When a patient has health insurance and goes to see a doctor, two situations can happen. The doctor might be in-network with their insurance, or the doctor might be out-of-network. These two situations change everything about how billing works, how much the insurance company pays, and how much the patient owes. Understanding the difference between in-network and out-of-network billing is one of the most important things a medical billing professional can know.
In-network means the healthcare provider has signed a contract with the insurance company. That contract sets the rules for how much gets charged, how much insurance pays, and what the patient owes. Out-of-network means no contract exists between the provider and the insurance company. Without a contract, the billing rules change completely and costs almost always go up significantly for everyone involved.
This difference matters enormously in medical billing. It affects claim processing, payment amounts, patient responsibility, billing rules, and even what the provider is allowed to charge. A billing mistake that confuses in-network and out-of-network status can result in large claim denials, unhappy patients who receive unexpected bills, and significant lost revenue for the practice.
This guide explains everything about in-network and out-of-network billing in plain language. It covers what these terms mean, how contracts work, how billing differs between the two situations, what patients owe in each case, what rules protect patients from surprise bills, and how billing companies handle both situations. Whether you work in medical billing, manage a medical practice, or want to understand how healthcare costs work, this guide gives you a clear and complete picture.
What In-Network Means
In-network status means a healthcare provider and an insurance company have a formal contract with each other. The provider agreed to see patients who have that insurance plan. The insurance company agreed to pay the provider a specific contracted rate for services. Both sides have obligations under this contract and both sides benefit from it.
How Providers Become In-Network
Becoming in-network with an insurance company is not automatic. The provider must apply to join the insurance company’s network. This application process is called credentialing. During credentialing, the insurance company verifies everything about the provider. They check that the provider has the right medical licenses, proper education and training, valid malpractice insurance, clean disciplinary history, and appropriate professional credentials.
Credentialing takes time. Most insurance companies take 60 to 120 days to complete the process. Some take even longer. The provider cannot bill as an in-network provider until credentialing is fully approved. Practices that hire new doctors must start the credentialing process immediately when the doctor is hired, not when they are ready to start seeing patients.
Once credentialing is approved, the provider and insurance company sign a contract. This contract is a legal agreement that covers how claims get processed, what rates get paid, what rules the provider must follow, and how disputes get resolved. Both sides must follow the contract terms.
What the Contract Covers
The contract between a provider and insurance company is detailed and covers many important areas.
Fee Schedule
The most important part of the contract is the fee schedule. This is a list of every medical service with a set payment amount for each one. The fee schedule shows exactly what the insurance company will pay for each procedure code. These payment amounts are called contracted rates or allowed amounts.
For example, the fee schedule might say:
- Office visit code 99213: Insurance pays $110
- Blood test code 85025: Insurance pays $18
- X-ray code 71046: Insurance pays $65
- Office procedure code 11100: Insurance pays $95
The provider must accept these amounts as full payment from insurance. They cannot charge in-network patients more than the contracted rate allows.
Network Rules
The contract also covers network rules. These rules tell the provider what they must do to stay in-network. Rules commonly include submitting claims within certain timeframes, maintaining proper medical records, providing required documentation when insurance requests it, participating in quality programs, allowing insurance company audits, and following specific billing procedures.
Breaking these rules can result in the insurance company terminating the contract and removing the provider from the network.
Duration and Renewal
Contracts have a start date and end date. Most contracts run for one to three years. When the contract term ends, both sides must renew or negotiate a new contract. This renewal is an opportunity to renegotiate rates. If agreement cannot be reached, the provider may be removed from the network.
Termination Clauses
Contracts include rules about how either side can end the relationship. The insurance company can terminate a provider for violating contract rules, submitting fraudulent claims, losing their medical license, or other serious issues. Providers can choose to leave a network by giving proper notice, usually 60 to 90 days.
Benefits of Being In-Network for Providers
Being in-network provides important benefits for healthcare providers even though they must accept lower contracted rates.
Patient Volume
Insurance companies steer their members toward in-network providers. When patients search for doctors in their insurance plan’s directory, only in-network providers appear. Patients who use out-of-network providers pay more out of pocket. This financial incentive drives patients toward in-network providers, increasing patient volume for contracted practices.
Predictable Payment
Contracted rates are known in advance. The practice knows exactly what they will receive for each service from each insurance company. This predictability makes financial planning and budgeting more straightforward.
Faster Processing
In-network claims process faster and get denied less often than out-of-network claims. The insurance company has a direct relationship with in-network providers and their systems are set up to process these claims efficiently.
No Balance Billing Restrictions
When a provider is in-network, the rules about what they can charge patients are clear and defined. Patients pay their copay, deductible, and coinsurance on the allowed amount. The rest gets adjusted off as a contractual write-off. This clarity reduces disputes with patients over billing.
Benefits of Being In-Network for Patients
Patients also benefit when their provider is in-network with their insurance.
Lower Out-of-Pocket Costs
In-network care almost always costs patients less. Insurance plans are designed to encourage in-network use by requiring lower copays, lower coinsurance, and lower deductibles for
in-network care compared to out-of-network care.
No Surprise Balance Bills
When a provider is in-network, the patient cannot be balance billed for amounts above the contracted rate. The insurance company pays the contracted amount and the patient pays their share of that contracted amount. No extra bills arrive for amounts above what insurance allowed.
