Out-of-network services: a nasty surprise ($150 vs $1,200)

A study from the Kaiser Family Foundation of Americans who had trouble paying their medical bills found that 32% received care from an out-of-network provider that insurance wouldn't fully cover and 21% of respondents did not know that their provider was out of network.

Why is it important to choose an in-network provider?

Out-of-network = higher co-pay, higher deductible, higher bill.

In-network providers have contracted with your insurance company to provide you services at a negotiated or discounted rate. This is why your insurance company will typically cover more of the cost of seeing these providers. Out-of-network providers have not agreed to the discounted rates. You may also have a higher deductible for out-of-network services (usually twice your in-network deductible), meaning you'll have to pay more out of pocket before insurance begins to pay. In some cases, the out-of-network provider can provide you service and accept the discounted rate from your insurance company and then bill you the difference.

For example, you have a 50/50 sleep study (this is the typical first sleep study) with a sleep center that's in-network and the total charge is $3,000. Because the sleep center is contracted with your insurance, a discount is applied to that amount for the negotiated rate between the sleep center and your insurance company. The negotiated rate is $750. The discount is $2,250. Your insurance pays 80% or $600 and you'll pay the remainder, $150.

Charge amount for 50/50 sleep study:	$3,000
Contracted rate between sleep center and your insurance company	$750
Discount	$2,250
Amount due for 50/50 sleep study	$750
Your insurance pays 80% to the sleep center for in-network services	$600
Remainder (amount due to sleep center minus the amount your insurance company will pay)	$150
You pay:	$150

If you go to a sleep center that's out-of-network, no discount is applied to the total charge because the provider is not contracted with your insurance. Your insurance company may agree to a usual and customary rate for similar services in your geographic area, probably about $1,200. But you're responsible for the remainder, $1,800. In fact, your insurance company may pay even less than $1,200 because your out-of-network coverage is 50% (not 80% like for in-network) and they only pay $600. But wait! You have a higher deductible for out-of-network providers. Deductibles for out-of-network providers are usually double your in-network deductible. Let's say your in-network deductible for this year is $2,500, so your out-of-network deductible is $5,000. This means that your insurance company pays $0 to the sleep center and the sleep center will bill you $1,200.

Charge amount for 50/50 sleep study:	$3,000
Contracted rate between sleep center and your insurance company	$0
Discount	$0
Usual and customary rate determined by your insurance company for sleep studies in your area:	$1,200
Amount due for 50/50 sleep study	$1200
Your insurance allows 50% for out-of-network services	$600
You have a $5,000 yearly deductible for out-of-network services that you haven't met.	-
Amount your insurance company pays to the sleep center for out-of-network services because you haven't met your deductible:	$0
You pay:	$1,200

In-network vs. Out-of-network:
$150 vs. $1,200

Fact: Accepting your insurance and being in-network are not necessarily the same thing.

Fact: You probably have two deductibles; one for in-network providers and one for in-network providers. You have to meet each deductible, separately, before services are paid for by your insurance company. You pay 100% out-of-pocket until you have met your deductibles

Fact: Some out-of-network providers will offer to bill you only the in-network rate, even though they're not in-network, but you'll still have to meet your deductible for future services. You still have to pay the "in-network rate" of $750, and the full $1,200 won't apply to your deductible, so if you plan on having any other services this year, in-network or out-of-network, you're still at square-one with your deductibles. Do you plan on having any other medical services this year? What about in network services, what about when you need a PAP device and replacement supplies later in the year?

Fact: Many insurance plans don't even include coverage for out-of-network providers anymore. If that is the case, you will either need to find an in-network provider or expect to pay full price or cash rate for your service.

If you're a patient:

Learn about your insurance coverage. Make sure you know whether your provider is in-network (not just contracted) with your insurance. What's the most they will bill you? It could be the difference between paying $150 for a sleep study and paying $1,200.

If you're a healthcare provider:

Make sure your patients understand that there are major differences in coverage with in-network vs. out-of-network providers. Whenever possible, refer your patients to an in-network provider. Patients are more likely to obtain the services that you recommend if they understand their financial responsibility and are prepared for the expense. No one likes a $1,200 surprise medical bill.

Download our guide to understanding your health insurance and see our top insurance FAQs (including codes for sleep studies, PAP devices and supplies).