assignment violation medicare

Does your provider accept Medicare as full payment?

You can get the lowest cost if your doctor or other health care provider accepts the Medicare-approved amount  as full payment for a covered service. This is called “accepting assignment.” If a provider accepts assignment, it’s for all Medicare-covered Part A and Part B services.

Using a provider that accepts assignment

Most doctors, providers, and suppliers accept assignment, but always check to make sure that yours do.

If your doctor, provider, or supplier accepts assignment:

• Your out-of-pocket costs may be less.
• They agree to charge you only the Medicare deductible and coinsurance amount, and usually wait for Medicare to pay its share before asking you to pay your share.
• They have to submit your claim directly to Medicare and can't charge you for submitting the claim.

How does assignment impact my drug coverage?

Using a provider that doesn't accept Medicare as full payment

Some providers who don’t accept assignment still choose to accept the Medicare-approved amount for services on a case-by-case basis. These providers are called "non-participating."

If your doctor, provider, or supplier doesn't accept assignment:

• You might have to pay the full amount at the time of service.
• They should submit a claim to Medicare for any Medicare-covered services they give you, and they can’t charge you for submitting a claim. If they refuse to submit a Medicare claim, you can submit your own claim to Medicare. Get the Medicare claim form .
• They can charge up to 15% over the Medicare-approved amount for a service, but no more than that. This is called "the limiting charge."  

Does the limiting charge apply to all Medicare-covered services?

Using a provider that "opts-out" of Medicare

• Doctors and other providers who don’t want to work with the Medicare program may "opt out" of Medicare.
• Medicare won’t pay for items or services you get from provider that opts out, except in emergencies.
• Providers opt out for a minimum of 2 years. Every 2 years, the provider can choose to keep their opt-out status, accept Medicare-approved amounts on a case-by-case basis ("non-participating"), or accept assignment.

Find providers that opted out of Medicare.

Private contracts with doctors or providers who opt out

• If you choose to get services from an opt-out doctor or provider you may need to pay upfront, or set up a payment plan with the provider through a private contract.
• Medicare won’t pay for any service you get from this doctor, even if it’s a Medicare-covered service.

What are the rules for private contracts?

You may want to contact your  State Health Insurance Assistance Program (SHIP) for help before signing a private contract with any doctor or other health care provider.

What do you want to do next?

• Next step: Get help with costs
• Take action: Find a provider
• Get details: How to get Medicare services

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What is Medicare assignment and how does it work?

Kimberly Lankford,

​Because Medicare decides how much to pay providers for covered services, if the provider agrees to the Medicare-approved amount, even if it is less than they usually charge, they’re accepting assignment.

A doctor who accepts assignment agrees to charge you no more than the amount Medicare has approved for that service. By comparison, a doctor who participates in Medicare but doesn’t accept assignment can potentially charge you up to 15 percent more than the Medicare-approved amount.

That’s why it’s important to ask if a provider accepts assignment before you receive care, even if they accept Medicare patients. If a doctor doesn’t accept assignment, you will pay more for that physician’s services compared with one who does.

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How much do I pay if my doctor accepts assignment?

If your doctor accepts assignment, you will usually pay 20 percent of the Medicare-approved amount for the service, called coinsurance, after you’ve paid the annual deductible. Because Medicare Part B covers doctor and outpatient services, your $240 deductible for Part B in 2024 applies before most coverage begins.

All providers who accept assignment must submit claims directly to Medicare, which pays 80 percent of the approved cost for the service and will bill you the remaining 20 percent. You can get some preventive services and screenings, such as mammograms and colonoscopies , without paying a deductible or coinsurance if the provider accepts assignment. 

What if my doctor doesn’t accept assignment?

A doctor who takes Medicare but doesn’t accept assignment can still treat Medicare patients but won’t always accept the Medicare-approved amount as payment in full.

This means they can charge you up to a maximum of 15 percent more than Medicare pays for the service you receive, called “balance billing.” In this case, you’re responsible for the additional charge, plus the regular 20 percent coinsurance, as your share of the cost.

How to cover the extra cost? If you have a Medicare supplement policy , better known as Medigap, it may cover the extra 15 percent, called Medicare Part B excess charges.