Clearer Cost Estimates
Because contracted rates are known, it is easier for in-network providers and insurance companies to give patients accurate cost estimates before services. Patients know upfront what they will owe.
| In-Network Benefit | For Providers | For Patients |
| Payment certainty | Know rates in advance | Know cost-sharing in advance |
| Lower denials | Fewer claim rejections | Fewer billing disputes |
| Patient access | More patients from insurance directory | Easy access through plan directory |
| Cost predictability | Budget accurately | Lower out-of-pocket costs |
| Billing simplicity | Clear write-off rules | No unexpected balance bills |
What Out-of-Network Means
Out-of-network means the healthcare provider does not have a contract with the patient’s insurance company. The provider and insurance company have no formal agreement about payment rates or billing rules. This situation creates significantly more complexity for everyone involved.
How Out-of-Network Situations Happen
Out-of-network situations arise in several ways. Sometimes a patient chooses to see a provider who is not in their insurance network. The patient might prefer that specific doctor for personal reasons, might have been referred by a friend, or might not have checked network status before making an appointment.
Sometimes patients receive out-of-network care without realizing it. A patient might go to an in-network hospital for surgery but not know that the anesthesiologist who works at that hospital is out-of-network. The surgeon might be in-network while the assistant surgeon is out-of-network. These situations are called surprise bills because patients receive unexpected charges from providers they did not know were out-of-network.
Sometimes patients have no choice. In an emergency, a patient goes to the nearest hospital even if it is out-of-network. A patient in a rural area might have very limited in-network options. A patient who needs a rare specialist might find that the only qualified specialist in their region is out-of-network.
Some providers choose to be out-of-network with all or some insurance companies. They may believe the contracted rates are too low to justify the restrictions that come with being in-network. They collect their fees directly from patients and let patients seek reimbursement from insurance on their own.
How Out-of-Network Claims Get Processed
When an out-of-network provider submits a claim to an insurance company, the processing is different from in-network claims.
No Contracted Rate
Because there is no contract, there is no pre-agreed fee schedule. The insurance company cannot simply look up the contracted rate and pay it. Instead, they must determine what they consider a reasonable payment for the service.
Usual, Customary, and Reasonable Rates
Insurance companies use a concept called usual, customary, and reasonable rates, often abbreviated UCR, to decide what to pay for out-of-network services. UCR is the amount the insurance company determines is the typical market rate for a service in a specific geographic area.
How UCR gets calculated varies by insurance company. Most use databases that track actual charges submitted by providers in a geographic area. They calculate a percentile of those charges, often the 50th or 80th percentile, and use that as their UCR rate.
The problem is that UCR rates are often much lower than what out-of-network providers actually charge. If a provider charges $500 for a service and the insurance company’s UCR is $200, the insurance pays a percentage of $200, not of $500. The patient may be responsible for the remaining $300 gap.
Out-of-Network Deductibles and Coinsurance
Most insurance plans have separate and higher deductibles and coinsurance for out-of-network care. A patient might have a $500 in-network deductible and a $2,000 out-of-network deductible. They might have 20% coinsurance for in-network care and 40% coinsurance for out-of-network care.
These higher out-of-pocket requirements mean patients pay much more for out-of-network care. Some plans have no out-of-network coverage at all for non-emergency services. If a patient with an HMO plan sees an out-of-network provider for non-emergency care, the insurance might pay nothing.
Plans That Cover Out-of-Network Care
Not all insurance plans cover out-of-network care. The level of out-of-network coverage depends on the type of plan.
PPO Plans
Preferred Provider Organization plans offer the most flexible out-of-network coverage. PPO members can see any provider, in-network or out-of-network, without needing referrals.
Out-of-network care is covered but at a lower benefit level. Higher deductibles and coinsurance apply. Patients pay more but do receive some coverage.
EPO Plans
Exclusive Provider Organization plans generally do not cover out-of-network care at all except in true medical emergencies. A patient with an EPO plan who chooses to see an out-of-network doctor for a non-emergency will receive no insurance payment. They pay the entire cost themselves.
HMO Plans
Health Maintenance Organization plans typically do not cover out-of-network care except for emergency services. Members must receive all non-emergency care from in-network providers within the HMO network. Out-of-network care is not a covered benefit.
HDHP Plans
High Deductible Health Plans can be either PPO or HMO style. Their out-of-network coverage depends on which type they are combined with. HDHP-PPO plans have out-of-network coverage. HDHP-HMO plans typically do not.
Medicare
Medicare has its own rules about in-network and out-of-network. Traditional Medicare patients can see any doctor who accepts Medicare patients. Providers who participate in Medicare have agreed to accept Medicare’s allowed amounts. Non-participating providers can charge up to 115% of Medicare’s allowed amount. For Medicare Advantage plans, network rules are similar to private insurance with in-network and out-of-network tiers.
| Plan Type | Out-of-Network Coverage | Patient Out-of-Pocket | Key Rules |
| PPO | Yes, at reduced benefit | Higher deductible and coinsurance | No referral needed |
| EPO | No, except emergencies | Full cost for non-emergency | Must use network |
| HMO | No, except emergencies | Full cost for non-emergency | Referrals required |
| HDHP-PPO | Yes, at reduced benefit | Very high deductible first | High deductible applies |
| HDHP-HMO | No, except emergencies | Full cost for non-emergency | High deductible applies |
| Medicare (Traditional) | Limited through non-participating rules | Higher for non-participating | 115% limit applies |
| Medicare Advantage | Varies by plan | Higher for out-of-network | Depends on specific plan |
How In-Network Billing Works Step by Step
Understanding exactly how in-network billing works from start to finish helps billing staff process these claims correctly.
Step 1: Verify Network Status Before the Visit
Before the patient is seen, billing or front desk staff must verify that the provider is in-network with the patient’s specific insurance plan. This verification seems simple but has important nuances.
