There has been a lot of talk of "balance billing" in the industry lately.  Many states are contemplating or have already passed laws forbidding some providers from collecting their full fee by prohibiting balance billing.

What is balance billing, and why has it become a problem?

A few decades ago, in an effort to keep claim costs low, most payers began developing "networks" and compelled providers to accept lower reimbursements for the privilege of being on the "network panel".  However, networks are limited by design, and many patients opt to go "out of network" so they can see the provider of choice.

Payers responded by deciding they would take it upon themselves to decide what any provider's service or product was worth, and pay only that amount.  These amounts were not based on market values, RVUs, or anything.  They were completely arbitrary and often laughably low.Often, they were set by subsidiary companies of themselves. Nonetheless they called the amounts "usual and customary", or sometimes "usual, customary, and reasonable" or UCR.  This UCR amount is customarily billed to the patient and is called "balance billing".

Any payment that falls short of your billed amount is a denial.

It has become a problem recently because deductibles are ever-increasing and balance billing is becoming bigger burden to patients now than in years past.  But in many cases, it shouldn't be a problem - it's only a problem because the provider is mishandling the UCR denial.

Yes, I'm using the term "denial" because if your patient's policy is covered under ERISA (Employee Retirement Income Security Act of 1974) then you do treat it as a denial.  Up to 86% of your non-government business is subject to ERISA.  Many times, the Summary Plan Description (SPD) allows for "payment in full" and a payer's arbitrary amount that falls below your billed amount is most definitely not payment in full. Any payment that falls short of your billed amount less patient coinsurance, copay, and deductible is an "adverse benefit determination" and is treated as a denial.

So what are the steps to take if you get a UCR reduction in payment?  First, determine if the plan is covered under ERISA:

  1. The patient has access to insurance through his or her employment, or is a dependent of someone who has access to insurance through his or her employment
  2. The employer of the insured is any entity other than a church or government or governmental agency.

That's it.  If you answered "yes" to both of these questions, your patient is covered by ERISA.

The next step is to obtain a copy of the SPD from the patient, employer, or insurer/TPA. Please feel free to contact us if you have questions on how to obtain an SPD from any of these parties. Study it for terminology stating the plan pays usual, customary, and reasonable.  If that language exists, next locate the definition of UCR.  Note that it must be exact - either by including a fee schedule or giving a definitive benchmark, such as 80% of billed charges, or 125% of Medicare allowables for the region and date of service.  If there is no such language or no fee schedule, start your ERISA appeal!

You should be requiring the patient to pay in full at time of service

But what if the patient's policy is not an ERISA policy - the patient has an individual policy or works for the local school district?  In those cases, you should not even be filling a claim.  You should be requiring the patient to pay in full at time of service, then handing them a superbill or receipt suitable for the patient to file their own claim. (Refer to your state statutes if you happen to practice in a state that has balance billing limitation laws.)

Don't forget that the provider-filed claim is a fairly recent phenomenon - also born of managed care.  As a further inducement for providers joining networks, the payer-provider contract gave "ownership" of the claim to the provider, and as such the provider was compelled to file the claim and wait for payment from the insurer.  With non-network patients, there is no contract, and the claim still belongs to the patient. In such cases, the entire transaction should be conducted as it was in decades past - with the patient paying in full, then filing their own claim for reimbursement to themselves.

 If you deal in services/equipment that are too high-dollar for the average patient to pay in full at time of service, you need to seriously review your collection rates and days sales outstanding rates for these patients and determine if you aren't better off insisting they go see an in-network provider.  Chances are great you'll realize you are better off sending these patients elsewhere.  However, if you decide the collections results justify the collections cost, then be sure to balance bill the patient.  UCR is not a contracted allowance because there is no contract. Whether from the insured or the patient, you are owed your bill in full.  

Be sure and contact us if you have any questions!