All Medigap policies cover Part B’s 20 percent coinsurance in full or in part. The F and G policies cover the 15 percent excess charges from doctors who don’t accept assignment, but Plan F is no longer available to new enrollees, only those eligible for Medicare before Jan. 1, 2020, even if they haven’t enrolled in Medicare yet. However, anyone who is enrolled in original Medicare can apply for Plan G.

Remember that Medigap policies only cover excess charges for doctors who accept Medicare but don’t accept assignment, and they won’t cover costs for doctors who opt out of Medicare entirely.

Good to know. A few states limit the amount of excess fees a doctor can charge Medicare patients. For example, Massachusetts and Ohio prohibit balance billing, requiring doctors who accept Medicare to take the Medicare-approved amount. New York limits excess charges to 5 percent over the Medicare-approved amount for most services, rather than 15 percent.

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How do I find doctors who accept assignment?

Before you start working with a new doctor, ask whether he or she accepts assignment. About 98 percent of providers billing Medicare are participating providers, which means they accept assignment on all Medicare claims, according to KFF.

You can get help finding doctors and other providers in your area who accept assignment by zip code using Medicare’s Physician Compare tool .

Those who accept assignment have this note under the name: “Charges the Medicare-approved amount (so you pay less out of pocket).” However, not all doctors who accept assignment are accepting new Medicare patients.

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What does it mean if a doctor opts out of Medicare?

Doctors who opt out of Medicare can’t bill Medicare for services you receive. They also aren’t bound by Medicare’s limitations on charges.

In this case, you enter into a private contract with the provider and agree to pay the full bill. Be aware that neither Medicare nor your Medigap plan will reimburse you for these charges.

In 2023, only 1 percent of physicians who aren’t pediatricians opted out of the Medicare program, according to KFF. The percentage is larger for some specialties — 7.7 percent of psychiatrists and 4.2 percent of plastic and reconstructive surgeons have opted out of Medicare.

Keep in mind

These rules apply to original Medicare. Other factors determine costs if you choose to get coverage through a private Medicare Advantage plan . Most Medicare Advantage plans have provider networks, and they may charge more or not cover services from out-of-network providers.

Before choosing a Medicare Advantage plan, find out whether your chosen doctor or provider is covered and identify how much you’ll pay. You can use the Medicare Plan Finder to compare the Medicare Advantage plans and their out-of-pocket costs in your area.

Return to Medicare Q&A main page

Kimberly Lankford is a contributing writer who covers Medicare and personal finance. She wrote about insurance, Medicare, retirement and taxes for more than 20 years at  Kiplinger’s Personal Finance  and has written for  The Washington Post  and  Boston Globe . She received the personal finance Best in Business award from the Society of American Business Editors and Writers and the New York State Society of CPAs’ excellence in financial journalism award for her guide to Medicare.

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Healthcare Financing Anti-assignment Limitations

By: Leslie J. Levinson , Robinson & Cole LLP

This article describes how to structure financing transactions for healthcare providers to overcome anti-assignment and collection limitations on Medicare and Medicaid receivables.

THE UNIFORM COMMERCIAL CODE (U.C.C.) GENERALLY prohibits restrictions on assignment, making it possible for secured lenders to obtain a perfected security interest in these assets. However, other regulations make it difficult for lenders to collect on these receivables. Lawyers, therefore, use a double lockbox mechanism to work around these federal regulations. You should be familiar with this structure and its legal status as defined in recent case law.

Introduction

Receivables, or “accounts” as defined under the U.C.C., are a valuable and common asset type to pledge to lenders in secured financings. They are simple to perfect, requiring only a general grant of the asset type in a security agreement along with the filing of a U.C.C. financing statement. However, many contracts that give rise to the underlying receivables also contain restrictions that on their face would prevent their assignment to lenders. These contractual anti-assignment clauses would be broad enough to greatly diminish the value of receivables as a form of collateral.