A provider might be in-network with Blue Cross Blue Shield generally but not with every single Blue Cross plan. There are PPO plans, HMO plans, Exchange plans, employer group plans, and others. Being in-network with one Blue Cross plan does not automatically mean being in-network with all Blue Cross plans.
Staff should check the provider’s participation status with the specific plan the patient has, not just the insurance company name. The insurance company’s provider portal or a phone call to provider services gives a definitive answer. Using online directories alone can be unreliable because they are sometimes outdated.
Step 2: Collect the Contracted Copayment
For in-network visits, the patient’s plan document specifies a copayment. This is a flat dollar amount the patient owes at the time of service. Common copayments are $20 to $50 for a primary care visit and $40 to $100 for a specialist visit.
Copayments must be collected at the time of service. Collecting them later is much harder. Patients who leave without paying their copay are difficult to reach and may not pay when they receive a statement. Front desk staff should ask for the copayment before the patient goes back to see the doctor.
Staff should also check the patient’s deductible status. If the patient has not yet met their deductible for the year, they may owe the contracted rate for the service instead of just the copayment. Checking this before the visit allows the practice to collect more at time of service.
Step 3: Provide Service and Document Thoroughly
After the patient sees the provider, the provider documents the visit completely in the medical record. This documentation forms the basis for coding and billing. Good documentation supports the codes used and the medical necessity for services provided.
For in-network claims, the documentation requirements are essentially the same as for any other claim. The record should clearly show why the patient came in, what was examined and found, what diagnosis was reached, and what treatment or plan was implemented.
Step 4: Code the Services
Medical coders translate the provider’s documentation into CPT procedure codes and ICD-10 diagnosis codes. The procedure codes describe what was done. The diagnosis codes explain why it was done and establish medical necessity.
For in-network claims, coding accuracy is important because insurance companies check that diagnosis codes support the procedures billed. If an office visit code does not match the documented complexity, the claim may be downcoded or denied. If a procedure code does not match the diagnosis codes, medical necessity is questioned.
Modifiers get added when needed. Common modifiers indicate which side of the body a procedure was done on, that multiple procedures were performed on the same day, or that services were performed under special circumstances.
Step 5: Create the Claim with Contracted Rate Information
When the claim is created in the practice management system, the system applies the contracted fee schedule for the specific insurance company. The claim shows the provider’s standard charge, but the system also tracks what the expected contracted payment will be.
The claim includes all required information:
- Patient demographics and insurance member ID
- Date of service and place of service
- Rendering provider name and NPI number
- Billing provider information
- All procedure codes with modifiers
- All diagnosis codes linked to procedures
- Billed charge amounts
Step 6: Submit the Claim
The claim goes to the insurance company through a clearinghouse or direct electronic connection. The clearinghouse scrubs the claim for errors and routes it to the correct insurance company.
In-network claims have lower rejection rates than out-of-network claims because the insurance company’s system recognizes the provider and expects claims from them. The claim processes through the insurance company’s adjudication system, which checks eligibility, coverage, and other factors before determining payment.
Step 7: Receive Payment and Post the Remittance
The insurance company pays the contracted rate and sends remittance advice explaining the payment. Billing staff post the payment to the patient account. They post the insurance payment amount and the contractual adjustment for the difference between billed and contracted rates. They transfer any patient responsibility to the patient balance.
Example of In-Network Payment Posting:
The practice bills $200 for an office visit. Blue Cross has a contracted rate of $140 for that visit. The patient has met their deductible and has 20% coinsurance.
- Amount billed: $200
- Contracted rate (allowed amount): $140
- Contractual adjustment: $60 (written off, cannot bill patient)
- Patient coinsurance: $28 (20% of $140)
- Insurance payment: $112 (80% of $140)
- Patient balance: $28
The practice collects $112 from insurance and $28 from the patient, totaling $140. The $60 difference between charges and the contracted rate is written off.
Step 8: Bill the Patient for Their Portion
After insurance pays, the patient receives a statement for their portion. The statement clearly shows what was billed, what insurance paid, and what the patient owes. For in-network services, the patient owes only their deductible, coinsurance, or copayment based on the contracted allowed amount.
The patient should never see a line on their in-network bill charging them for the contractual adjustment. That amount is a write-off between the provider and insurance company. Billing patients for contractual adjustments violates the provider’s contract with the insurance company.
How Out-of-Network Billing Works Step by Step
Out-of-network billing follows a different path that involves more complexity and more risk of payment problems.
Step 1: Inform the Patient Before Services
When a patient makes an appointment with an out-of-network provider, the practice should inform them upfront that the provider is out-of-network with their insurance. Patients deserve to know this before receiving care so they can make an informed decision.
The notification should explain:
- The provider is not in-network with their insurance plan
- Their insurance may pay less or nothing for out-of-network care
- The patient will likely owe more than for in-network care
- An estimate of what the patient might owe
Getting this information to patients before services prevents surprise billing situations and protects the practice from disputes over charges.
Some states have laws requiring out-of-network providers to give patients written notice before providing non-emergency services. Even where not legally required, giving patients advance notice is good practice.
Step 2: Verify Out-of-Network Benefits
Billing staff should verify the patient’s out-of-network benefits before the visit. This means calling the insurance company and asking specifically about out-of-network coverage.
Questions to Ask When Verifying Out-of-Network Benefits:
- Does this plan have out-of-network benefits?
- What is the out-of-network deductible amount?
- How much of the out-of-network deductible has been met?
- What is the out-of-network coinsurance percentage?
- What is the out-of-network out-of-pocket maximum?
- Does the plan use UCR rates? What database do they use to determine UCR?
- Are there any services that are never covered out-of-network?
- Does the patient need a referral for out-of-network specialist visits?
