What Is Balance Billing?

Surprise Billing Explained in Less Than 5 Minutes

Smiling doctor looking at patient in hospital bed.
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Balance billing is when a medical provider bills you the difference between their charge and what your health insurance pays. This bill is for the balance, or the remainder, of the medical care you received. 

If you aren’t expecting a bill, balance billing can cause financial concerns. To help avoid this, it’s important to know which providers can send you a balance bill and which ones aren’t supposed to. This way, you’ll have a better understanding of which bills you need to pay and which to refute.

Definition and Examples of Balance Billing 

What your medical provider charges for a service and the amount your health insurance company will pay for that service can be, and often are, two different numbers. Balance billing is when your provider bills you for the difference. In-network providers are not allowed to do this for covered services.

However, out-of-network providers are.

Since this bill can come as a shock, it’s also known as surprise billing. Unfortunately, it’s a fairly common scenario. In fact, researchers found that over 20% of patients having surgery at an in-network hospital with in-network physicians still ended up with thousands of dollars worth of unexpected medical bills.

This can happen because not every specialist or clinician at an in-network facility has an agreement with your insurance company. If one of these providers was involved with your treatment, you may be billed for their services. 

  • Alternate Name: surprise billing

An Example of Balance Billing

Let’s say you schedule surgery with a preferred provider at an in-network medical facility. You may assume that after you pay your copay and any portion of the procedure you owe, that your insurance company will cover the rest of the bill. However, if the anesthesiologist who keeps you comfortable during surgery is an out-of-network provider, you could wind up with a surprise bill for the anesthesiologist's services. 

You can also experience these bills in an emergency situation. About 20% of emergency room visits result in unexpected medical bills because patients are seen by out-of-network providers. In an emergency, you can’t always pick which hospital you go to or which doctor treats you. This makes it more likely that you’ll be treated by an out-of-network provider.

How Does Balance Billing Work? 

Balance billing is when you’re responsible for the remainder of a bill after your insurance company has paid the allowed or approved amount. If you visit a preferred provider, that provider isn’t allowed to balance bill—in-network providers have an agreement with the insurance company to provide services for the agreed-upon amount. 

However, providers who aren’t in your network aren’t bound by the same restrictions and are free to bill you for the remaining fees. 

It’s important to consider all potential costs when determining whether to choose an in-network or out-of-network provider.

Type of Provider Price of Services  Who Is Responsible for the Remaining Balance?  Out-of-Pocket Costs for Patient
In-Network Provider agrees to a negotiated rate There is no remainder; the provider can only bill up to the amount approved by the insurance company for covered services  Amounts determined by your policy, including deductibles, copays, and coinsurance 
Out-of-Network Provider sets its own rate, typically higher than negotiated rates The patient  Amounts determined by your policy, including deductibles, copays, and coinsurance, plus the balance of any services 

Unexpected medical bills aren’t the type of mail you want to receive. To help avoid surprise charges, ask your insurance company if the doctors and specialists you want to see are preferred providers in your insurance plan’s network. 

When Is Balance Billing Not Allowed? 

To help protect its clients from unexpected medical bills, some insurance companies have banned balance billing. For example, Medicare providers are prohibited from balance billing qualified Medicare patients.

Some states also banned this practice in certain situations. For instance, Nebraska and California are two of a growing number of states that have passed laws banning balance billing for emergency care.

Note: If you receive a surprise bill in the mail, it’s important to know whether to pay or argue it. Contact your State Department of Insurance for balance-billing laws within your state. 

Additionally, federal protections against balance billing are on the way. In 2020, the No Surprises Act was signed into law and most sections of the legislation will go into effect on Jan. 1, 2022. It will help protect patients from receiving surprise medical bills for emergency services and at in-network facilities, and includes other measures aimed at making the process more transparent for patients.

Key Takeaways

  • Balance billing is when a provider bills you for the rest of the charge after your insurance company has paid their limit. 
  • Balance billing is also known as surprise billing since it often takes patients by surprise. 
  • Some states have taken steps to protect patients from balance billing.
  • Medicare providers aren’t allowed to balance-bill Medicare patients for covered services.
  • The federal government recently passed legislation that will protect most Americans from surprise billing—most sections will go into effect on Jan. 1, 2022.