Here Is How You Got That Surprise Bill from Your Trip to the ER

Often, a doctor doesn’t even know what the hospital will charge

This post was written by EOI Floyd Jones Fellow Brandon Bannister.

Have you ever had a procedure where you figured the cost would be covered by your insurance, then out of nowhere, you ended up with a huge bill for the whole thing? This is called “surprise billing” – or in insurance-company speak – “balanced billing.”

Surprise billing happens when a consumer uses a health care service from an out-of-network provider. These are providers that do not fall within your insurer’s circle who agree to a set rate for services.

When you use an out-of-network provider, they send the bill to your insurance company at a rate they set independently. Insurers may disagree with this price set and either pay a portion of it or nothing at all. Then, they drop anything that remains in your lap and you have to pay the difference, which can be substantial.

A Consumer Union survey from 2015 found that 30 percent of privately insured individuals reported receiving a surprise medical bill in the last year.

It’s not always predictable when a medical service is out of network. Sometimes, an in-network hospital contracts ambulances from an out-of-network provider. Sometimes, a physician in a network hospital isn’t part of that network. The patient may not be aware of this until the bill comes.

Health care is one of the few areas where consumers have no idea what services cost until after they are performed. Often, a doctor doesn’t even know what the hospital will charge, because there are many different rates for different insurance situations. Yet for many of us, bill of a couple thousand dollars can upend our whole lives. According to Bankrate’s 2018 financial security survey, only 39 percent of Americans said they would be able to cover a $1,000 bill using their savings.

With growing outrage around health insurance premiums, insurers are shrinking their provider networks in order to seem more cost effective for consumers. Narrow networks made up 23% of plans offered by employers in 2012, up from 15% in 2007. This can result in lower costs for customers – but only if they are on their toes about which services are becoming out of network, which is exceptionally difficult to manage.

Under the current system, providers and insurance companies have no incentive to be more transparent as they shrink networks, because the status quo costs them nothing.

If we want to make health care more affordable, transparency needs to be addressed before surprise billing spreads like wildfire.

There is no good reason why providers and insurers can’t hash out a price disagreement amongst themselves rather than passing the buck to the consumer. There can be a formal process of arbitration for these price disputes. Illinois has already taken action on this, mandating an independent legal resolution between providers and insurers without involving the consumer. Nine other states have introduced legislation around capping the amount ER’s can charge for out of network services.

For the sake of consumer protection, Washington State should enact legislation around price dispute arbitration and out-of-network emergency room cost capping. Consumers should not be expected to pay high premiums to insurers only to find out their coverage doesn’t work when they need it most.

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