An analysis of out-of-network claims in large employer health plans

Being unable to afford health care when it is needed is one of the major worries of families, even those with insurance.  Overall cost sharing (i.e., deductibles, copayments, and coinsurance) has been increasing in employer plans, and enrollees who use services from providers that are not in their health plan’s network are exposed to potentially high out-of-pocket costs because providers can directly bill for the difference between the amount the provider charges for its services and the amount that their health plan pays the provider.  This analysis assesses the extent to which patients receive services from an out-of-network provider, putting them at risk for potentially high out-of-pocket costs.

Virtually all health insurance plans require plan enrollees to pay something when they need care. Private plans set their cost sharing for care received from hospitals, physicians and other providers.  Providers in the network agree with the plan on the amounts that they will charge for services, and enrollees who use in-network providers know they will only owe the cost sharing specified under the plan when they seek care.  In addition, under the Affordable Care Act, private health plans are required to have a maximum limit on cost-sharing payments for a year (for 2018, the amounts are $7,350 for single coverage and $14,700 for family coverage), but generally this protection only applies to services from in-network providers. 

Among people with employer coverage, nearly one in five inpatient admissions includes a claim from an out-of-network provider Click To Tweet

Enrollees can face higher, sometimes much higher, out-of-pocket costs when they receive care from providers that are not in their plans’ provider networks.  Out-of-network care might not be covered at all if the patient is enrolled in a health maintenance organization (HMO) or exclusive provider organization (EPO) plan, which only cover non-emergency services in network.  If the patient is enrolled in a preferred provider organization (PPO) plan or other plan that provides coverage out of network, the patient’s out-of-pocket costs could be higher for two reasons.  First, the plan may have somewhat higher cost-sharing amounts (for example, it may have a separate or higher deductible) for services from out-of-network providers. Second, and more importantly, the providers they use may ask them to pay any difference between what the plan reimburses and the amount that the provider charges for its services.  This typically is called balance billing, and it can expose enrollees to very high out-of-pocket costs.  While some plans may have a separate out-of-pocket limit for the higher cost sharing they assess for out-of-network care (this is permitted but not required by law), these limits typically do not protect enrollees from high balance bills.

Given these additional potential costs, why do enrollees receive care from out-of-network providers?  In some cases, they may prefer a provider outside their network, maybe due to reputation, familiarity, or convenience.  Sometimes, provider networks may have few in-network options for certain types of services, such as for mental health care.  In other cases, patients may not be in a position to select a network provider, for example in emergencies or urgent care situations.  Other instances of out-of-network service use may be inadvertent, such as where an enrollee encounters an out-of-network provider (maybe an anesthesiologist) in the course of treatment at an in-network hospital or surgical center, or when their in-network provider refers them to an out-of-network provider for services such as laboratory testing or radiology. These latter situations are sometimes called “surprise medical bills,” because patients may not have been aware that they were exposing themselves to the potentially large cost sharing and balance bills for out-of-network services. A 2016 KFF survey of medical debt found that among individuals who faced out-of-network bills they could not afford to pay, nearly 7 in 10 did not know the provider was out of network at the time they received care. 

These charts are based on KFF analysis of insurance claims from large employer plans to identify how often inpatient admissions or outpatient services result in a claim from an out-of-network provider. For inpatient services, we look at all claims involving a facility, such as a hospital or inpatient psychiatric facility, as well as the associated claims for professional services, such as from a physician or other health professional.  For outpatient services, we combine all of the claims for a single day (“outpatient service day”), including claims from facilities, such as an emergency room or outpatient hospital, and from physicians and other professionals, to analyze how many of these days include a claim from an out-of-network provider. We look at the incidence of these claims overall and for subsets of admissions or outpatient services days that may include certain types of care (e.g., mental health care) or the use of certain providers (e.g., emergency room).

The analysis illustrates the exposure of enrollees to balance billing from claims by out-of-network providers. The data we are using includes information about the cost sharing that the enrollees incurred under their plans, but does not have information about any additional amounts the provider may have billed directly to the patient (the balance bill).  

Nearly one in five inpatient admissions includes a claim from an out-of-network provider

Almost 18% of inpatient admissions by enrollees in large employer health plans include at least one claim from an out-of-network provider.

A lower percentage (7.7%) of outpatient service days include a claim from an out-of-network provider.  Outpatient service days that include at least one claim from a facility provider (e.g., emergency room, outpatient hospital, ambulatory surgical center) are a little more likely (9.2%) to include a claim from an out-of-network provider.

Patients using in-network facilities can still face claims from out-of-network providers, particularly for inpatient admissions

The share of inpatient admissions with a claim from an out-of-network provider remains significant (15.4%) even when enrollees use in-network facilities for care.  For outpatient services days including a facility claim (e.g., outpatient hospital, ambulatory surgical center, emergency room), the share with a claim from an out-of-network provider falls meaningfully when enrollees use in-network facilities. 

