Balance billing

What Is Balance Billing?

Balance billing, also known as surprise billing, occurs when a healthcare provider bills a patient for the difference between the total amount charged for services and the amount paid by their health insurance plan⁴⁸. This practice typically arises when a patient receives care from an out-of-network provider, meaning a provider or facility that does not have a contract with the patient's health insurance company to provide services at negotiated rates⁴⁷. Balance billing is a significant concern within [healthcare finance], as it can leave patients with unexpected and substantial [medical debt] beyond their anticipated [copayment], [coinsurance], or [deductible] responsibilities⁴⁵, ⁴⁶.

History and Origin

The history of medical billing in the United States has evolved significantly, from early practices where physicians charged patients based on their ability to pay, to more standardized reimbursement mechanisms with the advent of insurance. Centuries ago, in some European legal systems, physicians could not legally bill for services, operating on a system of voluntary "honoraria"⁴⁴. However, this tradition did not take root in the American colonies, where selling medical services was treated akin to other commercial transactions⁴³.

Before widespread health insurance, doctors often used sliding fee scales. The expansion of private insurance by the mid-20th century, and later government programs like Medicare, led to a standardization of fees and the establishment of "usual, customary, and reasonable" (UCR) rates by insurers⁴¹, ⁴². However, a gap remained: when a [healthcare provider] was out-of-network, they were not bound by these negotiated rates and could charge the patient for any remaining balance after the insurer's payment⁴⁰.

The prevalence of balance billing, particularly in emergency situations or when patients inadvertently received care from out-of-network providers at an [in-network] facility, led to a growing consumer advocacy movement³⁷, ³⁸, ³⁹. This culminated in legislative efforts to protect patients from these unexpected charges. A major turning point occurred with the enactment of the No Surprises Act (NSA) in the U.S. as part of the Consolidated Appropriations Act of 2021, effective January 1, 2022³⁵, ³⁶. This federal law broadly prohibits balance billing for certain emergency and non-emergency services, aiming to remove consumers from payment disputes between providers and insurers³³, ³⁴.

Key Takeaways

• Balance billing occurs when an out-of-network provider bills a patient for the difference between the charged amount and the insurer's payment.
• It is a common cause of unexpected medical debt, particularly when patients cannot choose their provider, such as in emergency situations.
• The No Surprises Act, effective January 1, 2022, provides federal protections against balance billing for certain emergency and non-emergency services.
• Under the No Surprises Act, patients are generally only responsible for their in-network cost-sharing for protected services.
• State laws may offer additional protections against balance billing that are stronger than federal law.

Formula and Calculation

Balance billing does not involve a complex financial formula, but rather a simple calculation of the difference between the provider's charge and the amount paid by the insurer and the patient's cost-sharing (deductible, copayment, coinsurance).

The balance bill amount can be conceptualized as:

Where:

• (\text{Provider's Total Charge}) represents the full amount the [healthcare provider] charges for the service.
• (\text{Insurer's Payment}) is the amount the patient's [health insurance] plan pays to the provider for the service.
• (\text{Patient's Cost-Sharing}) includes amounts such as the [deductible], [copayment], and [coinsurance] that the patient is responsible for under their plan.

If the "Balance Bill" amount is greater than zero after the insurer and patient have paid their contracted portions, and the provider is out-of-network, this remaining amount is what the provider may attempt to balance bill the patient for.

Interpreting Balance Billing

Interpreting a balance billing scenario involves understanding the patient's health insurance coverage, the provider's network status, and applicable state or federal regulations. A patient typically receives a balance bill after their [health insurance] company has processed the claim and paid its portion, leaving a remaining amount that the [healthcare provider] expects the patient to pay directly³².