The answers to these questions help the practice estimate what insurance will pay and what the patient will owe.
Step 3: Collect Payment Estimate Upfront
For out-of-network services, collecting a larger payment upfront is wise. Because out-of-network patients owe more, collecting at time of service is more important than ever.
Based on the out-of-network benefit verification, staff can estimate what the patient will owe. For example, if the patient has a $2,000 out-of-network deductible that has not been met, the patient will owe the entire contracted or UCR amount for the visit until that deductible is met.
Collecting estimated patient responsibility at the time of service protects the practice. Patients who owe large amounts are less likely to pay when they receive a bill in the mail weeks later.
Step 4: Submit the Claim to Insurance
Out-of-network providers can still submit claims to the patient’s insurance company. Some patients do not realize this and think out-of-network means insurance pays nothing. In many cases, especially with PPO plans, insurance does pay something for out-of-network care.
The claim form and coding for out-of-network claims is essentially the same as in-network claims. The difference is what happens when the claim reaches the insurance company.
What Insurance Does with Out-of-Network Claims:
The insurance company receives the claim and recognizes the provider is not in their network. They check whether the patient has out-of-network benefits. If they do, the insurance applies its UCR rate for the service. They pay their percentage of the UCR rate after applying the out-of-network deductible.
The difference between what the provider billed and what insurance pays can be very large. The provider billed $300. Insurance says UCR for that service in that area is $180. Insurance pays 60% of $180 after deductible, which is $108. The patient owes their 40% coinsurance of $180, which is $72. And the provider can potentially charge the patient for the remaining $120 difference between charges and UCR, depending on state law and the specific situation.
Step 5: Handle Balance Billing Decisions
Balance billing is charging the patient for the difference between the provider’s charge and what insurance paid. This is generally allowed for out-of-network providers who have no contract limiting what they can charge.
However, balance billing rules are complicated and vary significantly:
For Private Insurance Out-of-Network: In most cases, out-of-network providers can balance bill patients for amounts above what insurance paid. However, state laws in many states limit or regulate balance billing. Federal laws also limit balance billing in certain situations.
For Medicare Out-of-Network: Non-participating Medicare providers can charge up to 115% of Medicare’s allowed amount. They cannot charge more than that, even though they have no contract. Opted-out providers can charge any amount but cannot bill Medicare at all.
For Medicaid Out-of-Network: Medicaid providers generally cannot balance bill Medicaid patients regardless of network status. The no-balance-billing rule in Medicaid is strict and applies even to providers who are not enrolled in Medicaid.
For Emergency Care: Federal law now limits balance billing for emergency care regardless of network status. Patients cannot be balance billed beyond their in-network cost-sharing for emergency services at out-of-network emergency facilities.
Step 6: Allow the Patient to Submit for Reimbursement
Some patients prefer to handle out-of-network claims themselves. They pay the provider directly and then submit a claim to their insurance company for reimbursement. Insurance reimburses them directly for the covered portion.
For patients who handle their own claims, the provider should give them a detailed superbill. A superbill is a detailed receipt that contains all the information the patient needs to submit a claim to their insurance company. It includes the provider’s name, address, and NPI number, the patient’s date of service, all procedure codes and diagnosis codes, the amount charged for each service, and proof of payment.
Billing staff should be prepared to provide superbills to patients who request them. This is especially common in practices that are out-of-network with all insurance companies and collect all payments directly from patients.
The Contractual Adjustment Explained
The contractual adjustment is a fundamental concept in in-network billing that billing staff must understand completely. Mishandling contractual adjustments creates serious billing problems.
What a Contractual Adjustment Is
When an in-network provider bills insurance, they bill their full standard charge. But the insurance company only pays the contracted rate, which is lower. The difference between what was billed and what the contracted rate allows is called the contractual adjustment or contractual write-off.
Simple Example:
- Provider’s standard charge for a service: $250
- Blue Cross contracted rate for that service: $175
- Contractual adjustment: $75
The $75 contractual adjustment gets written off. The provider agreed to accept $175 when they signed the contract with Blue Cross. The $75 is not collectible from anyone. It simply disappears from the account.
Why Contractual Adjustments Cannot Be Billed to Patients
One of the most important rules in medical billing is that contractual adjustment amounts cannot be billed to patients. When a provider signs a contract with an insurance company, they agree to accept the contracted rate as full payment from covered patients. Charging patients the contractual adjustment amount violates this agreement.
Example of What Is Wrong:
- Provider bills $250
- Blue Cross pays $175 (contracted rate)
- Contractual adjustment: $75
- Patient owes: Their copay/coinsurance on the $175 allowed amount only
If the billing staff sends the patient a bill for $75 plus their coinsurance, that is a contract violation. The patient cannot be billed for the contractual adjustment under any circumstances for in-network services.
Consequences of Billing Patients for Contractual Adjustments:
- Violation of the provider’s contract with the insurance company
- Potential termination from the insurance network
- Legal liability under state consumer protection laws
- Patient complaints and damage to the practice’s reputation
- Potential fraud investigation
Posting Contractual Adjustments Correctly
When payment posting staff record insurance payments, they must post the contractual adjustment properly. The correct posting sequence is:
Step 1: Post the insurance payment amount to the account
Step 2: Post the contractual adjustment as a write-off
Step 3: Transfer the patient responsibility amount to the patient balance
Step 4: Verify the account balance makes sense
After all three postings, the remaining patient balance should equal exactly what the patient owes: their copay, deductible, or coinsurance based on the allowed amount. Nothing more.