Inpatient admissions that include an emergency room claim are more likely to include claims for an out-of-network provider

For inpatient admissions, those that include an emergency room claim are much more likely to include a claim from an out-of-network provider than admissions without an emergency room claim.  This is true whether or not enrollees use in-network facilities. 

Under federal law, health plans cannot assess patients higher cost sharing for emergency services received from out-of-network providers, and must count payments towards deductibles, copayments or coinsurance toward the plan’s out-of-pocket limits.  These provisions, however, do not prevent out-of-network providers from balance billing emergency patients. 

The likelihood of having a claim from an out-of-network provider varies with the reason for the admission

Admissions for childbirth and newborn care are less likely to include a claim from an out-of-network provider. 

Admissions for psychological or substance abuse care have a high likelihood of including an out-of-network claim, possibly reflecting difficulty in accessing in-network facilities or professionals.

Outpatient service days that include a claim in a facility are more likely to include a claim from an out-of-network provider

Outpatient service days generally are less likely to include a claim from an out-of-network provider than inpatient admissions.  As shown below, similar to inpatient admissions, use of the emergency room or mental health services on an outpatient basis lead to a higher likelihood of a claim from an out-of-network provider.  

Enrollees using outpatient mental health services are significantly more likely to have a claim from an out-of-network provider

Significant shares of outpatient service days that include a claim for psychotherapy or therapeutic psychiatric services include a claim from an out-of-network provider.  This raises questions about the availability and perhaps the quality of mental health service providers within health plan networks.

The high incidence of out-of-network provider claims among enrollees using mental health services occur for enrollees with no facility claims and with facility claims

Enrollees receiving outpatient mental health or substance abuse services are much more likely to have a claim from an out-of-network provider, whether or not they use facility-based services during the day.  Enrollees using facility-based services are much less likely to have an out-of-network claim if they are able to use only in-network facilities. 

Outpatient service days that include an emergency room claim are much more likely to include a claim from an out-of-network provider

As with inpatient admissions, outpatient service days with a facility claim that include a visit to the emergency room are much more likely to include a claim from an out-of-network provider.  This is true whether or not enrollees use in-network facilities. 

Enrollees with anesthesia or pathology  claims are more likely to have an out-of-network provider claim, even when using in-network facilities

Outpatient service days with a facility claim that include an anesthesiology claim (for example, outpatient surgeries) are more likely to include a claim from an out-of-network provider. In addition, outpatient service days with a facility claim that include a pathology claim (i.e., for lab work) are more likely to include a claim from an out-of-network provider. This is true whether or not enrollees use in-network facilities. 

Discussion

A meaningful share of inpatient admissions result in the patient receiving a claim from an out-of-network provider, even when enrollees choose in-network facilities.  Admissions that include an emergency room claim are more likely to include an out-of-network provider claim.  Admissions for psychological or substance abuse services also are much more likely to include an out-of-network provider claim, although enrollees who are able to receive care at an in-network facility significantly reduce their exposure.

The patterns for out-of-network provider claims are similar for outpatient services days, although the incidence of these claims generally is lower than for inpatient admissions.

People with employer coverage who use mental health services are significantly more likely to have a claim from an out-of-network provider Click To Tweet

In many instances, it is doubtful that enrollees could reasonably anticipate or control their use of out-of-network providers.  For inpatient admissions, enrollees using only in-network facilities still have at least one claim from an out-of-network provider in over 15% of admissions. For both inpatient and outpatient services, enrollees using emergency rooms have a much higher likelihood of having an out-of-network claim, even when they use in-network facilities.  Patients in emergency situations have limited ability to control the care they receive and from whom they receive it. Even when the facility is in-network, the professional services may not be and the patient often is not in a position to direct their care.

The high incidence of out-of-network claims for mental health and substance abuse services stands out for both inpatient admissions and outpatient service days.  These high rates raise questions about the availability of services within plan networks, and perhaps of the quality of the network providers.  In some cases, services may be urgent and patients may not have in-network options available.

Several policies have been adopted, at the federal level and in some states, to try to protect patients from surprise medical bills.  As noted above, federal law requires health plans to apply in-network cost sharing when enrollees use out-of-network providers in emergency services. This law protects the patient from the higher cost sharing amounts that plans generally have for out-of-network services, but does not protect patients if the out-of-network providers directly bill them for additional charges. 

