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The Costs of Surprise Medical Billing

By Blue Cross NC | September 14, 2020 | Industry Perspectives

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Eighteen months ago, a friend of mine was wheeled into the operating room for surgery. Before the medical team put him to sleep, he asked, “Hey, is everybody here in Blue Cross NC’s network?” They all laughed.

The thing is, he wasn’t joking. You see, as an employee of Blue Cross and Blue Shield of North Carolina, my friend was familiar with “surprise billing.” He wanted to make sure he didn’t get stuck with a bill for out-of-network services received at an in-network hospital.

At Blue Cross NC, we strive to make health care simpler, better and more affordable. In partnership with providers, we work to improve quality of care and to lower costs for patients–and that means addressing the causes of surprise medical bills.

Surprise Medical Bills

There are generally two types of surprise medical bills: the kind customers get in the mail and are forced to pay, and the kind they don’t always see but still must pay through higher insurance premiums.

The big surprise bill that comes in the mail often happens when a patient’s in-network doctor refers them to someone who is out-of-network. For example, your primary care doctor refers you to an out-of-network specialist, or they send your lab work to an out-of-network laboratory. Generally, the patient doesn’t know the provider was out-of-network until the bill arrives. Since out-of-network providers don’t have reimbursement agreements, there’s no limit to what they can charge. This means the provider can demand any payment amount, significantly driving up costs for patients.

Another example is when the reasonable option for care is out of their insurer’s network. In those cases, North Carolina law attempts to protect patients from being hit directly with these huge, unchecked medical bills. After all, in an emergency, no one should worry about the ER having a payment agreement with their insurer.

However, this situation is still a cost problem for patients. Providers still demand huge payments, and customers still pay the huge bills – but now it’s hidden in the form of much higher insurance premiums.

Some providers exploit this environment to demand unreasonable payments that hurt all customers, which means that this problem also impacts costs for seeing in-network providers.

“Patients and families have enough to worry about when they’re in the hospital. They shouldn’t have to worry about a surprise bill when they’re in an in-network hospital,” said Rahul Rajkumar, chief medical officer at Blue Cross and Blue Shield of North Carolina. “One simple way we can protect North Carolinians is for hospitals to only use in-network hospital-based providers or publicly notify patients that they use out-of-network hospital-based providers and will get a surprise bill.  It’s the right thing to do.”

Here’s How It Works

Certain provider groups practicing at in-network hospitals stay out-of-network. This is generally done when providers know patients have no choice but to see them for care: for example, the emergency room or your anesthesiologist during surgery. Just because you are at an in-network hospital, that doesn’t mean the doctor seeing you will be in-network.

By staying out-of-network, these providers can demand any payment they want because there are no laws that require an out-of-network provider’s payment demands to be reasonable,  either from the patient or the insurer.

In North Carolina, out-of-network, hospital-based anesthesiologists bill customers on average 1020% higher than what Medicare pays. Out-of-network hospital-based ER medicine doctors bill customers on average 1027% higher than what Medicare pays.

That means the anesthesiology bill that cost $500 for your neighbor on Medicare, can cost more than $5,000 for you. While North Carolina law offers some protection from how much the customer pays for a specific service, that doesn’t mean you don’t eventually pay for it – or pay for everyone else’s enormous bills.

These unchecked medical bills cost Blue Cross NC members $14 million a year in premiums.

This environment for out-of-network providers also drives up reimbursement demands from many in-network providers. This is because those in-network providers know going out of network and billing high rates is a serious financial threat to insurance plans and their customers. This threat is used to demand exorbitant in-network rates. After all, it is ultimately less expensive to pay even exorbitant in-network rates, than it is to pay limitless out-of-network rates.

This is another form of surprise billing when the cost of medical care is so much higher than anyone could reasonably expect. All of this drives insurance premiums even higher.

Here’s How We Fix It

Providers deserve to be paid fairly to treat patients. But, we can all agree that sending huge surprise bills, or engaging in medical price-gouging and driving up premiums for everyone isn’t right.

If you’re thinking there is a better way, you’re right. It’s quite simple: you put a reasonable limit on what out-of-network providers can demand to be paid.

Senate Bill 386 in the North Carolina General Assembly does just that. It’s a commonsense proposal that will protect people from surprise bills and save them an additional $14 million a year in insurance premiums.

Let’s fix the system so it protects the patient and the premium-paying public across North Carolina so that North Carolina will be known as a state with affordable, quality health care.

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