The U.C.C. solves this by rendering most contractual anti-assignment clauses ineffective. Under U.C.C. § 9-406, a term in an agreement between an account debtor (i.e., the party that owes payment to the borrower under the receivable) and the assignor or borrower that “prohibits, restricts, or requires the consent of the account debtor or person obligated on the promissory note to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, the account” is generally ineffective. A term that would result in a default of a contract if the underlying account is pledged is similarly rendered ineffective. This has allowed for borrowers to freely assign these assets and has made Asset-Based Loan financings more accessible to borrowers with large amounts of receivables.

However, a key aspect to an assignment from a lender’s perspective would be its right to receive payments from the account debtor. The U.C.C. has some lender-friendly provisions here but contains some restrictions relevant to the assignment of Medicare and Medicaid receivables. The anti-assignment override provided by the U.C.C. would not be of use to a lender that is unable to collect on those receivables from an account debtor (i.e., the government) during, say, an exercise of remedies. Fortunately for lenders, U.C.C. § 9-406(a) would require an account debtor to make a payment to an assignee (i.e., a lender) if adequate notice is provided to the account debtor. However, U.C.C. § 9-406(b) limits this right of payment if it is otherwise restricted “under law other than this article.”

In fact, the Medicare and Medicaid anti-assignment provisions, with limited exceptions, prohibit anyone, except the healthcare provider, from receiving payments from federal government healthcare programs. In order to comply with the anti-assignment provisions, a provider cannot assign its right to be paid to any other entity, including its lenders. However, as described below, there are cash-management techniques, which if properly structured, will enable the parties to arrange compliant financing transactions.

Anti-assignment Provisions – The Regulatory Framework

Pursuant to 42 C.F.R. § 424.73, except with respect to certain limited exceptions, “Medicare does not pay amounts that are due a provider to any other person under assignment, or power of attorney, or any other direct payment arrangement.” There are several exceptions to this anti-assignment provision, which apply only under limited circumstances but are generally described as payment to a government agency or entity, payment under assignment established by or in accordance with a court order, and payment to an agent who furnishes billing and collection services to the provider, all subject to certain conditions being met.

There are also specific anti-assignment provisions pertaining to each of Medicare Parts A and B. Part A covers hospital insurance benefits for the aged and disabled, while Part B includes supplementary medical insurance benefits for the aged and disabled. For Part A, 42 U.S.C.S. § 1395g(c) states in relevant part that “No payment which may be made to a provider of services under this title [42 U.S.C.S. § 1395 et seq.] for any service furnished to an individual shall be made to any other person under an assignment or power of attorney . . . ” with certain specified exceptions, such as with respect to an assignment to a government agency. For Part B, 42 U.S.C.S. § 1395u(b)(6) states in relevant part that, with certain listed exceptions, “No payment under this part [42 U.S.C.S. § 1395j et seq.] for a service provided to any individual shall . . . be made to anyone other than such individual or (pursuant to an assignment described in subparagraph (B)(ii) of Paragraph (3)) the physician or other person who provided the service . . . .”

In addition, 42 C.F.R. § 447.10, as outlined in Subsection (a), implements Section 1902(a)(32) of the Social Security Act “which prohibits State payments for Medicaid services to anyone other than a provider or beneficiary, except in specified circumstances.” Pursuant to Subsection (d), “Payment may be made only (1) To the provider; or (2) To the beneficiary if he is a noncash beneficiary eligible to receive the payment under § 447.25,” or as otherwise outlined in other sections of 42 C.F.R. § 447.10 (covering, for example, reassignments and payments to a billing agent, such as a billing service or an accounting firm in specified circumstances).

The Double Lockbox Mechanism

It is crucial for both borrowers and lenders, and their counsel, to understand and comply with all aspects of the anti-assignment provisions. The Medicare Claims Processing Manual (Manual), Chapter 1, Section 30.2.5, provides useful guidance to lenders in dealing with Medicare and Medicaid receivables. Specifically, the Manual states that payments due a provider may be sent to a bank for deposit in such provider’s account if certain conditions are met, including that the account be “in the provider/supplier’s name only and only the provider/supplier may issue any instructions on that account. The bank shall be bound by only the provider/ supplier’s instructions. No other agreement that the provider/ supplier has with a third party shall have any influence on the account. In other words, if a bank is under a standing order from the provider/supplier to transfer funds from the provider/ supplier’s account to the account of a financing entity in the same or another bank and the provider/supplier rescinds that order, the bank honors this rescission notwithstanding the fact that it is a breach of the provider/supplier’s agreement with the financing entity.”