Prior to comprehensive legislation like the No Surprises Act, the existence of a balance bill often indicated that the service was provided by an [out-of-network] professional, or that the service itself was not fully covered by the patient's plan. Patients often assumed that if they went to an [in-network] hospital, all services would be covered under their in-network benefits, but out-of-network specialists (e.g., anesthesiologists, radiologists) could still bill independently³⁰, ³¹. The interpretation now largely hinges on whether the services fall under the protections of the No Surprises Act or strong state laws. If protected, the patient should only be responsible for their standard in-network [cost-sharing].

Hypothetical Example

Consider Sarah, who needs an emergency appendectomy. She is rushed to the nearest hospital, which is an [in-network] facility for her [health insurance] plan. The emergency room physician, the surgeon, and the anesthesiologist are all involved in her care. After her recovery, Sarah receives several bills.

One bill is from the hospital for $10,000, which her insurance covers mostly, leaving her with her $500 [deductible] and $200 [copayment]. Another bill arrives from the anesthesiologist for $2,000. Sarah checks her Explanation of Benefits (EOB) and finds her insurance only paid $800 to the anesthesiologist, deeming that their "reasonable and customary" amount for the service, and stating that Sarah owes 20% [coinsurance] of that $800 ($160). However, the anesthesiologist is [out-of-network] and did not contract with Sarah's insurer. They bill Sarah for the remaining $1,040 ($2,000 charged - $800 paid by insurance - $160 patient coinsurance on the allowed amount).

Before the No Surprises Act, this $1,040 would be a classic balance bill, and Sarah would be responsible for paying it. However, under the protections of the No Surprises Act, emergency services provided by out-of-network providers at an in-network facility are prohibited from balance billing. In this scenario, Sarah would only be responsible for her in-network [cost-sharing] for the anesthesiologist's services, consistent with what she would pay if the provider were in-network. The insurer and the anesthesiologist would then enter into a dispute resolution process to determine the final payment, keeping Sarah out of the middle of the payment disagreement²⁹.

Practical Applications

Balance billing primarily manifests in the context of [healthcare provider] services and [health insurance] claims. Its practical applications, or rather its prevention, are crucial for patient financial well-being.

• Consumer Protection: The most significant application of understanding balance billing is in empowering consumers to protect themselves from unexpected costs. Legislation like the No Surprises Act (NSA) is designed to shield patients from balance billing in specific scenarios, such as [emergency services] and non-emergency services provided by [out-of-network] professionals at [in-network] facilities²⁷, ²⁸. The U.S. Department of Labor provides resources for individuals covered by employer-sponsored health plans to understand their rights under the No Surprises Act.²⁶
• Regulatory Compliance: For [healthcare providers] and insurers, understanding balance billing is critical for regulatory compliance. They must adhere to the rules set forth by federal laws like the No Surprises Act and various state laws, including requirements for disclosures about balance billing protections and [prior authorization] processes²⁵. The Centers for Medicare & Medicaid Services (CMS) offers extensive information and resources for providers and consumers on compliance and patient rights.²⁴
• Patient Advocacy: [Patient advocacy] groups frequently work to educate the public about their rights regarding balance billing and lobby for stronger consumer protections. They play a vital role in helping individuals navigate complex medical bills and challenge inappropriate charges. The National Consumer Law Center highlights how various laws, including the No Surprises Act, offer protection against balance billing, particularly for vulnerable populations²³.
• Revenue Cycle Management: From a healthcare system perspective, the rules surrounding balance billing significantly impact [revenue cycle management]. Providers must adjust their billing practices to comply with balance billing prohibitions and engage in independent dispute resolution processes with insurers when out-of-network payments are disputed, rather than billing the patient directly²².

