What Is Balance Billing?

Surprise Billing Explained in Less Than 5 Minutes

Smiling doctor looking at patient in hospital bed.
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Definition

Balance billing is when a doctor bills you the difference between their charge and what your health insurance pays.

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 passed legislation that protects most Americans from surprise billing—most sections went into effect on Jan. 1, 2022.

How Does Balance Billing Work? 

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

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

However, out-of-network providers 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 

Note

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.

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, 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 18% 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.

When Is Balance Billing Not Allowed? 

To help protect their 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.

The No Surprises Act took effect in 2022 as a way of protecting patients from receiving surprise medical bills for emergency services and at in-network facilities. The law also includes other measures aimed at making the process more transparent for patients.

Frequently Asked Questions (FAQs)

How do you fight balance billing?

You can dispute the billing directly with your insurance company. The company may remove the charge if you show that the surprise billing was in error. You can start a dispute online with the federal independent dispute resolution (IDR) system.

How do you avoid balance billing?

To avoid balance billing, you must ensure that all of your services and providers are in-network for your insurance plan. This can be tricky since it isn't always clear what is in-network when you receive a wide range of services from many different medical professionals in a single hospital visit. When in doubt, you can ask a provider or insurer to clarify what you can do within your insurance network.

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. U.S. Department of Labor. "Fact Sheet: Requirements Related to Surprise Billing: Final Rules," Pages 1-3.

  2. JAMA Network. "Out-of-Network Bills for Privately Insured Patients Undergoing Elective Surgery With In-Network Primary Surgeons and Facilities."

  3. Kaiser Family Foundation. "No Surprises Act Implementation: What To Expect in 2022."

  4. Centers for Medicare & Medicaid Services. "Prohibition Billing Dually Eligible Individuals Enrolled in the Qualified Medicare Beneficiary (QMB) Program."

  5. Nebraska Legislature. "Legislative Bill 997."

  6. Department of Managed Health Care. "Surprise Medical Bills."

  7. Centers for Medicare & Medicaid Services. "No Surprises: Understand Your Rights Against Surprise Medical Bills."

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