How to Protect Yourself From Surprise Medical Bills

Key takeaways:

• If you’ve ever been shocked to discover how much you owe for a healthcare visit, you may have received a surprise medical bill.
• Surprise medical bills usually arise when people use out-of-network healthcare providers without knowing it.
• The No Surprises Act, slated to take effect in January 2022, will provide new federal consumer protections against surprise medical billing.

Healthcare is already expensive for many Americans. Facing a large, unexpected medical bill can drive you into debt or cause you to avoid needed healthcare out of cost concerns. Currently, a patchwork of state-level legal protections can prevent such surprise medical bills. But a new federal law hopes to make healthcare costs more predictable and less burdensome. Starting January 1, 2022, the No Surprises Act will introduce comprehensive, uniform protections against surprise medical billing.

Here’s what you need to know about this surprise billing practice and how the new law will help.

What is a surprise medical bill?

The term “surprise medical bill” or “surprise charge” refers to an unexpected medical bill you may get after accidentally or unknowingly using an out-of-network healthcare provider.

A provider is out-of-network if they don’t have a contract with your health insurance plan. This means the provider and your insurer don’t have a negotiated reimbursement rate for health services — and you may be responsible for paying the difference.

Certain medical specialities are more likely to be out-of-network than others. In 2016, Healthcare Cost Institute studied over 600,000 in-network admissions and all of the associated out-of-network claims. They found some specialities — such as anesthesiology and emergency care — had the highest percentage of out-of-network claims.

How do surprise medical charges arise?

Surprise medical bills are usually a surprise if you use out-of-network providers by accident or in an emergency situation. If you have a health emergency, you’ll usually receive care from the nearest hospital or urgent care provider, regardless of whether they’re in your insurance plan’s network. You don’t typically get to choose your providers.

Even in non-urgent circumstances, you don’t always have perfect information or control to determine which services accept your insurance. For example, if you visit an in-network hospital for care, you may still receive tests, scans, laboratory work, or other services from providers who work with the hospital but are not in your network.

In both cases, the use of an out-of-network provider leads to surprise medical bills. A Kaiser Family Foundation (KFF) study found that 70% of individuals with unaffordable bills didn’t know the provider was out-of-network when they received care. This can lead to unexpected charges for you in two ways. The first is due to cost-sharing differences.

When you use insurance for a health service, your insurer covers a portion of the bill and you pay a certain amount out-of-pocket based on the terms of your health plan. What you pay is usually a copay, deductible, or co-insurance payment. If you use an out-of-network provider, the cost-sharing amount is usually much greater. So when the bill comes, you’re left with an unexpectedly large out-of-pocket cost.

The second way surprise charges can arise is through balance billing. Balance billing is when an out-of-network provider bills you the difference between what your insurer decides to pay and the full amount of your bill. Since the provider doesn’t have a contract with your insurance company, they are allowed to do this.

Surprise medical billing is a problem linked with private insurance but not government-provided coverage. That’s because if you are covered through Medicare or Medicaid, Centers for Medicare & Medicaid Services (CMS) regulations prohibit these programs from balance billing.

How common are surprise medical charges?

Surprise medical charges are both a common worry and a common reality for many Americans. A 2020 KFF study found that 1 in 3 insured adults have received a surprise medical bill either for themselves or a family member in the past 2 years. In addition, 2 out of 3 adults worry about being unable to afford a surprise medical bill.

On average, 18% of emergency visits result in at least one out-of-network charge. These results vary by state, with the highest percentages of at least one out-of-network charge occurring in Texas (38%) and the lowest percentage in Minnesota (3%).

Emergency visits aren’t the only situations that result in surprise charges. On average, 16% of in-network hospital admissions result in at least one out-of-network charge. The highest rate was found in New York (33%) and the lowest rate in Minnesota, Nebraska, and South Dakota (2%).

What is the cost of surprise medical bills?

Surprise medical bills vary in cost but are often unaffordable. Of those who said they got a surprise medical bill, a third of people said the bill was $1,000 or more. About half said their bill was under $500, and only 2% said their bill was less than $100. But the cost of surprise medical bills can be much higher.

A New York Department of Financial Services study found that the average out-of-network emergency bill was about $7,000. They also found that insurers typically paid a little less than half of these emergency bills, leaving people to cover almost $4,000 out of pocket. According to KFF, nearly half of insured adults reported that they could not pay a $500 surprise medical bill.

Are there any protections against surprise medical billing?

There are certain federal and state protections against surprise medical billing but many holes remain that can still leave you with a surprise charge.

Current federal protections against surprise billing come from the Affordable Care Act (ACA). The ACA requires that most private health plans apply in-network cost-sharing amounts for emergency services. But the ACA didn’t ban balance billing. So an out-of-network provider can still bill you the difference between what your insurer pays and the full cost of their services.