Limitations and Criticisms

While legislation like the No Surprises Act has significantly curbed the practice of balance billing, certain limitations and criticisms persist:

• Scope Gaps: Despite its broad protections, the No Surprises Act does not cover all scenarios of balance billing. For example, it notably does not apply to ground ambulance services, leaving a potential gap where patients might still receive unexpected bills for emergency transportation²¹. Similarly, if a patient knowingly and voluntarily chooses an [out-of-network] provider for non-emergency services and gives written consent to be balance billed, the protections may not apply²⁰.
• Awareness and Enforcement: The effectiveness of balance billing protections also depends on consumer awareness of their rights. Many patients may not fully understand the provisions of the No Surprises Act or how to dispute a balance bill they believe is unlawful¹⁸, ¹⁹. Enforcement mechanisms, including the Independent Dispute Resolution (IDR) process between providers and insurers, can also face challenges in implementation and efficiency¹⁷.
• Provider and Insurer Disputes: While designed to protect patients, the No Surprises Act's provisions for resolving payment disputes between providers and insurers have led to ongoing legal challenges and disagreements over appropriate [payment standard]s for out-of-network services¹⁵, ¹⁶. These disputes, while not directly involving the patient financially, can still affect the healthcare landscape, potentially influencing provider networks and overall healthcare costs.
• Impact on Provider Networks: Some critics express concern that strict prohibitions on balance billing, without appropriate [financial arrangements] for out-of-network payments, could disincentivize providers from contracting with insurers, potentially narrowing [in-network] options for patients. However, research is ongoing to assess the long-term impacts of the No Surprises Act on provider networks and [health insurance] premiums¹⁴.

Balance Billing vs. Surprise Billing

The terms "balance billing" and "surprise billing" are often used interchangeably in common discourse and even in official communications¹³. However, "surprise billing" is essentially a subset or specific type of balance billing.

Balance billing refers to the general practice where a [healthcare provider] bills a patient for the difference between the provider's charge and the amount the patient's [health insurance] plan pays, after the patient has paid their [cost-sharing] (deductible, copayment, coinsurance)¹². This can happen whether the patient was aware that the provider was [out-of-network] or not.

Surprise billing specifically refers to an unexpected instance of balance billing¹⁰, ¹¹. This typically occurs in situations where the patient has no control over who provides their care or their network status. Common scenarios include:

• Receiving [emergency services] from an out-of-network provider or facility.
• Being treated by an out-of-network provider (e.g., an anesthesiologist, radiologist, or assistant surgeon) at an [in-network] hospital or ambulatory surgical center, without the patient's prior knowledge or choice⁸, ⁹.

The key distinction is the element of "surprise" or lack of control on the patient's part. While all surprise bills are a form of balance billing, not all instances of balance billing are necessarily "surprise bills" if the patient knowingly chose an out-of-network provider and consented to the potential for additional charges. The No Surprises Act primarily targets and prohibits these "surprise" instances of balance billing⁷.

FAQs

What should I do if I receive a balance bill?

First, carefully review the bill and your Explanation of Benefits (EOB) from your [health insurance] plan to understand what was charged and what was covered. If the bill is for [emergency services] or services received at an [in-network] facility from an [out-of-network] provider (like an anesthesiologist during an in-network surgery), it may be prohibited under the No Surprises Act. You can contact the No Surprises Act Help Desk at 1-800-985-3059 or visit the Centers for Medicare & Medicaid Services (CMS) website for more information on your rights and how to file a complaint⁵, ⁶.

Does Medicare or Medicaid allow balance billing?

Generally, no. Medicare and Medicaid programs have specific protections in place that prohibit [healthcare providers] from balance billing patients enrolled in these programs. If you are a Medicare or Medicaid beneficiary and receive a balance bill, it may be a violation of these protections, and you should contact the appropriate government agency⁴.

Can I waive my protections against balance billing?

For certain non-emergency services received from an [out-of-network] provider at an [in-network] facility, a provider may ask you to sign a notice and consent form to waive your protections under the No Surprises Act. However, you are never required to give up these protections, and you can always choose an [in-network] provider. Importantly, some services, like [emergency services] and ancillary services (e.g., radiology, anesthesiology) provided by out-of-network providers at an in-network facility, cannot be balance billed even with consent¹, ², ³.