The Importance of Cost Difference between In-Network and Out-of-Network Providers

Health insurance seems to be always in the news, especially now that it’s election season. Whether public officials are arguing for the umpteenth time over The Affordable Care Act, or the government is putting a stop to a merger between giant insurance conglomerates, health insurance remains a constant source of debate and attention.

It is odd, then, that so many employees who receive employer-based health insurance often times don’t take into account the difference between in-network and out-of-network providers, especially considering that this difference can result in them saving hundreds, possibly thousands of dollars.

The problem lies in many health plan members operating under the false assumption that the entirety of their physician visits, and the services they receive, are covered by the insurance carrier. This is not always the case, which is why verifying one’s provider network status is so important. Many insurance carriers work behind the scenes in order to develop relationships with medical providers so as to minimize the cost of procedures and negotiate billing. This negotiation can result in lowering portions of a member’s bill, so that what is left over after the discount and the services covered by the employer’s health plan is passed onto the member in savings. Ideally, this will leave the member to pay the lowest possible portion of the bill. Here is a demonstration of such a plan, using an 80% coverage plan:

Service — Discount — What Plan Paid — What the Member Owes

$650             $120                   $424                               $106

Without the negotiated terms in the above example, the member would have to pay a minimum of $226, and could be forced to pay even more if the charges from the provider exceed the allowed amounts as defined by the plan. It is always best to use an in-network provider, as they will break down the cost of the services before they are even performed, thus ensuring that there are no unwanted surprises when the bill comes due. Check with your company benefits/human resources coordinator for a list of providers, or ask to be directed to a site that will provide you with that list. After all, being covered means being aware of what that coverage entails.