Surprise Billing: Another Healthcare Market Failure

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Patients often assume that their health insurance will cover emergency care or major procedures. They’re caught by surprise when they find out that they’re not fully covered.

Of all the euphemisms in U.S. healthcare billing practices, so-called “balance billing” may take the cake. Balance billing, better known as surprise billing, happens when a patient receives care from a doctor or hospital outside of her insurer’s network. Subsequently, the doctor or hospital bills the patient for the amount insurance didn’t cover. Needless to say, these bills can be hefty. They add insult to injury, tormenting the American consumer of healthcare.

Surprise bills are symptomatic of the extraordinarily complex ways in which healthcare prices are set in the U.S. Supposedly, balance bills reflect the difference between in- and out-of-network costs to the insurer. The often unchallenged assumption is that health plans contract with doctors, hospitals, and pharmacy networks to reduce the costs of care and keep premiums low for consumers. While undoubtedly in-network contracts save money for insurers, it’s unclear whether and how much of the savings are passed on to the consumer. Since when did your premiums go down, or your out-of-pocket costs for that matter, even if you had all your care done in-network?

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