One of the issues that dominate every Presidential election in the US is “Healthcare”. Despite being a country with one of the best medical infrastructures in the world, healthcare system in the US is not free from contentious issues regarding the way healthcare providers and health insurance companies charge the customers for the service rendered to them.
‘Balance Billing’ also referred to as ‘surprise billing’ is one of those contentious issue where a medical service provider charges the patient the difference between the actual bill and that the health insurance company has paid as part of its plan obligation. Other than the US, the practice of balance billing is also prevalent in certain parts of Canada (where it is called extra-billing) and in France.
In this blog, Student Cover tries to explain what balance billing is; the ethical and legal arguments for or against it and how customers can minimize the risk of having to spend more than what is due.
What is Balance Billing?
As mentioned above, balance bill is that amount which the healthcare provider bills to the patient which the difference left after the health insurance company has paid as part of its plan obligation. Let us explain it in detail with illustrations.
John suffers from an injury or ailment. He goes to an ‘in-network’ (also called Preferred Provider) to get the requisite medical treatment. The ‘in-network’ provider bills to John the amount pre-agreed between the healthcare provider and the insurance company. The health insurance company pays that portion of the treatment cost (Preferred Allowance) while John has to pay the remaining portion as deductibles, co-pay and co-insurance. The instance of balance billing does not arise.
If John on the other hand goes to an ‘out-of-network’ provider, the insurance company is liable to pay only that portion of the medical cost which is defined as ‘usual and customary charges’. However, unlike preferred allowance, these usual and customary charges are not pre-agreed between the healthcare provider and the insurance company, but an estimate made by the insurer after conducting a survey of similar costs in that area.
Thus, if the ‘usual and customary charge’ of a particular procedure is fixed as $10,000 by the health insurance company, it will consider only that amount from the healthcare provider. However, the ‘out-of-network’ healthcare provider is under no obligation to accept this amount. So, when the healthcare provider charges $15,000 for the same, insurance company offering 80% co-insurance will pay $8,000 out of $10,000 that it has fixed as usual and customary charges. The medical service provider then bills the insured, the Balance of additional $5,000 after Deductible, coinsurance copay is paid. This is balance billing. So, at the end, the insured ends up paying $ 2,000 + $ 5,000 = $ 7,000 instead of just $ 2,000.
While it is usually associated with ‘out-of-network’ providers, it can also take place when the medical service provider is ‘in-network’. It may so happen in a rare case of certain treatment or procedure for which the health insurance company does not provide cover. In such situation, the amount that the health insurance company refuses to pay due to partial non-coverage, gets billed to the insured person.
At times, it may so happen that even when the medical service provider is ‘in-network’ and the treatment covered, the physician who treats the patient might be ‘out-of-network’ and may be working with the medical institution on contract or has been hired on per-case basis due to non-availability of in-house physician or a physician of desired specialty. Thus, if the ‘preferred allowance’ for physician was fixed at say, $200 between the institution and the insurance provider but attending physician’s charge happens to be $500, the medical institution might charge the insured Deductible, Co-insurance & Co-pay on the additional $ 300 assigned to Out of network physician under the plan.
Arguments for and against Balance Billing
Like every contentious issue, there are arguments both in favor of and against balance billing.
Those who support the practice of balance billing argue that health insurance companies, in order to minimize the cost tend to lower the cost of treatment and medical procedures in ‘usual and customary’ charges. This in turn causes physicians and medical institutions to be unable to charge right price to the health insurance providers and thereby end up billing the insured person for the balance.
The critics of balance billing however see it as unethical and immoral, even if not illegal, due to the lack of transparency and arbitrary nature of pricing of treatment by the hospitals. They also argue that often, patients do not have control over the cost of treatment, especially in case of medical emergency. When they are billed for the balance, it not only comes as a surprise but also causes financial hardship.
How to avoid balance billing or surprise billing?
While there is no hard and fast rule to avoid balance billing, one can minimize the risk of being billed by following a number of steps.
1. Go through the health plan and find out from the health insurance provider what all treatment and procedures are covered and what all aren’t.
2. As far as possible, always go to the preferred provider hospitals or ‘in-network’ hospitals. Keep a list of all ‘in-network’ medical institutions in the nearby area so as to approach them in case of medical emergency.
3. Always check with the medical institution whether the physician is ‘in-network’ or not.
4. Find out with the insurance provider the estimated cost of treatment for a particular ailment or injury and compare it with the estimated cost of treatment of the hospital.
5. Check local laws regarding balance billing. Some states have come up with laws and regulations to check the misuse of balance billing in their states.
Let’s Wrap Up!
Balance billing is a practice that has been marred in controversy for long. It is done by medical institutions to recover the amount of treatment cost from the insured which is not paid by the health insurance provider. While it usually occurs in ‘out-of-network’ hospitals, one can get balance bill even while undergoing treatment in preferred (in-network) hospitals if the attending physician is ‘out-of-network’ or the treatment undertaken is not covered by the insurance plan. One of the best ways to avoid getting balance bill is to get treated in ‘in-network’ hospitals and going through the coverage of the plan.
Disclaimer: The content of the blog is based on personal research of the write. Readers’ discretion is advised. Neither Student Cover nor the write will be held responsible for any wrongful interpretation of the content of this blog.