The ACA out-of-pocket maximums also cap how much you must pay out-of-pocket for all of your medical bills each year. A 2018 ACA rule requires that health plans count your cost-sharing amounts for some surprise bills toward your out-of-pocket maximum.

In addition, there is a wide variety of state protections against surprise medical billing, according to the Commonwealth Fund. However, 15 states lack comprehensive regulations to prevent surprise billing, and 17 states have no protections at all.

But if you live in one of the following states, you already have broad protections against surprise medical billing from your state government:

• California
• Colorado
• Connecticut
• Florida
• Georgia
• Illinois
• Michigan
• Maine
• Maryland
• New Hampshire
• New Jersey
• New Mexico
• New York
• Ohio
• Oregon
• Texas
• Virginia
• Washington

What is in the new law preventing surprise medical billing?

• Congress passed and former President Donald Trump signed the No Surprises Act into law at the end of December 2020. Staring in 2022 — when the law first takes affect — the No Surprises Act will require private health plans to:

• Cover emergency services, including any services immediately related to emergency care, at in-network rates. Cover any out-of-network services that occur at in-network hospitals at in-network rates. For example, if you get an X-ray at an in-network hospital but an out-of-network radiologist administers it, your insurance must cover this at the in-network rate.

• Ban balance billing. Providers won’t be allowed to bill you for the remainder of a surprise bill after your health plan pays the in-network rate.

In all of these cases, you will still have to pay toward your bill, but only an amount similar to what you would normally pay for an in-network provider.

This act also offers protections in the form of increased transparency so you know what to expect when you receive healthcare services.

For example, you rely on provider directories — a list of providers who accept your insurance — to choose healthcare services covered by your insurance benefits. If your insurer’s directory isn’t accurate or up-to-date, you might inadvertently schedule with an out-of-network provider even though they were listed in your insurer’s directory.

The No Surprises Act aims to fix this by requiring health plans to maintain accurate provider network directories. Some states, such as California, already have network accuracy requirements. However, the No Surprises Act goes a step further by requiring health plans in all states to update their networks more frequently.

The new law also lets you request an “Advanced Explanation of Benefits” before you even receive healthcare services so you know what to expect. Your insurer must give you this explanation within 3 days of your request. It must list which providers will be present during your care, if they are in- or out-of-network, and the expected costs you will likely be required to pay.

However, for all its protections against surprise medical billing, the No Surprises Act won’t protect you from extra costs for ground ambulances. Ambulances have the highest rate of out-of-network billing, the New York Times reported. Research shows 71% of ambulance rides may result in a bill, and the average cost is $450. However, Congress plans to address this gap in protection through an advisory committee.

How can I dispute a surprise medical bill in the meantime?

If you receive an unexpected medical bill there are steps you can take to fight it. Here’s what you can do:

• Contact your healthcare provider and ask for an itemized version of your bill. This will allow you to look over each service billed and check for errors. According to Medical Billing Advocates of America, about 75% of medical bills contain some sort of error. You can ask your provider for clarification on each service and to correct any errors.

• Research customary prices for services you received. By visiting FAIR Health Consumer’s website, you can find the average price charged by providers in your area. You can ask your health provider if they would be willing to negotiate based on your research.

• Formally protest the surprise medical bill. Write a protest letter explaining that you will only pay the part of your bill for in-network services. You can use these templates from Dr. Elisabeth Rosenthal to get started. File a formal appeal with your insurer. Each insurance company has a process — usually called an appeal, complaint, or grievance — that allows consumers to contest how an insurer paid their medical bills. To file an appeal, collect all the information you can on the health service you received, the medical necessity of that service, where you received it, what your insurer paid, and the specifics of your insurance policy. Then contact your insurance company or look on its website for the forms to file an official complaint.

• Take your complaint to your state insurance regulator. If you still aren’t getting a satisfactory result, look up the insurance regulator in your state. In many states, the Department of Insurance oversees health insurance complaints. Type “help with surprise medical bill” along with your state name into a search engine and you may be able to find a link to the state agency that can assist you. If a hospital bill is the problem, the U.S. Public Interest Research Group recommends contacting the state’s health department or consumer affairs office. Depending on your state regulator, you may be able to file a complaint or get additional assistance with your surprise bill.

After the No Surprises Act goes into effect on January 1, 2022, you will also have federal external appeal rights. This means if your insurance plan rejects your appeal regarding a surprise medical bill, you have the right to appeal to an independent decision-maker. You can do this through your state’s designated external review process or through one of two federally approved organizations.

The bottom line

The No Surprises Act will be an important step toward protecting you against surprise medical billing. This act will require providers to charge you the same rates your insurer would pay for emergency services and any services at in-network hospitals. In the meantime, choosing providers in your insurance network whenever possible and understanding your existing state protections against surprise medical billing will best help you avoid unexpected charges.