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Why am I not always required to pay the outstanding amount listed on my Explanation of Benefits?

Documentation of how EOBs work state that I am responsible for any outstanding amount that the insurance does not pay. However, it also states that I do not have to pay unless and until the provider bills me, which they may or may not do. What determines how a provider chooses to make this decision?

As examples, I am often sent an EOB for dental work that shows that the dentist charged far more than they received, but they decide not to bill me. What happens do the outstanding balance? Do they just eat the cost? If so, why? Likewise, I often am billed for hospital visits, even routine things such as blood tests. Why are these billed when others aren't?

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  • Here's a link from the Wikipedia article on[ EOB's](en.wikipedia.org/wiki/Explanation_of_benefits), it's fairly complicated, there's a bit on 'allowed amount' - which is the amount the insurance company will pay for standard medical procedures. iridiumsuite.com/understanding-an-eob-and-your-bill – JonMark Perry Aug 13 at 17:26
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    @JonMarkPerry both of these sources say that the patient is responsible for the balance to the provider. It doesn't answer my question, which is why the provider sometimes decides not to follow up on this and "throws out" this bill. – Southpaw Hare Aug 13 at 17:38
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    @Gordon What you're describing sounds like haggling, i.e. starting the price high and then accepting lower later. I wasn't aware that there was a culture of such haggling in healthcare. – Southpaw Hare Aug 13 at 18:01
  • Your questions are good. I tried to give a general quick answer. If you get insurance through work at a large company, there may be someone at the company whose job is to explain this to you. Also, most patients just pick up on these things as they go along. But I hope someone can give you a formal answer though frankly the subject matter is not medical science. – Gordon Aug 13 at 18:16
  • @Gordon I'm pretty sure it meets the requirements of being On-Topic as defined on the help page, and there are suitable tags (e.g. "medical billing"), so I see no problem. – Southpaw Hare Aug 13 at 18:20
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Like many questions regarding healthcare billing, there are a lot of subtleties to your question, and you haven't really given us exactly the information we would need to give you an exact answer. However, we can answer in a general sense. Before trying to determine why a provider would or would not bill a certain amount, you need to understand the background of how the system works. Scroll to the quote of your actual question near the end of this answer if you don't want the "Health Insurance 101" lesson.

You made a comment under your question that mentioned balance billing and networks. That's an important part of the context for your question, since being in (or out) of network impacts what a provider is allowed to do in terms of billing.

In the US, determining insurance payments and who is allowed what money is based on two concepts:

  • Providers and insurers can choose to work together ahead of time to determine a billing fee schedule, which is written into a contract, and describes what a provider will get paid for certain services. Providers who choose to do this with a specific health insurance plan are said to be "in network" with that plan. Providers who don't do this are "out of network." Technically, if a provider is out of network, that means there is no fee schedule, and insurers will typically assume a rate based on an industry-wide accepted rate (often referred to as UCR, usual/customary/reasonable). Providers have an incentive to be in-network because it gives them access to a captive audience of potential patients (since people are more likely to visit in network providers due to the better benefits). Insurers are motivated to participate since it gives them leverage to get good rates with providers, and to be able to know ahead of time what they'll have to pay, which is helpful when underwriting a plan.

  • Health insurance plans include benefits for certain services, which are typically described in terms of a cost sharing model, depending on if the provider is in network or not. "Cost sharing" refers to coinsurance (the plan only covers a portion of the agreed rate), copays (the member is responsible for a flat dollar amount for the visit or service), or deductibles (the member is responsible to pay until they've paid a certain amount in a given year). It's important to not that cost sharing doesn't change the agreed price for the service. If a provider is contracted for $150, they will get their $150, regardless of which other party pays it due to cost sharing.

When insurance plans adjudicate claims, they generate several outputs. The provider gets a payment and a document typically called an EOP (explanation of payment) or voucher, which describes to the provider what the insurance plan did with the claim. Similarly, an EOB (explanation of benefits) is generated and provided to the member, which describes what the insurance plan has decided to do with the claim. As is usually stated in bold letters on the EOB, it is not a bill and does not imply that anyone is billing you or attempting to collect from you.

