DEFINITION of 'Balance Billing'

When a health care provider bills a patient for the difference between what the provider charges and what insurance covers. Balance billing is only allowed when a provider is not in the insured’s network or when the service is not covered by health insurance. Patients who are not aware of balance billing can experience an ugly surprise when they receive an unexpected bill. They might also overpay if they don’t realize they have been balance billed inappropriately. One of the most common situations where patients are caught off guard by balance billing is when they visit an in-network hospital but not all of the providers who care for them during their treatment are in-network.

BREAKING DOWN 'Balance Billing'

Here’s an example of how balance billing works. Suppose you visit your primary care physician, who is in your insurance network, because you are experiencing chronic back pain that has gotten so bad it is interfering with your daily activities. Your primary care physician refers you to a spine expert. Even though he is not in your insurance network, you decide to see him because your primary care physician says he is the best in the area.

Several weeks later, after your insurance has processed the claims for your visits to both doctors and the doctors have been reimbursed, you get two bills in the mail. The first, from your primary care physician, is for $20. Your insurance paid 80% of the $100 bill and your co-insurance responsibility is the remaining $20. The spine specialist, on the other hand, sends you a much larger bill. His customary fee for a consultation with a new patient is $500. Your insurance provides some out-of-network coverage, but it will only cover $200 for a visit to a specialist, of which you are responsible for 40% out-of-network coinsurance, or $80. The spine doctor balance bills you for $380, which is the difference between the $120 it received from your insurance company and his $500 fee.

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