Lately, I've been reminded of a great video from three years ago called 'If Air Travel Worked Like Health Care'. Recently, I've had an influx of employees at my desk with stacks of bills and explanation of benefits, lamenting the injustice of out-of-network providers, their reimbursement rates and the complexity of trying to navigate the health care system in general.

There are very few issues in the U.S. health care world that are as complex as dealing with out-of-network payments. The ongoing problem is that our employees do not fully understand the cost impact of receiving out-of-network care. All of the benefit summaries, including the new Summary of Benefits and Coverage, do not adequately explain the full impact of balance billing.

In case you are not aware, balance billing occurs when an individual receives out-of-network care. Typically an insurance plan will cover some percentage between 50% and 70% after the deductible for out-of-network charges. At issue is the confusion surrounding the base number that the 50% to 70% is calculated from. Most employees believe that their plans will pay 50% to 70% off of the amount that the physician charges. However, most plans will only pay 50% to 70% of a "usual and customary rate" or an allowed amount. These UCR and allowed amounts are often significantly lower than the charges that the physician bills and the difference between these two numbers can be billed to the employee.

In recent years, after some litigation regarding the way that out-of-network reimbursement rates were set, many insurance companies have changed their calculation methodology and linked them with Medicare or one-to-three times the Medicare rate. The issue with this is that it is quite difficult to determine what these rates are for any specific procedure. The Fair Health Consumer Cost Lookup Tool was created to assist consumers in looking up health care pricing information, yet is too complex for the average user to effective discern the cost of a major procedure. Moreover, its accuracy is questionable.

As an example of balanced billing, I had an employee recently come to me over a bill for an outpatient surgery. The insurance paid approximately $13,000 as the UCR or allowed amount. The surgery center billed close to $68,000. This left the employee with a shockingly high bill of $55,000. In looking up the estimated out of pocket using the Fair Health Consumer Cost Lookup Tool and entering in the CPT codes from the individual's actual procedure, it predicted an out-of-pocket cost of roughly $5,000, as opposed to the $55,000 that my employee was actually billed.

There are currently only nine states that prohibit the practice of balance billing for out-of-network medical claims on health maintenance organizations, and four which prohibit the practice for preferred provider organizations, according to the Kaiser Family Foundation. In all other states, the practice is allowed, much to the confusion and disappointment of our employees when they are faced with large medical bills.

According to America's Health Insurance Plans, approximately 12% of all medical care in the U.S. is out of network. Part of the difficulty with these out-of-network claims is that often, the employees themselves do not even realize that they have gone out of network. Many times, the ancillary hospital services, such as ER physicians, radiologists, anesthesiologists and pathologists are not part of the hospital contract and result in an employee ending up with unexpected out-of-network costs.

As you start thinking about your benefit offerings for next year, take the time to really understand your out-of-network coverage, how the amounts are calculated, and ask for some real-life examples of amounts that employees have paid (or been billed) for out-of-network services. Then take the time to really educate your employees about the cost differential between in- and out-of-network care. The phrase: "You will receive a higher level of coverage by going in-network" unfortunately no longer adequately prepares employees for the financial costs of going out of network. And finally, teach them about some of the nuances, like the anesthesiologist at the hospital who might be out of network, and encourage them to always call the insurance company when they receive a surprise out-of-network claim to explain the situation. In many situations, an insurance company may reprocess those claims as in-network and save the employee money.


Contributing Editor Shana Sweeney is a self-proclaimed geek and political junkie with degrees in politics and human resources. She is an SPHR with more than a decade of experience working in various industries, including high-tech, utilities, manufacturing and health insurance. She can be reached at

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