What Is Balance Billing in Insurance? Balance Billing Definition, Rules, and Regulations

Balance billing can significantly impact patients' financial responsibilities for healthcare services. It arises when healthcare providers bill patients for the difference between a service's cost and the amount covered by insurance. This can lead to unexpected, often substantial, medical bills, especially when out-of-network providers are used. 

Understanding balance billing will save you money and ensure you don’t get stuck with unseemly out-of-network medical bills. Recent U.S. laws, like the No Surprises Act, aim to protect patients from surprise medical bills, illustrating the ongoing significance of this issue. In this post, we will address what balance billing means, as well as recent legislation and regulations targeting it.

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What is balance billing?

"Balance billing" is a term used in healthcare to refer to the difference between a healthcare provider's charge and the payment allowed by the insurance. In other words, it's the amount that a healthcare provider may bill a patient for an amount that their health insurance doesn't cover. A balance bill comes after the service has been rendered by your healthcare provider and paid by your insurer, when there is still a balance owed. 

Here's a simple example: Suppose you see a doctor who charges $200 for a visit. However, your health insurance only covers $150 for this kind of visit. In this case, if the doctor engages in balance billing, you would receive a bill for the remaining $50.

It's important to note that balance billing practices can vary based on several factors such as the type of insurance plan, whether the healthcare provider is "in-network" or "out-of-network," and specific state regulations. For example, balance billing is more common with out-of-network providers because they do not have a contract with the insurance company that sets the prices for services. When you see an in-network provider, their price has already been negotiated with the insurer, so there should not be a difference between the price they charge and the price your insurer pays. 

Note: balance billing is a relatively niche concept in insurance billing. To define balance billing effectively, it helps for you to know how other aspects of insurance billing, like deductibles, coinsurance, and gap exceptions work. Our Complete Guide to Out-of-Network Reimbursement explains all of those things and more. 

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Balance billing meaning and history

The practice of balance billing has a long and contentious history in the United States. It has traditionally been a way for healthcare providers to recoup costs not covered by insurance companies. However, over time, there has been growing concern over the financial burden this practice places on consumers.

In the 20th century, as private health insurance became more prevalent in the U.S., balance billing became a common practice. This was particularly the case for out-of-network providers, as there were no agreed-upon rates between these providers and the insurance companies. This often led to significantly higher costs for patients, especially for expensive procedures or in emergency situations where patients had little control over who provided their care.

As healthcare costs continued to rise in the 21st century, and high-profile cases of extreme balance billing made headlines, there was increasing pressure on lawmakers to address this issue. Several states took it upon themselves to enact protections against balance billing. In 2010, the Affordable Care Act (ACA) implemented some protections against balance billing in emergency situations, although these protections were limited in scope.

A significant step was taken with the signing of the No Surprises Act into law in December 2020. This legislation, which went into effect in 2022, provides new protections for consumers from surprise medical bills and balance billing in certain situations, such as emergencies or certain situations where patients aren't able to choose an in-network provider. However, it's worth noting that the No Surprises Act does not eliminate balance billing entirely. It applies mainly to emergencies and certain out-of-network care. Certain types of insurance (like short-term health plans) are not covered by the Act.

Overall, the history of balance billing in the United States is characterized by a struggle to balance the financial interests of healthcare providers and insurance companies with the need to protect consumers from unexpected and potentially devastating medical bills. It's a complex issue that is likely to continue evolving in the future.

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Balance billing regulations and rules

The rules and regulations regarding balance billing vary by state, with some states having stronger consumer protections than others. But as we said, the overarching federal law as of this time is the No Surprises Act, which went into effect in 2022.

Here are some key elements of the No Surprises Act:

1. Emergency services: Patients are only responsible for their in-network cost-sharing amounts, regardless of whether they receive care from an in-network or out-of-network emergency department. This protection covers the emergency services and any post-stabilization care the patient cannot consent to.
2. Certain non-emergency services: The act also protects patients who receive non-emergency services at an in-network hospital but unknowingly receive care from an out-of-network provider. A common scenario is a surgery where the hospital is in-network but the anesthesiologist is out-of-network.
3. Air ambulance services: Patients transported by air ambulance are only responsible for in-network cost-sharing, regardless of whether the air ambulance provider is in or out-of-network.
4. Notice and consent exceptions: Certain out-of-network providers at in-network hospitals or ambulatory surgical centers will need to provide patients with a notice and receive the patient’s consent in order to balance bill for non-emergency services.

It's important to note that the No Surprises Act does not cover ground ambulance services, which are often a source of surprise medical bills. 

Also, given the complexity of these rules and the variance from state to state, it's a good idea to check the most current laws in your specific state or consult with a healthcare professional for up-to-date advice.

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How does balance billing out-of-network differ from in-network? 

In-network and out-of-network refer to whether a healthcare provider has a contractual agreement with a specific health insurance plan. This agreement affects how much the provider charges for services and how much the insurance company will pay. This, in turn, affects whether and how much balance billing a patient might face. Here we’ll give a more detailed example to show you why balance billing out-of-network is more common. 

In-Network Providers: These are healthcare providers who have a contractual agreement with a health insurance company. They have negotiated a set rate for their services with the insurance company. When you see an in-network provider, you are generally only responsible for your plan's cost-sharing obligations, such as copayments, coinsurance, and deductibles. After you have met these obligations, your insurance company typically covers the rest of the in-network provider's fee. In most cases, in-network providers cannot balance bill you for amounts beyond what your insurance agrees to pay.

Out-of-Network Providers: These providers do not have a contractual agreement with the health insurance company. They can charge whatever they want for their services, and the insurance company will only pay up to a certain amount it deems "reasonable" or "customary." If the provider's fee is higher than this amount, you may be balance billed for the difference. This can sometimes lead to significantly higher out-of-pocket costs.

For example, let's say you have a surgical procedure that costs $20,000. If the surgeon is in-network, they have agreed to a rate of $15,000 for this procedure with your insurance company. You would only be responsible for your plan's cost-sharing obligations (e.g., deductible, copayment, coinsurance) up to $15,000. The surgeon cannot bill you for the remaining $5,000 difference between their standard fee and the contracted rate.

However, if the surgeon is out-of-network, they might charge their full $20,000 fee. If your insurance company's "reasonable" amount for this procedure is $15,000, the insurance would pay up to that amount (minus your cost-sharing obligations), and you could be balance billed for the remaining $5,000.

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Where does SuperDial come in?

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