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In-Network vs Out-of-Network: How They Affect Your Medical Costs

In-Network vs. Out-of-Network: What Does It Mean?  

When shopping for health insurance coverage, it’s important to consider the plan’s provider network. This is a list of healthcare providers, facilities, and suppliers the insurance carrier has contracted to provide services to individuals covered under a specific health insurance plan.

Providers, facilities, pharmacies, and suppliers that are “in-network” have negotiated a contract with the insurance company, agreeing to charge a predetermined amount for services. In exchange, the insurer agrees to pay its share according to the provisions of the health insurance plan.

“Out-of-network” providers, facilities, pharmacies, and suppliers do not have a contract with the insurance carrier. The cost of services has not been prenegotiated, so the provider is free to charge any amount. In addition, your health insurance plan may or may not cover the costs. Some plans offer partial coverage for out-of-network expenses and/or charge higher copayments and coinsurance amounts. 

How Health Insurance Networks Work

Health insurance networks help insurance companies control and predict their expenses by allowing them to pre-negotiate prices for health services. Typically, a provider agrees to a reduced payment for their services (also called an allowable payment) in exchange for being a part of the plan’s network.

Since insurance companies typically discourage covered individuals from going to out-of-network providers, those that are in-network for insurance benefit by being able to access a larger volume of patients. Some insurance plans do not cover out-of-network costs, which requires covered individuals to pay the entire expense out of pocket. Others allow for out-of-network services, although typically at a higher out-of-pocket cost.

What It Means to Be “In-Network”

Insurance companies typically have networks of healthcare providers, such as doctors and therapists, and facilities, such as hospitals. Pharmacies and other medical suppliers may also be a part of the plan’s network. Each network works similarly.

For example, a pharmacy network is a group of pharmacies that have negotiated with the insurance carrier to provide prescription medications and care at a discounted price. When you choose to receive your health care, medications, and supplies from in-network providers, you receive discounted pricing and other important benefits.

Benefits of Staying Within Your Plan’s Network  

Cost savings is a critical benefit of staying within your health insurance plan’s network. Since the insurance company has negotiated discounted prices, you typically pay less for the exact same services than if you were to use an out-of-network provider or did not have health insurance coverage.

You also receive protection from unexpected medical bills. As part of the negotiation process, the provider agrees to accept the contracted rate as full payment and does not charge the covered individual any additional amount.

In-network providers bill the insurance company directly. Covered individuals pay the predetermined copayment and deductible to the provider at the time of service. If your plan requires coinsurance, the insurance company collects the predetermined percentage of your covered costs at a later date. No additional payment is due to the provider at the time of service or in the future. 

Insurance companies also typically hold their in-network providers to certain standards, which could help ensure you receive quality healthcare. If your insurance plan requires you to have a primary care provider and referrals for specialists, you may benefit from having your care coordinated by a knowledgeable provider who can also ensure information is shared among your care providers. 

What It Means to Go Out-of-Network  

Going out of network with insurance means you’ve chosen to seek care from a provider, facility, pharmacy, or supplier not part of your insurance company’s network. While this is typically more expensive, it may be necessary in some situations.

For example, you may need to go out of network if you need to see a specialist who is not part of your provider’s network or if you already have an established relationship with an out-of-network provider. Sometimes, logistics may also play a role. For example, if you’ve just moved or are on vacation, an in-network provider may not be an option.

Consequences of Seeking Care Outside Your Plan’s Network  

There are several potential drawbacks to receiving services from providers outside your plan’s network. This includes:

  • Higher costs: Out-of-network providers are not required to offer discounts on their services, so the cost is typically higher.
  • Upfront payment requirement: Providers can require you to pay your entire bill upfront instead of billing your insurance company. If this happens, you can typically submit a claim to your insurance provider for reimbursement, but they may or may not pay, depending on the provisions of your plan.
  • Balance billing: The provider may require you to pay the portion of your medical bill that the insurance company doesn’t cover.
  • No coverage: Your insurance company may not cover the medical bills you receive from out-of-network providers, leaving you to pay the entire balance out of pocket.

