Did you know that insurers of qualified health plans (QHPs) sold on HealthCare.gov denied 36% of out-of-network (OON) claims in 2023 alone? This number is enough to make any clinician uneasy if they are providing out-of-network care to patients.
But, wait a second, let’s take a step back, and ponder together what triggers these denials? The answer: a lack of knowledge about payer-specific out-of-network billing rules.
This guide will change things for you. How? We will discuss everything you need to know about OON medical claims, from the process to key challenges. So, continue reading!
- In-Network vs. Out-of-Network Insurance Billing
- Types of Out-of-Network Coverage Plans
- How Does Out-of-Network Reimbursement Work?
- Common Denial Codes for Out-of-Network Provider
- Out-of-Network Billing Rules by Major Payors
- Major Challenges in Out-of-Network Billing
- Partner With MediBillMD to Streamline Out-of-Network Insurance Billing
In-Network vs. Out-of-Network Insurance Billing
The table below offers an at-a-glance view of the key differences between in-network and out-of-network insurance billing:
| Out-of-Network Insurance | In-Network Insurance | |
|---|---|---|
| Provider Contract Status | No contract exists. That is, the provider has not agreed to the insurer’s rates. | The provider has a signed contract with the insurance carrier to accept set rates. |
| Payment Certainty | Variable because it is subject to patient benefit limits and plan-specific allowable caps. | High since claims are adjudicated based on clear contractual terms. |
| Patient Collections | Higher patient responsibility. That is, balance billing is permitted. However, it is subject to the No Surprises Act. | Limited to fixed copays/coinsurance. That is, balance billing is contractually prohibited. |
| Market Access | Requires independent marketing. | Inclusion in the payer’s directory drives patient volume directly to the practice. |
| Credentialing | Minimal credentialing required. However, gap exceptions may be needed for coverage. | Requires initial credentialing and ongoing maintenance. |
| Admin Overhead | High administrative burden. It may require manual claim filing, superbills, or complex appeals for medical necessity. | Standardized electronic workflows, easier eligibility, and claims tracking. |
Types of Out-of-Network Coverage Plans
This section breaks down the most common out-of-network coverage plans:
Preferred Provider Organization (PPO)
PPOs offer higher flexibility to members as they can visit in-network and out-of-network providers as per their wish. However, the cost structure varies:
- Members pay lower costs when using in-network providers.
- Members can choose out-of-network care at a higher cost-sharing amount.
Payments for out-of-network care are typically based on a percentage of the maximum allowable amount once the deductible is met.
Health Maintenance Organization (HMO)
HMOs generally provide no out-of-network coverage. This means members must use a specific network of providers to receive benefits.
However, in the event of a medical emergency, out-of-network care is also covered.
What’s more? HMOs may grant a gap exception if a necessary specialist is not available within the network.
Point of Service (POS)
It is a hybrid model that combines the features of both PPOs and HMOs. POS members must obtain a referral from a primary care physician (PCP) to see specialists, including those out-of-network.
What happens when a member decides to receive care out-of-network without a PCP referral? It results in significantly higher out-of-pocket expenses.
How Does Out-of-Network Reimbursement Work?
Let’s discuss what an out-of-network insurance billing workflow looks like:
- The patient receives services from a non-participating clinician, i.e., a provider who does not have a contract with their insurance payer.
- The OON provider generates a superbill, and the claim is submitted either by the provider or the patient.
- Once the medical claim is received, the payer reviews the claim and determines the allowed amount for the service. Note that this amount is based on the usual, customary, and reasonable (UCR) rate for that geographic area.
- The insurance company applies the patient’s specific out-of-network benefits, including their deductible and the coinsurance percentage.
- Next, the payer sends a check or electronic payment for the covered portion either to the patient or the provider, depending on their specific policies.
- The patient is responsible for the difference between the provider’s original billed charge and the amount covered by insurance (unless prohibited by specific laws, such as the No Surprises Act or Medicaid rules).
Common Denial Codes for Out-of-Network Provider
Some of the common denial codes that out-of-network billing triggers are listed below:
| Denial Code | Description | Example |
|---|---|---|
| CO-16 | This denial occurs when the claim has missing, incomplete, or invalid information. | In OON billing, providers don’t have electronic data interchange (EDI) links with every payer. Thus, imagine that a staff member manually types a superbill into a portal. However, he forgets to include the specific modifier or the NPI number for an out-of-network surgeon. |
| CO-27 | You get this denial when the patient’s insurance coverage has expired. | You rendered a service to a patient on the third day of the month as an OON provider. However, the patient’s employer canceled their out-of-network PPO plan on the first day of that same month. |
| CO-45 | It is triggered when the billed amount exceeds the allowed amount. | The non-participating clinician bills $450 for a complex consultation based on the internal charge master. However, the payer only allows $220 based on their regional UCR rates. |
| CO-96 | The OON provider receives this denial code when the charges are not covered. | Suppose an out-of-network podiatrist performed nail debridement and sent the bill to the payer. The payer rejected the claim because the provider was OON. Hence, his service will not be covered. |
| CO-197 | It is triggered due to missing precertification, authorization, or notification that the payer requires. | A patient undergoes an elective MRI at your facility. However, you are an OON provider, and your billing team failed to secure a gap exception or prior approval from the insurer. |
| CO-242 | It occurs when service is not rendered by the network or primary care provider. | Assume a patient with a closed-network HMO plan visits your out-of-network clinic for a non-emergency specialist visit. The payer will deny the claim because you are not the preferred provider. |
| CO-256 | This denial code is issued when the service is not payable by the managed care contract. | Imagine that a patient received skin allergy treatment from an out-of-network dermatologist, but because of a contract exclusion, the payer will deem the service non-reimbursable and deny the claim with code 256. |
Out-of-Network Billing Rules by Major Payors
This section covers the OON billing rules related to major insurance carriers:
Blue Cross Blue Shield (BCBS) Out-of-Network Billing Policies
The BCBS OON billing rules are listed below:
- Elective OON services generally require prior authorization from the plan to be considered for coverage.
