Surprise…Out-of-Network Billing


According to a 2018 Amerispeak survey, 57 percent of participants received a “surprise” medical bill that they expected their insurance would pay. The results of this survey mirror a larger trend across the US populous: surprise medical billing is an all-too-prevalent phenomenon. These unanticipated costs often occur as a result of out-of-network charges. When an individual receives care at a facility or by a provider that does not have a contract with said individual’s health insurance, the insurer may elect to pay part of, or none of, the charges. Thus, through the practice of balance billing, an insurer typically pays only a portion of the “usual, customary, and reasonable” amount (i.e. what is usually charged). Often, this conventional, calculated amount is much lower than what the consumer is actually being billed. Thus, through the practice of balance billing, the remaining amount owed is left to the consumer.



The Kaiser Family Foundation recently found that 15 percent of inpatient bills and 5 percent of outpatient bills from in-network facilities contained out-of-network charges. The major factor behind this trend appears to be emergency department visits. A 2016 study by Yale University’s Cooper and Morton analyzed 2.2 million emergency department (ED) visits from a select commercial insurer, leading to the conclusion that 99 percent of ED visits occurred within in-patient networks. Yet, 22 percent of these visits included an out-of-network provider. The proportion of out-of-network physicians providing services in-network facilities varies by region. In McAllen, TX, for example, 90 percent of visits were served by an out-of-network provider whereas the percentage was approximately 0 in South Bend, IN.


In conjunction with the prevalence of out-of-network charges, the quantified expense of these out-of-network bills needs to be considered. According to a 2012 survey conducted by the New York Department of Financial Services, the average out-out network emergency bill for insurers and HMOs was $7,006. Consumers were left to pay $3,778, a potentially crippling sum since only 39 percent of Americans have over $1,000 in savings.



To combat out-of-network expenses, several states, including New York, have taken legislative measures. New York’s Emergency Medical Services and Surprise Bills law went into effect April 1, 2015. Under this law, providers, insurers, and hospitals have increased responsibility with regard to disclosure of information such as network affiliations and price. Furthermore, it establishes a method of protecting patients from surprise bills through means such as an assignment of benefits form. In this case, a patient can determine to whom their insurance payments can be made (i.e. directly to a provider or healthcare facility).  A dispute resolution process is also included in the law.


According to a study of 323,936 ED episodes in New York hospitals between 2011 and 2015, this New York State law led to a 6.8 percentage point reduction in out-of-network rates in comparison to the other states in New England. The analysis determined that New York followed the trend of the other New England States prior to this legislation being introduced in 2014. Across New York hospitals in 2013 the out-of-network rate was 20.1 percent; by comparison, it was 6.4 percent in 2015. Even though this law only applies to fully insured insurance products, even Administrative Services Only (ASO) products saw a notable decrease in out-of-network rates.


Recently, New Jersey approved the Out-Of-Network Consumer Protection, Transparency, Cost Containment and Accountability Act, the most comprehensive attempt to combat surprise medical billing. This Act mandates increased disclosure by healthcare facilities of the network status of its physicians and the insurance plans with which it contracts. Furthermore, facilities must provide an estimated cost of care to patients. Providers and insurers must meet similar requirements with regards to disclosure of networks and affiliations. Prohibition of out-of-network billing for emergent care and a means of arbitration for billing disputes are also written into the law.


Following the lead of the states, Congress put forward draft legislation on September 18th. The “Protecting Patients from Medical Bills Act” was drafted by a bipartisan group of senators including: Sens. Cassidy (R-LA), Bennet (D-CO), Grassley (R-IA), Carper (D-DE), Young (R-IN), and McCaskill (D-MO). In targeting  the practice of balance billing, three overarching frameworks are considered by the bill.


Firstly, when emergency services are provided to a patient by both an out-of-network physician provider and facility, the patient is only required to pay the in-network cost-sharing. Thus, the patient is immune to balance billing, as the provider cannot serve the consumer with any further payments. Any remaining charges, beyond those paid by the consumer, will be reimbursed by the patient’s health plan in accordance with state laws.


Next, the bill addresses the provision of non-emergency services provided after an emergency in an out-of-network facility.In this situation, once stabilized, a patient or their proxy must be informed of the potential additional charges they will obtain if they continue treatment through an out-of-network provider/facility.Additionally, the provider must give the patient the opportunity to transfer and receive in-network care.This verbal exchange will be verified by a signed, written acknowledgment by either the patient or their proxy.


The final section addresses non-emergent services provided at an in-network facility by an out-of-network provider. As in the first case, a patient cannot be billed more than his/her in-network cost-sharing. The health plan is responsible for payment of any remaining amount.



The prevalence of surprise medical billing due to balance billing and out-of-network costs and the resulting financial burden on the American public is noteworthy. This struggle appears to be influencing and informing policy decisions on both a state and now a federal level. Congress’ efforts at remedying the situation may provide relief to patients in over 20 states which do not have protections against balance billing. Successful attempts to curb these expensive healthcare practices could aid in establishing greater financial security for consumers. Currently, medical debt is the number one reason that consumers file for bankruptcy.