Some states have gone further.  California, for example, recently adopted a law protecting certain insured patients from high medical bills from out-of-network providers when they receive care at an in-network facility (e.g., hospital, ambulatory surgery center, lab, or imaging facility).  The California law requires state-regulated managed care plans to apply in-network cost sharing to such services; sets standards for health plan reimbursement of the out-of-network providers; and establishes the amount that the out-of-network provider would be paid as the greater of (1) the amount the health plan typically pays in-network providers for the same service or (2) 125% of what Medicare would pay.  A dispute resolution process was established to adjudicate disputes.  Providers are permitted to balance bill in certain cases if they obtain written consent.  Several other states, including New York, have similar laws, while other states have more limited protections (e.g., protections only in emergency situations). 

Constructing policies to help consumers exposed to surprise medical bills is complex and involves several difficulties. One has to do with the multiple parties involved in situations that result in out-of-network patient charges.  For state policies to effectively protect enrollees, they must both address what the insurer requires the enrollee to pay under the plan (e.g., the amount of cost sharing) and states also would need to restrict the amount that the provider can assess as a balance bill. This can be politically controversial because it essentially sets private payment rates for the affected services. 

Another complexity is jurisdictional: States can pass laws that regulate health insurers and providers, but they cannot regulate the conduct (including the payment arrangements or reimbursement amounts) of private employer health plans that are self-funded (i.e., they pay for care directly and not through insurance).  A large share of people with job-based coverage are covered under self-funded plans, which means that states cannot regulate how these plans handle cost sharing in out-of-network situations. While states could limit how much out-of-network providers can charge as balance bills, they cannot assure that the self-funded plan will pay a reasonable amount for services.  A comprehensive approach therefore requires federal action.

While policymaking has primarily focused on surprise situations – where enrollees receive an out-of-network claim as part of receiving services in an in-network facility — the very large share of out-of-network claims for mental health and substance abuse services, even when no facility claim is involved, suggests that other types of policy interventions may need to be considered.  State and federal laws generally require that provider networks be adequate, with some oversight as to the number and location of participating providers, but these rules do not appear to be affording access to in-network care for using mental health or substance abuse services.  There are several possible explanations: enrollees may not consider in-network providers to be available or of reasonable quality; there may a shortage of high quality mental health and substance abuse providers who want to join provider networks; plans may not reimburse mental health and substance abuse treatment and sufficient levels to attract quality providers; or, and likely, some combination of these factors is at work.  More information about care patterns and plan networks is needed to determine why out-of-network claims are so common for these services.

Additional data about the prevalence and circumstances surrounding out-of-network claims – surprise or not – could help policymakers better understand the issue.  The ACA includes a provision requiring health plans – including those sponsored by employers and those offered in the individual market – to periodically report data to the federal government on cost sharing and payments with respect to out-of-network coverage.  The Secretary is required to share this information with other federal and state regulators for use in oversight and to develop tools for consumers to compare health plans. This provision, however, has not yet been implemented.

METHODS

We analyzed a sample of medical claims obtained from the Truven Health Analytics MarketScan Commercial Claims and Encounters Database, which is a database with claims information provided by large employers.  We analyzed a subset of claims from the 2016 that includes claims for almost 20 million people representing about 23% of the 85 million people in the large group market. We only include claims for people under age 65.  Weights were applied to match counts in the Current Population Survey for large group enrollees by sex, age, state and whether the enrollee was a policy holder or dependent.

For this analysis, we looked separately at inpatient and outpatients claims.  Inpatient claims were aggregated by admission and outpatient claims were aggregated by the day, so the units of analysis were inpatient admissions and days of outpatient services (‘outpatient service days’).  Some of the findings look at inpatient admissions or outpatient service days by either type of service or by place of service.  For inpatient admissions, the inpatient services file classifies admissions into five categories: surgical; medical; childbirth and newborn; psychological and substance abuse; and, other. We used those classifications.  The database also has a variable (‘stdplac’) that indicates for each claim the place where the service occurred; we used this to determine whether an admission included a claim for a service provided in an emergency room.  For outpatient service days, the outpatient services file has a variable (‘procgrp’) that groups outpatient services into groups based on CPT4, ICD-9-CM or HCPCS procedure codes.  We use this variable to identify whether or not enrollees received certain types of care during an outpatient service day: emergency room care, anesthesia, pathology, psychotherapy, or therapeutic psychiatric services.  The outpatient services file also has a variable (‘facprof’) to indicate whether or not a claim was submitted for a facility service or a professional service.  We use this variable to determine whether or not an outpatient service day included a claim with a facility.

Each claim on the inpatient and outpatient services files has a variable (‘ntwkprov’) that indicates whether or not the provider providing the service was in or not in the health plan’s network.  For each inpatient admission or outpatient service day, we determined whether or not the admission or day included at least one claim from an out-of-network provider.  In some cases, we look at admissions or days where all of the facility claims were from in-network providers;  here, we exclude admissions or days with facility claims from an out-of-network provider or where the response to the network question is missing).