If the balance does not equal the expected patient responsibility, something was posted incorrectly. Common posting errors include forgetting to post the contractual adjustment, posting the adjustment to the wrong line, or transferring the contractual adjustment amount to the patient balance instead of writing it off.
| Posting Element | What It Is | Who Pays | How to Post |
| Insurance payment | What insurance paid | Insurance company | Credit to charges |
| Contractual adjustment | Difference between charge and allowed amount | Nobody – write off | Write-off adjustment |
| Patient copay | Fixed amount patient owes | Patient | Transfer to patient balance |
| Patient deductible | Amount applied to deductible | Patient | Transfer to patient balance |
| Patient coinsurance | Percentage of allowed amount patient owes | Patient | Transfer to patient balance |
Deductibles, Copayments, and Coinsurance Explained
Understanding how patient cost-sharing works differently for in-network versus out-of-network care helps billing staff explain bills to patients and collect correctly.
Deductibles
A deductible is the amount a patient must pay out of pocket for covered services before their insurance starts paying its share. Deductibles reset at the beginning of each plan year.
In-Network Deductible: In-network deductibles are typically lower. A plan might have a $500
in-network deductible. Until the patient has paid $500 for covered in-network services during the year, they pay the contracted rate for each service themselves. Once the deductible is met, insurance starts paying its share.
Out-of-Network Deductible: Out-of-network deductibles are usually much higher than
in-network deductibles. The same plan with a $500 in-network deductible might have a $2,000 out-of-network deductible. In-network payments generally do not count toward the
out-of-network deductible and vice versa.
How Deductibles Affect Billing: When a patient has not yet met their deductible, they owe the contracted rate (for in-network) or the UCR rate (for out-of-network) for each service. Insurance pays nothing until the deductible is met. The practice must collect this amount from the patient.
Billing staff should check deductible status during eligibility verification before every visit. If a patient has a large remaining deductible, the practice knows to collect more at time of service.
Copayments
A copayment is a fixed dollar amount the patient pays for each covered visit or service. Copayments are usually the same every time the patient uses that type of service.
In-Network Copayments: In-network copayments are typically low. Primary care visits might have a $20 to $40 copayment. Specialist visits might have a $40 to $75 copayment. Emergency room visits often have a $100 to $300 copayment.
Out-of-Network Copayments: Plans that cover out-of-network care often have higher copayments for out-of-network visits than in-network visits. Or instead of a copayment, the plan might apply coinsurance for out-of-network care.
When Copayments Do Not Apply: Copayments usually do not apply before the deductible is met for non-preventive services in HDHP plans. In these plans, the patient pays the full contracted or UCR rate until the deductible is met. Once the deductible is met, the copayment structure kicks in.
Coinsurance
Coinsurance is a percentage of the allowed amount that the patient pays after their deductible is met. Unlike copayments which are fixed dollar amounts, coinsurance is a percentage that varies based on the cost of services.
In-Network Coinsurance Example: A patient has 20% coinsurance for in-network care. After meeting their deductible, insurance pays 80% of the contracted rate for each service. The patient pays 20%.
- Contracted rate for service: $200
- Insurance pays 80%: $160
- Patient pays 20%: $40
Out-of-Network Coinsurance Example: The same patient has 40% coinsurance for out-of-network care. But the calculation is based on UCR, not the contracted rate.
- Provider charges: $300
- Insurance UCR for this service: $200
- Insurance pays 60% of UCR: $120
- Patient pays 40% of UCR: $80
- Provider can potentially balance bill remaining $100 (difference between charge and UCR)
- Patient’s total potential cost: $80 to $180 depending on balance billing
This is why out-of-network care costs patients so much more. The coinsurance percentage is higher, it applies to the UCR rather than a contracted rate, and balance billing may apply on top.
Out-of-Pocket Maximum
The out-of-pocket maximum is the most a patient can pay for covered services in a plan year. After reaching this limit, insurance pays 100% of covered services for the rest of the year.
In-Network Out-of-Pocket Maximum: Plans have a lower out-of-pocket maximum for in-network care, offering patients protection from unlimited costs for covered in-network services.
Out-of-Network Out-of-Pocket Maximum: Plans that cover out-of-network care often have a higher separate out-of-pocket maximum for out-of-network services. Costs that apply to the out-of-network maximum generally do not count toward the in-network maximum.
Important Note: For EPO and HMO plans that do not cover out-of-network care, there is no out-of-pocket maximum protection for out-of-network services. If a patient uses an
out-of-network provider with one of these plans for non-emergency care, they could owe unlimited amounts.
| Cost-Sharing Element | Typical In-Network | Typical Out-of-Network | Key Difference |
| Annual Deductible | $500-$1,500 | $1,500-$5,000 | OON deductible is 2-5x higher |
| Copayment (PCP) | $20-$40 | $50-$100 or none | OON copay higher or replaced by coinsurance |
| Copayment (Specialist) | $40-$75 | $75-$150 or none | OON copay significantly higher |
| Coinsurance | 10-30% | 30-50% | OON percentage much higher |
| Out-of-Pocket Max | $3,000-$7,000 | $6,000-$15,000 | OON max is much higher |
| Balance Billing | Not allowed | May be allowed | Major difference in patient exposure |
The No Surprises Act and Surprise Billing Protections
One of the most important developments in in-network and out-of-network billing is federal legislation that protects patients from surprise medical bills. The No Surprises Act took effect on January 1, 2022 and changed important rules for out-of-network billing.
What Surprise Billing Is
Surprise billing is when a patient receives unexpected medical bills from providers they did not know were out-of-network. The most common surprise billing situations involve:
Emergency Care A patient has a medical emergency and goes to the nearest hospital. That hospital is out-of-network with their insurance. The patient has no choice about where to go in an emergency but receives large out-of-network bills afterward.
