After three years of suffering with pain so intense he couldn’t work, and undergoing three back surgeries, Gary Duncan, then 47 and living in Claremont, Calif., received a diagnosis of Lyme disease. To see doctors who specialized in Lyme, he and his wife, Holly, went out of their insurance plan’s network. They thought their preferred provider organization limited their out-of-pocket costs to $10,000 a year, which they were willing to spend to make Gary well. They didn't know they were on their way to a $20,000 tick bite.
They knew that every time an out-of-network doctor sent them a bill, their insurance would cover 60 percent. What they didn’t understand was that meant 60 percent of what their insurer deemed a “usual, customary, and reasonable,” or UCR, charge, which was often much less than the providers’ actual fees. So when a doctor charged them, say, $1,000, and the plan determined the UCR charge was $800, the plan paid only 60 percent of $800, or $480—not 60 percent of $1,000. Plus the plan had a $3,500 deductible. By the end of the year, the couple had paid more than $20,000 out of pocket.
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You could similarly rack up big bills if the medical providers you use are not in your plan’s network. Your in-network providers have agreed to accept your insurance plan’s contracted rate. (You still must pay deductibles, co-insurance, and co-pays.) But providers who are not in your network can charge you whatever they think is reasonable and bill you for the balance not covered by your insurer, known as “balance billing.”
An obvious way to avoid stratospheric out-of-network charges is to not use out-of-network providers. But that’s not always possible. Many people receive out-of-network care without knowing it, says Cheryl Fish-Parcham, the deputy director of health policy at Families USA, a nonprofit consumer advocacy group.
Your insurer’s list of providers may be out-of-date, for example. Or you might have surgery at an in-network hospital but have out-of-network providers read your X-rays. “You may not even know their names until you get a bill,” says Karen Pollitz, a senior fellow at the Kaiser Family Foundation. Imaging and lab bills can be especially high, she adds; it’s not unusual for people to be charged 10 times what is set as the UCR price. If you have a long hospital stay, your bills could easily add up to thousands of dollars—or more.
Of course, going outside your network is sometimes unavoidable. For example, a hospital you are rushed to in an emergency might not be in your network. (There are some special protections for billing in an emergency. For more information, download a PDF of the Families USA Patients' Bill of Rights.) But, when possible, the choice should be up to you.
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Familiarize yourself with your plan. Ask your benefits department or insurer for the plan’s Summary of Benefits and Coverage. That is a standardized document that details the plan’s relevant features. Then call your plan and ask how it determines what it will pay for out-of-network care.
Get a current network list. Call and ask providers whether they are still in the plan before you make an appointment.
Research the amount you’ll pay. If you choose to go out of network, ask the provider’s staff how much he or she will charge before your visit. Try to negotiate prices in advance. Start by looking up the “fair” prices in your area for your test or procedure at Fair Health, Healthcare Blue Book, or both. Use the results as a basis for negotiating with the out-of-network provider, and get it in writing.
Dig into the details. If you have to undergo complex out-of-network procedures that aren’t listed on Fair Health or Healthcare Blue Book, ask the out-of-network provider for the billing codes for services to be performed. Also get the provider’s tax identification number and the ZIP code of where the service will be performed. Then call your insurance company with that information; they are obligated to tell you what they will pay. Then you can negotiate the balance with the provider.
Carefully review your bills. If you receive an unexpected out-of-network bill from a doctor after surgery in a network hospital, for example, you might be able to get it reduced by negotiating after the fact, too. First, determine the typical price and ask the doctor to discount the fee. If that fails, complain to the hospital, your insurer, your employer, and your state insurance department or state health insurance consumer advocate. The National Association of Insurance Commissioners has links to every state's insurance department.
Dispute incorrect charges. If you find billing errors, notify your insurer. The procedure to file an appeal should be included in your billing. Healthcare.gov has more details on the dispute process for non-Medicare plans, including those offered by the Affordable Care Act exchanges. Medicare customers will find information on its appeal process on its site.
This article also appeared in the March 2014 issue of Consumer Reports Money Adviser.
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