If you work in healthcare, you may have heard the term “balance billing” and wondered exactly what it means. Balance billing is a common but often misunderstood medical billing practice that can create confusion, patient frustration, and even compliance risks for providers.
In this article, we’ll explain what balance billing is, how it works in health insurance, and how the No Surprises Act impacts providers and patients alike.
What Is Balance Billing?
Balance billing occurs when a healthcare provider bills a patient for the difference between the provider’s charge and the amount paid by the patient’s insurance company.
In simple terms:
- A provider bills an insurance company for a service.
- The insurance company pays only part of that bill.
- The provider then bills the patient for the remaining balance.
For example, if a provider charges $1,000 for a service and the insurance company allows only $700, the provider may attempt to bill the patient for the remaining $300. Due to its potential impact on patients, balance billing is highly regulated and not always permitted.
What Is Balance Billing in Health Insurance?
To understand what balance billing is in insurance, we need to look at network status.
In-Network Providers
When a provider is in network, they have a contract with the insurance company that sets agreed-upon rates. In most cases:
- The provider must accept the allowed amount as payment in full.
- Balance billing is not permitted, beyond deductibles, copays, or coinsurance.
Out-of-Network Providers
Balance billing most often occurs when a provider is out of network. Since there is no contract in place:
- The insurance company may pay a reduced amount.
- The provider may bill the patient for the remaining balance.
This is where many patients receive large medical bills, especially if they were unaware that a provider was out of network. In-network providers are typically contractually barred from balance billing for covered services.
Define Balance Billing in Medical Billing
From a medical billing perspective, balance billing is the practice of billing a patient for charges that remain after insurance reimbursement (when allowed by law and payer rules). These charges are amounts above the insurer’s allowed amount, not the patient’s normal cost share. However, modern medical billing requires careful attention to:
- Federal and state regulations
- Payer contracts
- Patient disclosure requirements
Improper balance billing can lead to denied claims, refunds, audits, and compliance penalties. This is why accurate billing workflows and provider knowledge are critical. For in‑network covered services, true balance billing is usually prohibited.
What Is Surprise Balance Billing?
Balance billing is sometimes called “surprise” billing. This happens when a patient unknowingly receives care from an out-of-network provider. This often happens in situations where they had no reasonable choice. Common examples include:
- Emergency room visits
- Anesthesiology services during surgery
- Radiology or pathology services
In these cases, patients may believe they are receiving in-network care, only to later receive a bill from an out-of-network provider they never selected. Surprise balance billing is a major source of patient complaints and was a key driver behind federal legislation.
What Is the No Surprises Act?
The No Surprises Act, which went into effect in December 2020, is a federal law designed to protect patients from surprise medical bills. The legislation is in effect for health insurance plans that started on January 1st, 2022. The No Surprises Act enforces:
- Patients cannot be charged more than their in-network coinsurance, copay, or deductible amounts for emergency services provided by an out-of-network provider.
- A provider outside a network can also not charge more than a patient’s in-network deductibles, coinsurance, or copays for covered services conducted at an in-network facility.
Patients are generally only responsible for in-network cost-sharing amounts thanks to the No Surprises Act.
How the No Surprises Act Affects Providers
For healthcare providers, the No Surprises Act significantly changes how billing is handled. Key requirements include:
- Prohibiting balance billing in covered situations
- Providing clear patient disclosures
- Following specific billing and payment timelines
- Using the federal Independent Dispute Resolution (IDR) process when payment disputes arise
Providers must ensure their billing teams understand when balance billing is prohibited. Failure to comply can result in penalties and repayment obligations.
Is Balance Billing Ever Allowed?
Yes, but only in limited situations. Balance billing may still be allowed when:
- A patient knowingly receives non-emergency care from an out-of-network provider
- Proper notice and consent requirements are met
- State laws do not prohibit it
- Services provided are not covered under their insurance plan
- A patient received ground ambulance services
Because the rules vary by service type, payer, and location, providers must be cautious and well-informed before issuing any bill.
Why Billing Compliance Matters
Incorrect billing can:
- Damage patient trust
- Trigger insurance disputes
- Lead to audits or regulatory action
- Delay or reduce provider reimbursement
For providers, understanding what balance billing is in health care is essential to maintaining compliance and protecting revenue.
How Professional Medical Billing Support Helps
Navigating balance billing rules, payer contracts, and federal regulations is complicated. Working with an experienced medical billing partner can help ensure:
- Claims are billed correctly the first time
- Balance billing restrictions are followed
- Patient billing is transparent and compliant
- Revenue cycle performance stays strong
At Hometown Billing, our team of over 30 billing experts stays up to date on all regulations. We help providers reduce risk and improve financial outcomes. If you have questions about balance billing or need support maintaining compliant processes, our professionals can help.
Contact us today to learn more about our offerings. With over 36 years of combined experience in medical billing services, we can handle all of your billing needs!
