What Is Out of Network?
"Out of network" refers to healthcare services received from a healthcare provider who does not have a contract with an individual's health insurance plan. Within the broader category of Health Insurance and Healthcare Finance, this designation means that the provider is not part of the insurer's established network of doctors, hospitals, and other medical facilities. When services are obtained out of network, patients typically face higher healthcare costs because their insurer may cover a smaller portion of the bill, or none at all, compared to services rendered by in-network providers. This can result in greater financial responsibility for the patient, including higher copayments, coinsurance, or the full charge for the service.
History and Origin
The concept of "out of network" evolved with the rise of managed healthcare plans in the United States, particularly from the 1970s onwards. As health insurers sought to control costs and streamline care delivery, they began forming networks of providers with whom they negotiated discounted rates for services. This model gave rise to various plan types, such as Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), each with different rules regarding access to non-network providers. For decades, a significant concern for consumers has been "surprise medical bills," which often arise when an insured individual inadvertently receives care from an out-of-network provider, even at an in-network facility20, 21. In response to widespread issues with these unexpected charges, the U.S. Congress passed the No Surprises Act, which took effect on January 1, 2022. This federal law provides protections against surprise medical bills in most emergency situations and for certain non-emergency services provided by out-of-network providers at in-network facilities17, 18, 19.
Key Takeaways
- "Out of network" describes healthcare services from providers not contracted with a patient's health insurer.
- Receiving care out of network generally results in higher patient financial responsibility due to lower insurance coverage.
- Costs may include higher copayments, coinsurance, or the full cost of the service.
- The No Surprises Act offers federal protections against unexpected out-of-network bills in specific emergency and in-network facility scenarios.
- Understanding network status is crucial for managing healthcare expenses and avoiding unforeseen costs.
Interpreting Out of Network
Understanding whether a healthcare provider is out of network is crucial for managing personal healthcare expenses. If a provider is out of network, the patient's financial liability often increases substantially. Many health plans have a higher deductible for out-of-network care, meaning individuals must pay more out-of-pocket before their insurance begins to cover costs. After the deductible is met, the plan might cover a smaller percentage of the approved amount (e.g., 60% for out-of-network vs. 80% for in-network), leaving the patient responsible for a larger coinsurance percentage.
Furthermore, out-of-network providers may engage in balance billing, which means they bill the patient for the difference between their full charge and the amount the insurance company pays. This practice can lead to substantial and unexpected costs. While the No Surprises Act has mitigated some instances of balance billing, particularly for emergency services and certain services at in-network facilities, it is not comprehensive and certain situations may still expose patients to these charges16. Patients should always strive to understand their plan's specific benefits for out-of-network care and confirm provider network status before receiving non-emergency services.
Hypothetical Example
Consider Sarah, who has a Preferred Provider Organization (PPO) health insurance plan. Her plan covers 80% of in-network services after a $1,000 annual deductible, and 60% of out-of-network services after a separate $2,500 annual deductible. She needs a specific diagnostic test.
Scenario 1: Sarah goes to an in-network lab. The test costs $500. Since her in-network deductible is already met, her insurance pays 80% ($400), and Sarah pays 20% ($100).
Scenario 2: Unbeknownst to her, Sarah goes to an out-of-network lab for the same test, costing $500. Her out-of-network deductible of $2,500 has not been met. Sarah must pay the entire $500. In addition, the out-of-network lab could potentially balance bill her for any amount above what the insurance company "allows" for the service, even if her deductible were met. If the allowed amount was $300 and the lab charged $500, she could be billed for the extra $200. This example highlights how selecting an out-of-network provider can significantly increase financial responsibility. Sarah's Explanation of Benefits (EOB) would detail how the insurer processed the claim and the amount she owes.
Practical Applications
The concept of "out of network" significantly impacts individual financial planning, especially concerning healthcare costs. When selecting a health insurance plan, consumers must consider the size and scope of the provider network. Plans like Health Maintenance Organizations (HMOs) typically offer lower premiums but severely restrict coverage for out-of-network care, often requiring a referral to see specialists and covering out-of-network services only in emergencies14, 15. Preferred Provider Organizations (PPOs), while generally having higher premiums, offer more flexibility, allowing patients to see out-of-network providers for a higher cost12, 13.
Understanding out-of-network implications is also crucial for financial advisors assisting clients with long-term care planning or budgeting for unexpected medical events. Healthcare consumers are protected by federal legislation, such as the No Surprises Act, which aims to shield individuals from unexpected charges from out-of-network providers in emergency situations and non-emergency services at in-network facilities10, 11. Resources are available from government bodies to help consumers understand their rights and how to address unexpected medical billing8, 9.
Limitations and Criticisms
While necessary for cost containment in managed care systems, the "out of network" distinction presents several limitations and has drawn criticism. A primary concern is the potential for surprise medical bills, where patients receive services from an out-of-network provider without their knowledge or consent, often in emergency situations or at facilities that are otherwise in-network6, 7. These unforeseen charges can lead to significant financial strain and even contribute to medical debt5.
Despite the implementation of the No Surprises Act, which addresses many scenarios, patients can still face unexpected bills in situations not covered by the law, such as non-emergency care at out-of-network facilities or if they knowingly waive their protections3, 4. Another criticism relates to the lack of transparency in healthcare pricing, making it challenging for consumers to determine the cost of out-of-network services in advance. This opacity can hinder informed decision-making and lead to frustration when patients discover they are responsible for substantial portions of a bill, even if they have reached their out-of-pocket maximum for in-network services.
Out of Network vs. In-network
The primary distinction between out of network and in-network lies in the contractual relationship between healthcare providers and insurance companies, and the subsequent financial implications for the patient. In-network providers have agreements with an insurance plan to provide services at pre-negotiated, discounted rates. Patients who see in-network providers typically benefit from lower copayments, coinsurance percentages, and often have their services count fully towards their annual deductible and out-of-pocket maximum.
Conversely, out-of-network providers do not have such agreements, meaning they can charge their full fees. While some insurance plans (like PPOs) offer partial coverage for out-of-network care, the patient's share of costs is significantly higher. Patients may be responsible for the difference between the provider's charge and the amount their insurer deems "reasonable and customary" for the service, leading to balance billing. Confusion often arises when patients receive care at an in-network facility but are treated by an out-of-network provider, such as an anesthesiologist or radiologist, leading to unexpected charges, though some protections against this exist under the No Surprises Act.
FAQs
What happens if I go out of network by accident?
If you accidentally receive care from an out-of-network provider, especially in an emergency or at an in-network hospital, you may be protected by the No Surprises Act from balance billing and excessive charges1, 2. However, for non-emergency situations outside of an in-network facility, you could be responsible for a much larger portion of the bill, including the full charge, as your health insurance plan's out-of-network benefits would apply.
Can I choose to go out of network?
Yes, depending on your health insurance plan type. Plans like a Preferred Provider Organization (PPO) allow you to choose out-of-network providers, but you will typically pay a higher percentage of the cost yourself. Plans like a Health Maintenance Organization (HMO) generally do not cover out-of-network care except in emergencies or with a specific referral from your primary care physician, making it difficult or impossible to intentionally choose out-of-network services without significant personal cost.
How do I avoid out-of-network charges?
To avoid out-of-network charges, always confirm that any healthcare provider you plan to see, including specialists, labs, and imaging centers, is part of your insurance plan's network. Verify their status with both the provider's office and your insurance company before your appointment. In hospital settings, inquire if all attending physicians (e.g., anesthesiologists, radiologists) are also in-network. For planned procedures, request a good faith estimate of costs.