Dear Nurse Katz,
Recently, my wife went into the hospital for a surgery that cost $12,500, but our insurance would only cover $5,300. The insurance company said the rest was an "excessive amount." What does this mean and will we have to pay the remaining $7,200 out of our own pocket?
It sounds like you are the victim of what is known as "balanced billing." This is one of the mysteries of the American health care system that no one seems to be able to solve. It has become an even bigger issue of more recent. Basically, insurance companies set "standards" defined as a "contracted rate" that they will pay towards a particular procedure. Anything over this standard/contracted amount is considered excessive. This remainder amount is called "balanced billing," and in most cases, you are responsible for this balance. Sometimes it's legal, and sometimes it isn't; it depends on the circumstances and your state's insurance laws. States like Florida are currently working on legislation to ban this type of practice.
For the most part, balanced billing is illegal in the following circumstances:
- When your doctor or hospital has a contract with your health insurance plan and is billing you more than that contract allows. This is not the case for out-of-network providers because they have no such contractual obligation.
- When you have Medicare and you're using a health care provider that accepts Medicare assignment.
- When you have Medicaid and your health care provider has an agreement with Medicaid.
The bad news is that it sounds like you are responsible for that "balanced amount" of $7,200, but share this with the right person at the hospital who can help you work out a reasonable payoff whether it be a patient assistance program or a payment plan. This is a why it is a good idea to shop around for both a hospital and a good health insurance policy if you have the luxury of planning before your next procedure. You may even get a deal by asking for a cash rate BEFORE submitting your insurance information. Keep in mind that your doctor may not practice at the hospital that is listed under your insurance plan and vice versa. Be sure to consider every option and read your health insurance benefits packet (you know that thick packet you got from your insurance company a while back). Pay special attention to topics such as your co-insurance, copayments and deductibles and how they are applied to get a better understanding of what may be coming out of your pocket in the end.
At this point Don, I am confident that you will be able to negotiate a reasonable payoff rate that won't throw all of your finances completely off balance. If you need more guidance, you can find more simple tips in the book, Healthcare Made Easy.