Further, the Manual states that the bank “may provide financing to the provider/supplier, as long as the bank states in writing, in the loan agreement, that it waives its right of offset. Therefore, the bank may have a lending relationship with the provider/supplier and may also be the depository for Medicare receivables.” In accordance with the Manual, despite what a provider and lender may agree to in writing, the lender cannot purchase the provider’s Medicare receivables. Accordingly, in light of the above manual provisions, a common and well-accepted mechanism for providers and lenders to structure payments is to have the provider open multiple deposit accounts, with one in the name of provider that receives only Medicare and Medicaid payments. The provider then enters into a compliant arrangement with the bank that generally vests sole control of the account with the provider while having standing (yet revocable) instructions to sweep the monies from the account into another provider bank account that the lender can access and possibly control. This concept is often referred to as the “double lockbox.” Parties regularly elect to have the sweep occur daily in order to ensure funds are not accumulating in the government payments account.

In setting up a double lockbox, there are various details involved and both providers and lenders need to carefully address those to avoid running afoul of any applicable federal or state restrictions. An example of typical language in loan documents that utilize this double lockbox mechanism is as follows:

If any of the Account Debtors is a Governmental Authority, including, without limitation, Medicare and Medicaid (each a “Governmental Account Debtor”), Borrower shall ensure that all collections of such Accounts shall be paid directly to Accounts # XXXXXX, XXXXXX, XXXXXX, at Lender for Borrower (collectively, the “Governmental Accounts”). All funds deposited into the Governmental Accounts shall be transferred into the Borrower’s Operating Accounts by the close of each business day pursuant to that certain Sweep Account Agreement dated as of the date hereof (as amended, restated, replaced, extended, supplemented or otherwise modified from time to time, the “Sweep Agreement”) by and between Borrower and Lender.

While there has not been a significant amount of litigation concerning the validity of these arrangements, they have typically passed judicial muster. For example, in DFS Secured Healthcare Receivables Tr. v. Caregivers Great Lakes, Inc. , when referring to 42 U.S.C. S. § 1395g(c), the court stated that “On its face, this statute stands only for the proposition that Medicare funds cannot be paid directly by the government to someone other than the provider, but it does not prohibit a third party from receiving Medicare funds if they first flow through the provider.” 1

Further, in Lock Realty Corp. IX v. U.S. Health, LP , the court favorably cited DFS Secured Healthcare Receivables Trust and other cases that support the right to assign Medicare and Medicaid receivables and of third parties to collect on those amounts if they first flow through the provider. 2 These other cases include:

• In re Missionary Baptist Foundation of America, Inc. (affirming the decision of the district court and holding that the bank took a valid security interest in the debtor’s accounts receivable due from medical care payments) 3
• Credit Recovery Systems, LLC v. Hieke (“[T]he Court notes that neither the Medicare nor Medicaid statutes expressly proscribe a provider’s assignment of the general right to receive Medicare or Medicaid receivables to a nonprovider.”) 4
• In re E. Boston Neighborhood Health Ctr. Corp . (“Nothing in these statutes prohibits the Debtor, as provider, from granting a security interest in its receivables under these programs or invalidates such security interests. By prohibiting the governmental insurer from making payment on the receivables to anyone other than the Debtor, the statutes may impair the Defendants’ ability to seek payment on the receivables from the governmental insurer without the provider’s cooperation, but that cooperation may well be available, and the statutes do not impair the Defendants’ ability to enforce their security interests once payment has been issued.”) 5
• In re American Care Corp .(denying junior creditor’s motion to terminate adequate protection payment to senior creditor who was entitled such protection pursuant to its valid security interest in Medicare receivables) 6

The court in Lock Realty Corp. IX , concludes, “The financing arrangements in this are case are valid and in accord with the federal anti-assignment statute, so Lock Realty cannot enforce its judgment to the extent satisfaction would infringe on a superior interest in the receivables.” The court in Lock Realty Corp. IX also provided further insight on proper structuring by stating:

In other words, the intervenors’ rights in the funds flow through Americare since neither party can receive Medicare funds pursuant to their arraignment without subsequent judicial enforcement of the security agreement. Because the financing arrangements don’t provide a non-provider with the opportunity to submit a false claim, the concerns addressed by the anti-assignment statute aren’t implicated.7 A court-ordered assignment pursuant to 42 C.F.R. § 424.90, directing payment from AdminiStar to Health Care Services or National City Bank doesn’t violate federal law.

