepared to take the lead in pushing things forward and co-ordinating all communication.
Remember in out-of-network situations where there are no laws surrounding balance billing, the hospital does not have to work with you to fix the situation. Because of this, you want to stay polite and professional, and ideally try to find someone at the hospital sympathetic to your case who will take the lead and push things forward. Don’t berate or accuse the person on the other end of the line of anything – this is counter-productive.
As a reminder, in-network balance billing occurs when you went to an in-network medical provider, your insurance company paid the rate that they had contractually agreed to, and the medical provider is still trying to bill you for the difference between that rate and the chargemaster price.
The good news is that the contract that the medical provider has with your hospital prohibits them from balance billing you. This should make it significantly easier to correct.
If you think you’re being balance billed, call up your insurance company and walk through you EOB and the hospital bill with them to confirm. The rep on the other end should be able to clearly see when you’re being balance billed.
Once you’ve confirmed, your insurance company should take the lead in solving the situation. If not, request that they reach out to the hospital directly to correct the situation. Note that it’s best practice to also follow-up with the hospital to check in on your case, as we’ve seen things get lost and people get sent to collections even though they thought their case was being worked on.
If the insurance company is unhelpful, aside from looking for a new insurance company, you can submit a letter to the hospital clearly outlining your case and requesting that it be corrected.
Getting a surprise medical bill from a hospital or other medical provider is extremely stressful and confusing, though know that you’re not alone AND that there are steps that can be done to correct this.
At Resolve, we’re excited to see more and more states take a proactive approach to a confusing and unfair practice, and are hopeful that this is addressed in full by the federal government soon.
While we’re hopeful that this guide will help people get out of this situation, we understand that reality can be much more confusing, stressful, and hard to deal with.
If you’d like to go over your bill with an expert to see whether or not you’re being balance billed and what can be done about it, call us toll free at 877-245-4244 OR schedule a free consult here.
Braden founded Resolve after experiencing first hand how unfair the system is for patients. Prior to Resolve, he built and ran Operations for a renewable energy company and then built and ran Product, Growth, and Operations for a VC-funded edtech company. He received his MBA from Dartmouth’s Tuck School of Business and BA in Philosophy from the College of William and Mary. When not trying to lower healthcare costs he can be found outdoors mountain biking, skiing, or hiking with his dog.