When claims are submitted, the provider can technically bill any amount they want. The insurance plan will either look the service up in the fee schedule for that provider in that network, or will look up the generic UCR rate for that service if the provider is out of network. This is usually reflected as a line item on your claim, with a reason code stating that the discount is due to the provider contract (or UCR rate). So, if a provider bills $200, but the network rate is $150, there will be a $50 discount reflected as the contract rate. Provider contracts (in every case I've seen) explicitly forbid the provider from attempting to bill the patient for this discount. So - if your EOB shows a $200 charge with an in network discount of $50, the provider generally can't bill you for that $50.

Of the remaining $150, the plan benefits may specify a cost sharing arrangement. Say, of that $150, there is a $25 copay. In that case, the plan will pay the provider $125 and indicate that they should (if they have not already) collect the $25 from the patient. As a fraud prevention measure, there are several regulations (i.e. the FFCA, the Federal False Claim Act) in the US that effectively require the provider to collect cost sharing amounts from patients. Generally, the provider can only opt to not bill these amounts (or collect them at the time of service) if the patient has a legitimate financial hardship. So in our example, the provider will almost certainly attempt to collect the $25 copay.

In essence, providers who are under contract (and therefore in network) are generally not able to bill members for any amounts that are not part of cost sharing, and they are generally required to bill the cost sharing amounts. So, in your example, if the "outstanding amount" represents the network discount, they cannot bill you for it. If it represents a copay, coinsurance, etc then they are required to bill you for it.

So what about out of network providers? For them, effectively, all bets are off. Insurance plans will make a decision on what they're owed and pay them that amount (with the discount shown on your EOB), and then the provider will respond as they see fit.

In other words, the scope of your question is fairly narrow - it really only applies to out of network providers who have chosen to bill more than the industry-typical (UCR) rates. Regarding those providers, you've asked two specific questions:

What determines how a provider chooses to make this decision?

This is hard to answer in a general sense, but there could be many reasons:

  • Sometimes out of network providers and plans will negotiate specific individual claims before the payment is made (especially large ones) and sometimes those agreements include language stating that balance billing is not allowed.
  • Many plans will use third party "repricing" services which attempt to negotiate with out of network providers, or which route the claims through third party networks (not owned by your insurance plan) that the provider participates in. Generally, these arrangements also explicitly prevent the provider from balance billing.
  • Many states enforce "surprise bill" laws which basically state that certain out of network providers aren't allowed to balance bill patients in certain circumstances, so if you're not billed, it may be because of these laws.
  • The fee schedules that providers bill at are generally inflated as a self-protective measure, to ensure that a provider never unintentionally bills less than they might receive from an insurance plan or other payor. From a provider's side, things can be very complicated in terms of trying to understand what amount(s) they may get paid for the same service provided to different patients. If you've got a handful of contracts with different plans, and you're in network with medicare, and you've got all kinds of patients with atypical insurance or cost sharing arrangements, you don't want to unintentionally bill any of those various payors less than they may have intended to pay you, so you will likely write your fee schedule above what you think the highest amount you'll be paid is, with the intention of never actually trying to get paid that much. Effectively, they bill more than they budget to collect, because they know that the vast majority of their income is coming through channels where their billed amount will be higher than what they're paid. So the choice to "write off" an amount instead of billing it may be premeditated in that sense.

So - assuming an out of network provider is paid less than they bill, and it's not covered by a surprise bill law, and there is no one-time contract, and there are no disputes or negotiations under way with a payor, and the provider actually intended to try to get paid as much as they billed - at the end of the day, they can certainly choose to balance bill the patient, or just write it off.

Simply put, unless the amounts are large, many providers are very happy to just write off the difference.