As the above illuminates, it is both possible and commonplace for lenders to offer financing to healthcare providers using Medicare and Medicaid receivables as collateral despite the existence of the anti-assignment provisions by using well documented, commercially acceptable, and compliant financing and collateral agreements. However, given the continued evolution in the way healthcare services are provided and financed, counsel for both providers and lenders must continue to stay abreast of all applicable laws, rules, regulations, and other interpretive guidance to ensure continuing compliance with all laws applicable to healthcare financings.

Les Levinson is a partner at Robinson & Cole LLP, New York, and Co-Chair of the firm’s Transactional Health Law practice group. He has represented private and public businesses throughout his more than 30-year career. Although Les maintains an active corporate and business law practice, he concentrates on the transactional, regulatory, and compliance representation of healthcare and life science clients, including home care and hospice companies, physician practices, hospitals, information technology and medical device companies, healthcare equipment providers, and healthcare investors and lenders.

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1 . 384 F.3d 338, 350 (7th Cir. 2004). 2 . 2007 U.S. Dist. LEXIS 14578, at *6–8 (N.D. Ind. Feb. 27, 2007). 3 . 796 F.2d 752, 759 (5th Cir. 1986). 4 . 158 F. Supp. 2d 689, 693 (E.D. Va. 2001). 5 . 242 B.R. 562, 573 (Bankr. D. Mass. 1999). 6 . 69 B.R. 66, 67 (N.D. Ill. 1986). 7 . See, e.g. , Bank of Kansas v. Hutchinson Health Services, Inc., 12 Kan. App. 2d 87, 735 P.2d 256, 259 (Kan. Ct. App. 1987).

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42 CFR § 424.80 - Prohibition of reassignment of claims by suppliers.

(a) Basic prohibition. Except as specified in paragraph (b) of this section, Medicare does not pay amounts that are due a supplier under an assignment to any other person under reassignment, power of attorney , or any other direct arrangement. Nothing in this section alters a party's obligations under the anti-kickback statute (section 1128B(b) of the Act), the physician self-referral prohibition (section 1877 of the Act), the rules regarding physician billing for purchased diagnostic tests ( § 414.50 of this chapter), the rules regarding payment for services and supplies incident to a physician 's professional services ( § 410.26 of this chapter), or any other applicable Medicare laws, rules, or regulations.

(b) Exceptions to the basic rule —(1) Payment to employer. Medicare may pay the supplier 's employer if the supplier is required, as a condition of employment, to turn over to the employer the fees for his or her services.

(2) Payment to an entity under a contractual arrangement. Medicare may pay an entity enrolled in the Medicare program if there is a contractual arrangement between the entity and the supplier under which the entity bills for the supplier 's services, subject to the provisions of paragraph (d) of this section.

(3) Payment to a government agency or entity. Subject to the requirements of the Assignment of Claims Act ( 31 U.S.C. 3727 ), Medicare may pay a government agency or entity under a reassignment by the supplier .

(4) Payment under a reassignment established by court order. Medicare may pay under a reassignment established by, or in accordance with, the order of a court competent jurisdiction, if the reassignment meets the conditions set forth in § 424.90 .

(5) Payment to an agent. Medicare may pay an agent who furnishes billing and collection services to the supplier , or to the employer, facility , or system specified in paragraphs (b) (1), (2) and (3) of this section, if the conditions of § 424.73(b)(3) for payment to a provider's agent are met by the agent of the supplier or of the employer, facility , or system. Payment to an agent will always be made in the name of the supplier or the employer, facility , or system.

