Out-of-network underpayment

You saw an out-of-network doctor or facility, the plan paid something, and the explanation of benefits shows a large gap between the bill and the payment. The first question is who is allowed to bill you for that gap. The second is whether the plan calculated its payment the way its own documents say it should.

What this means

When a provider is out of network, the plan does not pay the provider’s full bill. It pays a percentage of an allowed amount (the figure the plan decides the service is worth), after your deductible. The provider may then bill you for the difference between its charge and the allowed amount, unless a federal or state rule or its own contract bars it. That bill is called a balance bill.

FAIR Health, an independent nonprofit that keeps a large claims database, describes two common ways plans set the allowed amount: a “usual, customary and reasonable” charge, drawn from a claims database, or a percentage of the Medicare fee schedule (FAIR Health gives 130 percent as a worked example). Your plan document should say which method it uses.

When you may owe only in-network cost sharing. The No Surprises Act bars the extra bill in these cases:

• emergency services, whether or not the provider is in network;
• care by an out-of-network clinician at an in-network hospital, hospital outpatient department or surgery center, unless you signed a valid waiver (some services can never be waived);
• air ambulance services;
• a provider the plan’s directory wrongly showed as in network.

In those cases you owe only the in-network cost sharing. For emergency services and a wrong provider directory, it also counts toward your in-network deductible and out-of-pocket maximum. For the other two cases, ask the plan whether it counts. The plan must send the provider an initial payment or a denial within 30 calendar days after it has the information it needs. Any dispute over the rest of the payment is between the plan and the provider. You are not a party, and you owe only the in-network cost sharing. These protections do not cover ground ambulance, short-term plans, health care sharing ministries or fixed indemnity plans.

If none of those cases fits, the plan’s payment follows its contract with you. Your argument then is that the plan did not apply its own terms correctly.

What to do

1. Get the explanation of benefits and the itemized bill. Compare the codes and charges. A coding mistake can cause both a low payment and a wrong bill. The itemized bill request letter helps. (You.)
2. Check whether a protection above applies. The surprise bill checker walks through it. If it applies, do not pay the balance. Tell the provider in writing and ask the plan to reprocess at in-network cost sharing. (You.)
3. Ask the plan how it calculated the allowed amount. Ask in writing for the method, the data source and the date of the data. Ask for the plan document language that defines it. (You.)
4. Collect a price benchmark. The FAIR Health consumer site lets you enter a ZIP code and a procedure to see estimated out-of-network and in-network prices. By its own description its estimates default to the 80th percentile of charges and can be adjusted. Save the page with the date. This shows what the service costs in your area. It does not prove the plan owed more. (You.)
5. Ask the plan to reprocess the claim. The script for asking for reprocessing helps on the phone. Write down the name, date and reference number. (You.)
6. File an appeal. Use the out-of-network underpayment appeal letter. Say what you want: reprocessing at a stated amount or at in-network cost sharing, and a written explanation. Employer and non-grandfathered individual plans must allow at least 180 days after you receive the denial notice to appeal. Check the date on your notice, which controls. (You.)
7. Talk to the provider about the bill. The bill negotiation offer letter and the guide on negotiating a medical bill show how. Ask the provider to hold the bill while you appeal. (You.)
8. Complain if the plan will not explain. For an insured plan, complain to the state insurance department. For a self-funded employer plan, contact the federal Department of Labor. (You.)

What the plan may say, and what to say back

“The payment is based on the allowed amount.” Ask for the written method and the data source. Ask whether the amount follows your plan document’s definition and whether the plan used the date of service.

“The provider is out of network, so the balance is your responsibility.” Reply by asking which of the protections above the plan considered. If emergency care, an in-network facility or the directory was involved, ask the plan to reprocess in writing.

“This is a contract term.” Ask the plan to cite the exact term. A network gap exception may still be possible if no in-network provider could provide the care, as the out-of-network denials guide explains.

The rule

An out-of-network provider covered by the surprise billing rules may not bill the patient more than in-network cost sharing, and the payment dispute is between the plan and the provider. 45 Code of Federal Regulations (CFR) 149.410

Watch for

• External review. The federal rule lists denials that involve medical judgment, compliance with the surprise billing protections, and rescissions. A payment-rate dispute is not listed. A denial that depends on whether the surprise billing rules apply is reviewable, including for grandfathered plans. Ask your plan and your state regulator what review applies to a rate dispute.
• Estimates and good faith estimates. The estimate that providers must give uninsured and self-pay patients, and the dispute process for bills $400 over it, is for self-pay patients. The matching rule for insured patients has not been put into effect.
• Ask for time before you pay if you think a protection may apply. Put the request in writing and keep a copy.
• States. Some states add their own limits on out-of-network billing for insured plans. See Texas and Washington for examples.

What next

• Out-of-network denials and network gap exceptions: when the plan denied the care instead.
• Surprise bills and the No Surprises Act: who is protected and how to complain.
• Negotiate a medical bill: working with the provider on what you owe.
• The bill while you appeal: protect yourself while the dispute runs.