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    This is very informative. However, near the middle, you seem to make the assumption that I'm talking about an out-of-network provider. I'm pretty confident that I am talking about an in-network one (and thus there is a very good reason why I'm not expected to pay). My confusion comes from the fact that I am so inexperienced on this topic, I literally didn't know what a "network" even was before asking. – Southpaw Hare Aug 14 at 19:05
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    If you're talking about an in network provider, the answer is almost certainly "they're prevented by their contract from balance billing." Take a careful look at your EOB, there are usually reason codes on every line or item, with a little key somewhere on the document to tell you what they mean. You'll likely find one that says something like "network discount applied" or "contract rate applied" or something else that shows why the discount applies. Worst case, if you're unable to determine, you can call your plan and ask someone to walk you through it. – dwizum Aug 14 at 19:08
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    Where do people normally learn this stuff? I'm an adult in my 30s, and I've never been told 95% of anything in this post before now. Google searches didn't help at all. – Southpaw Hare Aug 14 at 19:08
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    Many people probably never learn it and just go along with whatever happens to them. I learned it working in the industry. Some times, health insurance plans will have good info available to members that walks them through this stuff. Ask your HR department or look on the plan's website. Also, some state's ACA insurance exchange websites have basic FAQ-type materials that explain the basics. – dwizum Aug 14 at 19:11
  • That makes sense. I can see it being rare for people to act as I am right now, asking questions preemptively when I don't have a problem and am just curious as to what stuff means. – Southpaw Hare Aug 14 at 19:25
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Most physicians and hospitals "accept" insurance in the sense of agreeing that they will accept reimbursement for a specific service at the rate specified by the insurance company (say $100), and not whatever their "standard" charge is (say $150) for that service (the one they put on their initial bill and which the uninsured are supposed to pay. Many companies say that they will reimburse the service provider for only 80% of the agreed-upon charge ($80) and the physician may then bill the patient for the remaining 20% ($20) of the agreed-upon charge if the physician/hospital so desires. The rest of the money (difference between "standard charge" of $150 and agreed-upon charge of $100) is written off by the provider as a cost of doing business. So why do the providers agree to such reduced payments from insurance companies? Well, insurance companies make the payment relatively quickly and $80 in hand (and the prospect of perhaps getting another $20 mañana) is better than $150 in the bush of which they might get some part after a lot of hassle and perhaps getting collection agencies involved, all of which requires a lot on expense.

  • The last sentence is also a reason why you can sometimes get lower prices when paying cash upfront and not involving insurance. Billing an insurance company takes time, money, and manpower, and if you save them that hassle, they'll frequently pass those savings on to you. – bta Aug 14 at 1:25
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What determines how a provider chooses to make this decision?

The provider (e.g. Hospital) makes that decision. How they make that decision is up to the provider and what capabilities/appetite they have to mess with it.

Let's take a doctor's office as an example. You receive services from a doctor. That doctor then files a claim with your insurance company with the services provided and what they "charged" you. The insurance company then responds to the doctor letting them know what services are covered and what amount they pay for those services. (I don't know exactly how/when the doctor is paid by the insurance, but for this question I think it's irrelevant).

They also send you an "Explanation of Benefits" showing what the doctor claimed and what they do or don't cover (and how much). Any item that they don't fully cover (or cover at all) may be billed directly to you by the doctor. That's so you know what the doctor might bill you for over what's covered.

Often, the doctor will just accept the covered amount and not bill you for the rest. It's up to the doctor whether or not they want to deal with that (billing, collections, haggling, etc). They may be content just getting as much as they can from insurance and not dealing with what's left over. Or they might want to make sure you come back to them and don't leave a sour note by billing you over and above what you pay for the insurance.

  • So this is some kind of automatic implied haggling between the doctor and I? They assume they I might not come back to them, so they "lower the price" (to a remainder of $0) to make me happy as a customer, all without me asking them to? – Southpaw Hare Aug 13 at 19:29
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    @SouthpawHare: Sometimes it is to keep to an explicitly quoted cost to patient. For some procedures (e.g. dental work, elective procedures) the cost estimate is shared at the same time informed consent is obtained, and since the patient has actually been told "this is how much it will cost you (assuming you've been honest about your insurance being valid)" it tends to be honored. – Ben Voigt Aug 13 at 19:45
  • @BenVoigt Sometimes, but not always? So this is actually an Honor System? It sounds like the provider could bill if they wanted to, and they might get away with it? Sounds very informal and messy for such a wide-spread system. – Southpaw Hare Aug 13 at 19:49
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    The medical billing/insurance system in the US is screwy. Sometimes the provider will bill high getting as much as they can from insurance, and not going after you for the rest. If they want to mess with it and come after you, they can but sometimes choose not to - meaning they're gotten what they need from insurance and aren't interested in gouging you. – D Stanley Aug 13 at 20:06
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    @SouthpawHare: More like, most providers do not want to have a court test whether fine print that they didn't give you time to read that authorizes balance billing is more binding than verbal representations that this printout marked "estimate" is actually what it costs. And during informed consent most providers are more interested in making sure their patient understands possible medical complications than possible financial ones. Why explain how balance billing works and risk patients walking away from elective procedures, when 95% of them will actually pay exactly what is estimated? – Ben Voigt Aug 13 at 20:26

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