- Payments are based on the maximum allowable amount. Besides, these payments are typically lower than a provider’s standard charge master rates.
- Healthcare practitioners can bill patients for the difference between their billed charges and the payer’s allowed amount (except where prohibited by the No Surprises Act or for emergency services).
- Note that the OON emergency services are covered at the in-network benefit level. That is, balance billing is restricted under federal/state laws for these cases.
- Patients face higher OON deductibles and coinsurance. Besides, the provider should collect these amounts directly from the patient.
Original Medicare Out-of-Network Billing Guidelines
The following are some of the key guidelines related to Medicare out-of-network billing:
- When compared with in-network providers that agree to the Medicare-allowed amount, OON providers can bill more on a claim-by-claim basis.
- The maximum amount an OON provider can charge a patient is 115% of the Medicare-allowed amount.
- Healthcare providers, even with out-of-network status, must file a claim for Medicare beneficiaries. That is, patients cannot file their own claims for covered services.
- Note that Medicare sends the payment directly to the patient for non-participating providers. This means the patient is responsible for paying the provider.
An OON provider can be unassigned and assigned to Medicare. Simply put, an assigned OON provider chooses to act like a participating provider for a specific claim. This means they agree to the Medicare rate for that visit and bill Medicare directly.
Contrarily, an unassigned OON provider does not accept the Medicare rate.
Let’s review an example for better understanding. Assume a care service for which the Medicare fee schedule amount is $100. The table below will show you how the out-of-network insurance billing will work for an assigned and unassigned non-participating provider:
| Assigned OON Billing | Unassigned OON Billing | |
|---|---|---|
| Payment Rate | 95% of the standard Medicare Physician Fee Schedule. | 95% of the standard Medicare Physician Fee Schedule. |
| Limiting Charge | Not available. | Providers can charge up to 115% of the 95% rate (effectively 109.25% of the standard rate). |
| Payment Recipient | Medicare pays the provider directly. | Medicare pays the patient. That is, the provider collects the total from the patient. |
| Patient Liability | The patient pays 20% of the 95% fee schedule. | The patient pays 20% of the 95% fee plus the limiting charge balance. |
Medicaid Out-of-Network Billing Policies
Do you want to bill Medicaid as an out-of-network provider? If yes, keep in mind that billing policies vary significantly across states. However, some of the common out-of-network insurance billing criteria that enable non-participating providers to bill a state’s Medicaid are listed below:
- The provider responsible for OON billing must inform the patient before rendering the service that they are not a Medicaid-participating provider for that service.
- The provider must inform the beneficiary of their options, including other available providers.
- The beneficiary must agree in writing to pay for the specific service before the OON provider performs it.
Major Challenges in Out-of-Network Billing
The following are some of the key challenges out-of-network billing providers encounter:
- Insurance carriers often cap payments at a UCR rate or maximum allowable amount. The issue? This rate is typically lower than the actual billed charges.
- OON claims are commonly denied or delayed due to gap exceptions or a lack of prior authorization.
- Yes, providers can bill the patient for the remaining balance. However, if the patient cannot afford it, practices end up writing off the balances.
- In out-of-network billing, providers must navigate varied payer policies and often handle manual claim submissions or superbills for the patient.
- That’s not all, out-of-network plans typically carry much higher deductibles and coinsurance. The outcome? For OON billing, providers must collect a large portion of the revenue directly from the patient rather than the insurer.
- Providers must comply with the out-of-network surprise billing and state-specific consumer protection laws to prevent audit risks and financial penalties.
Partner With MediBillMD to Streamline Out-of-Network Insurance Billing
With that said, it is time to conclude! Undoubtedly, out-of-network insurance billing comes with its fair share of challenges. Hopefully, after skimming through this guide, navigating OON billing will become easier.
In case you still struggle to collect your rightful reimbursements from payers, feel free to partner with MediBillMD for professional medical billing services. Our team of specialty-specific billing experts is well-versed in the out-of-network rules of leading insurance carriers.
