Surprise medical billing refers to when a consumer is unaware that health care services will be charged at out-of-network rates, whether by their insurer or by the out-of-network provider. For example, if a patient receives emergency care at an out-of-network hospital or care from an out-of-network provider at an in-network hospital, they could receive a surprise medical bill.
As we face the first global pandemic of the 21st Century, our nation confronts a health care system that is not prepared to deal with an infectious disease at this scale. One of the many challenges we face will be patients who delay or defer care because they are unsure if their visit to a testing facility, urgent care center or emergency room will result in a surprise bill, not covered by their insurance.
Surprise medical bills have two main components, according to a 2019 Health System Tracker brief from Peterson Center on Healthcare and the Kaiser Family Foundation:
- The higher amount a patient owes due to the difference in cost-sharing levels between in-network and out-of-network services. “For example, a preferred provider health plan (PPO) might require a patient to pay 20% of allowed charges for in-network services and 40% of allowed charges for out-of-network services. In an HMO or other closed-network plan, the out-of-network service might not be covered at all.”
- An additional amount the physician or other provider may bill the patient directly, which is known as “balance billing.” “Typically, health plans negotiate discounted charges with network providers and require them to accept the negotiated fee as payment-in-full. Network providers are prohibited from billing plan enrollees the difference (or balance) between the allowed charg and the full charge. Out-of-network providers, however, have no such contractual obligation. As a result, patients can be liable for the balance bill in addition to any applicable out-of-network cost sharing.”
The problem is widespread: A 2018 University of Chicago survey found that 57% of respondents had experienced a surprise medical bill. Additionally, this survey found that 86% of all respondents blamed health insurance companies and 82% blamed hospitals for surprise medical bills. A large study published in 2020 that looked at over 347,000 surgical patients found that over 20% had incurred out-of-network charges.
The problem has serious consequences, especially for communities of color: Almost half of respondents in a Commonwealth Fund survey said that they could not cover an unexpected medical bill of $1,000 within 30 days. And this can have a disproportionate impact on marginalized communities, with Black (63%) and Hispanic (59%) respondents reporting higher inability to cover such a bill compared to Non-Hispanic White respondents (40%). This issue also impacts the overall cost of employer-sponsored insurance plans, according to a December 2019 article in Health Affairs.