14 Sep Innie or Outie- In-Network vs Out-of-Network
Welcome to Part 2 of the Are You Covered series. Catch up on the first post here! Mark your calendars for October 5th to learn all about the allusive EOB.
Have you ever wondered why some people have Innie belly buttons and others have an Outie? Well, I did! Turns out your belly button is a result of the umbilical cord, being cut after delivery. The umbilical cord is a tube that attaches the mother directly to the baby while in mom’s belly. This allows nutrients and all the good things to be shared with the growing baby. Obviously, after birth this is not needed anymore and will be cut. Wives tales used to say the way in which the cord was cut would tell what kind of belly button someone would develop. This is actually wrong! Science has now shown that the formation of skin around the umbilical cord is purely arbitrary. Some people grow a little extra skin, and some don’t! Hmm! Interesting tidbit!
Although your belly button structure might be quite by chance, your insurance network is definitely not!
Health Insurance operates on the basis of agreed upon contracts. A contract between you and the insurance company on how much you will pay each month called a premium. An agreement on the cost of services you will pay (deductible, co-payments and maximum out of pocket). These agreements are decided way before you buy insurance. The hospitals, clinics, pharmacies attempt to agree with each insurance company about the amount that each service will cost.
They ATTEMPT to come to an agreement, they do not HAVE to come to an agreement! This is why there are two columns of providers: in-network and out-of-network.
The in-network column is listing providers that have come to an agreement with that specific insurance company. The provider will only charge the pre-determined cost for each service. This stops the provider from charging more for a service than what was deemed appropriate.
the hospital and the insurance company decided that an x-ray would cost $100 during their contracting agreement. You, the patient and insurance subscriber, get an x-ray and a bill from the hospital for $100. Let us say for this example you have a $50 copay. You get a bill showing that the hospital charged $100 for an x-ray, but you only owe $50 and the insurance company will pay the other $50. This is stipulated in the contract between you and the insurance company when you signed up for the plan (If you are confused about how this works stain tuned for next month’s blog about the ever-allusive EOB or Explanation of Benefits). You pay the $50 and all is well. The hospital charged you what they agreed to charge based on the insurance that you purchased. You paid the portion that you were supposed to pay based on the agreement between you and the insurance company.
Subsequently, that same hospital discovers they are losing money on x-ray services. Since they are in-network provider, they are restricted from asking you, the patient, for additional money to make up for the loss. They will have to go through negotiations with the insurance company to change the price. If you were to get a bill from the hospital for a $200 x-ray, instead of $100 that would be breaking the in-network contract. This keeps hospitals from doing a practice called Balance Billing.
What happens when they can’t come to an agreement?
Then the provider goes into the out-of-network column. This means that your insurance company does not have a pre-determined price set for services with that specific provider. To the provider you are equal to a person that does not have insurance. Therefore, the provider can bill you whatever they deem acceptable, because they don’t have a contract with your insurance company.
However, some insurance companies will pay a portion of your bill to out-of-network providers. The important part here is that they are contracting with you, the subscriber, not the provider. This is to give an added benefit to insurance subscribers in case you’re caught visiting an out-of-network provider. Helping to pay part of an out-of-network provider services is not mandated. This is why it is important to make sure your insurance company is in-network with all of your frequent providers, before you purchase a plan. This will save you from being surprised when you are at the doctor, finding out they do not accept your insurance. In other terms, you are out-of-network, and out of luck.