Facility vs. Provider Mismatch A patient schedules surgery at an in-network hospital. They check that their surgeon is in-network. But the anesthesiologist who administers anesthesia during the surgery is out-of-network with their insurance. The patient had no way of knowing this and did not choose the anesthesiologist. They receive a surprise out-of-network bill from the anesthesiologist.
Air Ambulance A patient requires air ambulance transport during a medical emergency. Air ambulance companies are frequently out-of-network with insurance plans. Patients receive bills for tens of thousands of dollars for emergency transport they did not choose.
What the No Surprises Act Does
The No Surprises Act established important protections that affect how out-of-network billing works for certain situations.
Emergency Services Protection Out-of-network providers cannot balance bill patients more than their in-network cost-sharing amounts for emergency services. If a patient goes to an out-of-network emergency room, they pay only what they would have paid at an in-network emergency room. The out-of-network provider gets reimbursed by insurance using a special payment process.
Ancillary Provider Protection When a patient goes to an in-network facility for a scheduled service, out-of-network providers working at that facility cannot balance bill for their services without specific patient consent. This protects patients from surprise bills from anesthesiologists, radiologists, and other facility-based providers who are out-of-network.
Air Ambulance Protection Air ambulance services are covered by similar protections. Patients pay only in-network cost-sharing amounts for covered air ambulance services, regardless of whether the air ambulance provider is in-network.
Patient Consent Exception For some non-emergency services where out-of-network care is involved, providers can get patient consent to waive these protections and proceed with
out-of-network billing. The patient must receive a clear notice explaining they are waiving their rights and sign a consent form. This consent process has specific rules about timing, content, and which services qualify.
Advanced Explanation of Benefits
Another requirement of the No Surprises Act is the good faith cost estimate. Providers must give uninsured or self-pay patients a good faith cost estimate of expected charges before scheduled services. This transparency requirement helps patients understand their financial exposure before receiving care.
Insurance companies must provide an Advanced Explanation of Benefits to insured patients before scheduled services. This document estimates costs based on the specific plan and provider, giving patients a preview of expected costs.
Independent Dispute Resolution Process
When an out-of-network provider disagrees with what the insurance company paid under the No Surprises Act protections, there is a federal independent dispute resolution process. Either the provider or the insurer can initiate this process.
An independent arbitrator reviews both sides and determines a final payment amount. Both sides present their case and the arbitrator makes a binding decision. This process replaces litigation and aims to resolve payment disputes efficiently.
For billing staff, understanding this process is important. When an out-of-network claim falls under No Surprises Act protections and the payment seems too low, the independent dispute resolution process provides a path to potentially higher payment.
Common Billing Errors with In-Network and Out-of-Network Claims
Billing errors involving network status are common and expensive. Knowing the most frequent mistakes helps billing staff avoid them.
Error 1: Billing as In-Network When Provider Is Out-of-Network
If billing staff incorrectly believe a provider is in-network when they are actually out-of-network, claims go out with in-network billing but process as out-of-network. The payment comes back much lower than expected.
Why This Happens:
- Network directories are not checked and are outdated
- A provider leaves a network but billing staff do not update records
- A new patient is assumed to have the same plan as existing patients
- Staff do not distinguish between different plans from the same insurance company
How to Prevent: Verify network status for every patient at every visit using the insurance company’s official provider portal or a phone call to provider services. Never assume. Document the verification with a timestamp.
Error 2: Billing Patients for Contractual Adjustments
Billing staff post the insurance payment but fail to post the contractual adjustment. The remaining balance transfers to the patient as if they owe the write-off amount.
Why This Happens:
- New staff do not understand contractual adjustments
- Auto-posting fails and manual posting is done incorrectly
- Staff confuse patient responsibility with contractual adjustment
How to Prevent: Train all payment posting staff thoroughly on contractual adjustments. Build system edits that require posting an adjustment when in-network payments are posted. Review patient balances regularly for amounts that look like contractual adjustments instead of normal patient responsibility.
Error 3: Collecting Wrong Copayment
Staff collect the wrong copayment amount because they do not verify the correct amount for the specific plan and visit type.
Why This Happens:
- Staff remember copay amounts from memory without verifying
- Patient’s plan changed but staff use the old copay amount
- Different plan types have different copay amounts but staff use wrong one
How to Prevent: Always verify copayment amount during eligibility verification before each visit. Do not rely on memory or on what the patient says their copay is. Check the insurance company’s eligibility system for current cost-sharing information.
Error 4: Failing to Inform Patients About Out-of-Network Status
The practice provides services to a patient without telling them the provider is out-of-network. The patient receives a large unexpected bill.
Why This Happens:
- Staff do not check network status
- Staff assume patients know their own network
- The process for informing out-of-network patients is not followed
How to Prevent: Make network status verification a standard part of every patient registration. Have a clear process for informing patients when providers are out-of-network. Document that the patient was informed. Under the No Surprises Act, this notification is legally required in many situations.
Error 5: Missing Secondary Insurance for Out-of-Network Claims
A patient has a primary in-network plan and a secondary plan that has out-of-network benefits. Staff bill only the primary insurance and miss the opportunity to file with the secondary plan for additional payment.