How Different Health Insurance Plan Types Affect Networks  

The impact of receiving medical services from out-of-network providers varies depending on the type of health insurance plan you have. While specific plans may vary, the following overview can help you understand the differences.

Preferred Provider Organizations (PPOs)

PPOs typically have a large network of approved providers. They also allow covered individuals to seek out-of-network care, although the costs may only be partially covered. Participants are not required to have a primary care provider or receive a referral before seeking specialist care. However, this flexibility comes with a cost. The average premium for a PPO plan tends to be higher than other options.

Health Maintenance Organizations (HMOs)

HMOs typically have a moderately sized provider network and do not cover out-of-network costs. This type of plan also typically requires covered individuals to have a primary care provider and receive referrals before consulting with specialists. Due to their limitations, the premiums for HMO plans tend to be low compared to other options.

Exclusive Provider Organizations (EPOs)

EPOs typically have fairly large networks but do not cover out-of-network providers except in the case of an emergency. Primary care providers are not required, but in some cases, you may be required to receive a referral before seeking specialist care. Premium costs for EPO plans tend to be moderate compared to HMOs and PPOs.

Point-of-Service (POS) Plans

A POS plan combines the features of a PPO and an HMO. These plans offer coverage for out-of-network care with some limitations. They do require a primary care provider and may require referrals for specialist care. Premiums for POS plans tend to be on the high side compared to HMOs and EPOs.  

Why Some Plans Offer No or Limited Out-of-Network Insurance Coverage  

When plans limit or do not offer coverage for out-of-network healthcare services, the insurance carrier may be able to negotiate better pricing with in-network providers by offering them a higher number of potential patients. Avoiding high costs for out-of-network providers may also help the carrier manage expenses and pass the savings on in the form of lower premiums.

How to Evaluate Your Plan’s Network

Your insurance plan’s network can impact both the cost of your medical care and the quality of the healthcare you receive. Before purchasing a health insurance plan, take the following steps.

Consider Network Size  

Large networks mean you have a wide selection when choosing your doctors, hospitals, pharmacies, and other healthcare services. However, when networks are extensive, insurance companies may have little control over the quality and cost of the care provided.

Some plans purposely have narrow networks made up of highly reputable providers. Plans with small networks may also have low premiums. Choosing an appropriately sized network for you depends on various factors, including your preferences and health conditions. It’s also important to consider whether a plan’s in-network providers are conveniently located in your geographic region.

Review Your Preferred Providers, Facilities, and Pharmacies

If you already have an established relationship with a doctor, another healthcare provider, or a preferred healthcare facility or pharmacy, it may be helpful to confirm that they are within the plan’s network. Otherwise, you may have to decide whether to choose a new provider or pay the extra out-of-pocket costs. 

Remember that there are typically many options to choose from, so if a plan you’re considering doesn’t include your preferred provider, you may be able to keep looking until you find one that does.

Determine Your Specialist Care Needs  

If you have a medical condition requiring specialist care, this can also be a significant factor in your decision. Some plans require a referral before seeing a specialist, which may be inconvenient. It’s also essential to ensure the specialists you need are part of the plan’s network, particularly if you’re already under the care of a preferred provider.

Understand Potential Costs for Seeking Out-of-Network Care  

Due to the extra costs involved in seeking out-of-network healthcare, it’s important to carefully evaluate a plan’s network before making a purchase. In addition to choosing a plan that is likely to meet your current and future needs, make sure you clearly understand the costs involved in seeking out-of-network services. This may include higher copayments and coinsurance, limited or no coverage. You may also have to pay the full cost of your out-of-network medical bills upfront and then submit the bills to your insurance company for reimbursement.

Putting It All Together  

Seeking healthcare services from in-network providers, facilities, pharmacies, and suppliers may save you significant money. Not only do the insurance companies negotiate discounted rates, but since the insurance carrier is billed directly, you don’t have to worry about unexpected medical bills.

When evaluating your options, remember that each type of healthcare plan treats out-of-network costs differently. Consider the size of the plan’s network and whether your preferred providers and facilities are included. It’s important to carefully evaluate each factor before selecting a health insurance plan.

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You’re just a few steps away from a personalized health insurance quote.

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