Why This Happens:
- Staff do not collect information about all insurance coverage
- The complexity of coordinating benefits leads to skipping secondary billing
- Staff assume primary paid enough and do not check for secondary
How to Prevent: Always ask about secondary insurance during registration. After primary insurance pays, automatically check whether a secondary claim should be filed. For patients where primary insurance leaves a large balance, secondary billing can recover significant amounts.
| Common Error | Financial Impact | How to Prevent |
| Wrong network status | Unexpected payment denials or reductions | Verify network at every visit through official sources |
| Billing contractual adjustment to patient | Contract violation, patient complaints | Train staff, build system controls |
| Wrong copay collection | Undercollection or patient disputes | Always verify copay from eligibility system |
| Not informing out-of-network patients | Patient complaints, legal liability | Create standard notification process |
| Missing secondary claims | Lost secondary insurance payments | Always check for secondary coverage |
| Balance billing in-network patients | Contract violation, legal liability | Never bill patients for contractual adjustments |
How Providers Decide Which Networks to Join
Medical practices regularly evaluate which insurance networks to participate in. This is a business decision with significant financial implications.
Evaluating Network Participation
When deciding whether to join a network, providers consider several factors.
Payment Rates The most important factor is what the insurance company will pay. Providers compare contracted rates to their costs of providing services. If the payment rate does not cover costs, participating in that network may lose money.
Different specialties have different cost structures. A high-volume primary care practice might accept lower per-visit rates because they see many patients. A surgical specialty with high overhead and expensive equipment needs higher rates per case to cover costs.
Patient Volume How many patients with that insurance plan live in the practice’s area? If a large employer in the area uses Blue Cross, joining the Blue Cross network brings access to many potential patients. If an insurance company has few members in the area, the volume benefit is limited.
Competitive Landscape If most other providers in the area participate with a certain insurance company, not participating puts the practice at a competitive disadvantage. Patients who cannot afford out-of-network care will simply go elsewhere.
Administrative Burden Some insurance companies have more complex billing requirements, more denials, and more administrative burden than others. A high-paying insurance company with extensive prior authorization requirements and frequent denials might not be worth participating with compared to a moderate-paying company with simple processes.
Negotiating Contracts
When an insurance company invites a provider to join their network, the initial contract offer is rarely the final word. Rates are often negotiable.
Negotiation Leverage Factors:
Large practices and health systems have more negotiating power because they control access to large patient populations. Specialists in high demand have leverage because insurance companies need them in their networks to attract members. Practices in underserved areas have leverage because the insurance company needs providers there. Quality metrics and outcomes data support negotiation for better rates.
What to Negotiate:
Beyond base rates, providers can negotiate for annual rate increases built into the contract, higher rates for specific high-volume services, timely payment guarantees with penalties for late payment, simplified prior authorization for common services, and minimum payment floors below which insurance cannot pay.
Leaving a Network
Sometimes providers decide to leave an insurance network. This might happen when contract negotiations fail and new rates are not acceptable, when the administrative burden outweighs the payment, when insurance company practices create too many claim problems, or when the practice wants to move to a cash-pay model.
Leaving a network requires following the contract’s termination notice requirements, usually 60 to 90 days. The practice must inform existing patients that they will no longer be in-network.
Some patients may follow the provider out-of-network and pay higher costs to continue seeing them. Others will transfer to in-network providers.
The decision to leave a network affects patient relationships and practice finances significantly and should be made carefully with full understanding of the consequences.
Special Situations in Network Billing
Several special situations in network billing require specific knowledge and careful handling.
Provider Mid-Treatment Network Changes
Sometimes a provider leaves a network while a patient is in the middle of a treatment course. This creates a difficult situation. The patient started care expecting in-network costs and now faces out-of-network charges to continue with the same provider.
Many states have continuity of care laws that require insurance companies to allow patients to continue with an out-of-network provider at in-network cost-sharing for a limited time after the
provider leaves the network. This is especially common for patients with chronic conditions, pregnant patients near their due date, and terminal patients.
Billing staff should know continuity of care rules in their state. When a provider leaves a network, patients in active treatment may be entitled to continued in-network pricing while they transition care.
Hospital In-Network but Provider Out-of-Network
The situation where a patient goes to an in-network hospital but receives care from an
out-of-network provider at that hospital is now heavily regulated under the No Surprises Act. However, billing staff must still handle these situations correctly.
For emergency situations, the No Surprises Act protections apply automatically. The out-of-network provider cannot balance bill beyond in-network cost-sharing.
For scheduled non-emergency situations, if the patient was not notified in advance and did not consent to out-of-network care, the No Surprises Act protections also apply. The provider cannot balance bill without proper advance notice and consent.
For situations where the patient received proper notice and signed a valid consent form, normal out-of-network billing rules apply.
Billing staff at hospitals and in hospital-based practices must be very familiar with these rules. The consequences of improper balance billing under the No Surprises Act include significant federal penalties.
Reference-Based Pricing
Some employer-sponsored health plans use reference-based pricing instead of traditional
in-network/out-of-network structures. These plans pay a set percentage of Medicare rates for services, regardless of whether the provider is contracted with a specific insurance company.
For example, a reference-based pricing plan might pay 150% of Medicare rates for all services. Providers can treat patients covered by these plans and receive payment at the reference rate. They can potentially balance bill patients for amounts above the reference rate in some states, though some states limit this.
Reference-based pricing is becoming more common and requires billing staff to understand it as an alternative to traditional network arrangements.
Deemed In-Network Situations
Under certain circumstances, out-of-network providers are treated as if they were in-network for payment purposes. This can happen when:
- The insurer required or directed the patient to use the out-of-network provider
- The in-network provider referred the patient to the out-of-network provider as medically necessary
- No in-network provider was available within a reasonable distance
In these deemed in-network situations, the out-of-network provider may be paid at in-network rates and balance billing may be prohibited. Billing staff should document these situations carefully and appeal if the insurance company processes the claim at out-of-network rates when deemed in-network treatment should apply.
How Billing Companies Handle In-Network and Out-of-Network Claims
Professional medical billing companies manage both in-network and out-of-network claims for their clients. Understanding their approach helps practices evaluate billing company capabilities.
Contract Management Services
Many billing companies offer contract management services to help practices manage their insurance contracts. This includes tracking contract expiration dates and renewal deadlines, monitoring whether insurance companies are paying contracted rates correctly, identifying underpayments where insurance paid below contracted rates, and supporting rate negotiations with data analysis.
Contract management is an ongoing process. A billing company that actively manages contracts protects practice revenue better than one that simply submits claims and posts payments without monitoring contract compliance.
Network Status Verification Systems
Professional billing companies maintain systems for verifying provider network status with each insurance company. These systems track which providers are in-network with which plans and update regularly as networks change.
When a patient schedules an appointment, the billing company can quickly verify whether the provider is in-network with that patient’s plan. This prevents billing errors that come from assuming network status instead of verifying it.
Out-of-Network Billing Expertise
Billing companies that handle out-of-network clients must understand the rules about what can be billed, how to maximize insurance reimbursement for out-of-network claims, how to handle patient billing and consent requirements, and how the No Surprises Act affects their clients.
For practices that choose to remain out-of-network with some or all insurers, having a billing company experienced in out-of-network billing ensures the practice bills correctly, collects maximum appropriate amounts, and stays compliant with applicable laws.
Dispute Resolution Support
When out-of-network payments are too low, billing companies experienced in network billing help clients pursue payment through proper channels. This includes appealing underpayments, using the No Surprises Act independent dispute resolution process for qualifying claims, and negotiating directly with insurance companies on payment disputes.
This dispute resolution support recovers revenue that would otherwise be lost, especially for high-dollar out-of-network claims where insurance initially pays significantly below market rates.
Patient Education Support
Billing companies can help practices educate patients about in-network and out-of-network costs. Patient communication materials that clearly explain network status, cost-sharing differences, and what patients can expect to owe reduce billing disputes and improve collection rates.
When patients understand their financial responsibility before receiving care, they are more likely to pay and less likely to dispute bills afterward. Billing companies that help with patient financial communication add value beyond just processing claims.
The Future of In-Network and Out-of-Network Billing
The landscape of network billing continues to change as regulations, technology, and healthcare payment models shift.
Increasing Price Transparency
Federal and state governments are pushing for more price transparency in healthcare. Hospitals must now publish their prices. Insurance companies must publish negotiated rates with
in-network providers. More transparency means patients can more easily compare in-network and out-of-network costs before receiving care.
For billing departments, transparency requirements mean maintaining accurate published price information and being prepared for more patients who come in with knowledge of expected costs and want detailed explanations when actual bills differ from expectations.
Growing Use of Tiered Networks
Many insurance companies are creating tiered networks that go beyond just in-network and
out-of-network categories. Tiered networks place providers into different tiers based on cost and quality. Tier 1 providers are the most preferred and have the lowest patient cost-sharing. Tier 2 providers are in-network but cost patients more than Tier 1. Tier 3 is out-of-network.
Billing for tiered network patients requires knowing which tier the provider is in and applying the correct cost-sharing based on the tier. This adds another layer of complexity to network billing.
Direct Contracting and Alternative Payment Models
Some employers and providers are creating direct contracting arrangements that bypass traditional insurance networks entirely. A large employer contracts directly with a health system for services at agreed rates. Patients use that health system’s services at low or no cost.
Traditional in-network and out-of-network distinctions do not apply in these arrangements.
As direct contracting grows, billing staff need to understand these alternative arrangements and how they differ from traditional network billing.
Technology Improvements
Technology is making network billing more efficient. Real-time eligibility verification systems instantly tell providers whether they are in-network for a specific patient’s plan. Automated prior authorization systems reduce the time spent on authorization requests. Artificial intelligence tools help identify underpayments and flag claims likely to have network-related processing issues.
These technology improvements reduce errors and improve efficiency in handling both in-network and out-of-network billing, allowing billing staff to focus on complex situations requiring human judgment.
Final Notes
In-network and out-of-network billing sit at the heart of how healthcare payments work in the United States. These two categories define the financial relationship between providers, insurance companies, and patients. Understanding them deeply is fundamental to effective medical billing.
In-network billing provides predictability. Contracted rates are known. Billing rules are clear. Patient cost-sharing is defined. Claims process efficiently. Contractual adjustments are written off. Patients know what to expect. The relationship between all parties is governed by a clear contract.
Out-of-network billing introduces uncertainty. Payment rates are not pre-agreed. UCR calculations vary. Patient cost-sharing is higher and harder to predict. Balance billing may apply.
Regulatory protections add complexity. The No Surprises Act changed important rules. Managing out-of-network claims requires more knowledge and more careful handling.
The key principles to remember:
For in-network billing, contractual adjustments can never be billed to patients. Copayments must be collected at time of service. Network status must be verified for every patient at every visit.
Claims must follow the specific rules of each contracted insurance company.
For out-of-network billing, patients must be informed before services are provided.
Out-of-network benefits must be verified separately from in-network benefits. Balance billing rules vary by payer type, service type, and state law. The No Surprises Act protections apply to emergency care and certain facility-based services.
For both situations, proper documentation, accurate coding, correct claim submission, and prompt follow-up on denials and underpayments drive maximum appropriate reimbursement.
Medical practices that master these concepts collect more revenue, experience fewer compliance problems, serve patients more transparently, and operate more effectively than practices that handle network billing without full understanding. Billing staff who know these rules deeply are valuable to any healthcare organization and make a real difference in practice financial performance.