(c) Rules applicable to an employer or entity. An employer or entity that may receive payment under paragraph (b)(1) or (b)(2) of this section is considered the supplier of those services for purposes of subparts C, D, and E of this part, subject to the provisions of paragraph (d) of this section.

(d) Reassignment to an entity under an employer-employee relationship or under a contractual arrangement: Conditions and limitations —(1) Liability of the parties. An entity enrolled in the Medicare program that receives payment under a contractual arrangement under paragraph (b)(2) of this section and the supplier that otherwise receives payment are jointly and severally responsible for any Medicare overpayment to that entity .

(2) Access to records. The supplier who furnishes the service has unrestricted access to claims submitted by an entity for services provided by that supplier . This paragraph applies irrespective of whether the supplier is an employee or whether the service is provided under a contractual arrangement. If an entity refuses to provide, upon request, the billing information to the supplier performing the service, the entity 's right to receive reassigned benefits may be revoked under § 424.82(c)(3) .

(3) Reassignment of the technical or professional component of a diagnostic test. If a physician or other supplier bills for the technical or professional component of a diagnostic test covered under section 1861(s)(3) of the Act and paid for under part 414 of this chapter (other than clinical diagnostic laboratory tests paid under section 1833(a)(2)(D) of the Act , which are subject to the special rules set forth in section 1833(h)(5)(A) of the Act) following a reassignment from a physician or other supplier who performed the technical or professional component, the amount payable to the billing physician or other supplier may be subject to the limits specified in § 414.50 of this chapter.

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Balance Billing in Health Insurance

• How It Works
• When It Happens
• What to Do If You Get a Bill
• If You Know in Advance

Balance billing happens after you’ve paid your deductible , coinsurance or copayment and your insurance company has also paid everything it’s obligated to pay toward your medical bill. If there is still a balance owed on that bill and the healthcare provider or hospital expects you to pay that balance, you’re being balance billed.

This article will explain how balance billing works, and the rules designed to protect consumers from some instances of balance billing.

Is Balance Billing Legal or Not?

Sometimes it’s legal, and sometimes it isn’t; it depends on the circumstances.

Balance billing is generally illegal :

• When you have Medicare and you’re using a healthcare provider that accepts Medicare assignment .
• When you have Medicaid and your healthcare provider has an agreement with Medicaid.
• When your healthcare provider or hospital has a contract with your health plan and is billing you more than that contract allows.
• In emergencies (with the exception of ground ambulance charges), or situations in which you go to an in-network hospital but unknowingly receive services from an out-of-network provider.

In the first three cases, the agreement between the healthcare provider and Medicare, Medicaid, or your insurance company includes a clause that prohibits balance billing.

For example, when a hospital signs up with Medicare to see Medicare patients, it must agree to accept the Medicare negotiated rate, including your deductible and/or coinsurance payment, as payment in full. This is called accepting Medicare assignment .

And for the fourth case, the No Surprises Act , which took effect in 2022, protects you from "surprise" balance billing.

Balance billing is usually legal :

• When you choose to use a healthcare provider that doesn’t have a relationship or contract with your insurer (including ground ambulance charges, even after implementation of the No Surprises Act).
• When you’re getting services that aren’t covered by your health insurance policy, even if you’re getting those services from a provider that has a contract with your health plan.

The first case (a provider not having an insurer relationship) is common if you choose to seek care outside of your health insurance plan's network.

Depending on how your plan is structured, it may cover some out-of-network costs on your behalf. But the out-of-network provider is not obligated to accept your insurer's payment as payment in full. They can send you a bill for the remainder of the charges, even if it's more than your plan's out-of-network copay or deductible.

(Some health plans, particularly HMOs and EPOs , simply don't cover non-emergency out-of-network services at all, which means they would not cover even a portion of the bill if you choose to go outside the plan's network.)

Getting services that are not covered is a situation that may arise, for example, if you obtain cosmetic procedures that aren’t considered medically necessary, or fill a prescription for a drug that isn't on your health plan's formulary . You’ll be responsible for the entire bill, and your insurer will not require the medical provider to write off any portion of the bill—the claim would simply be rejected.

Prior to 2022, it was common for people to be balance billed in emergencies or by out-of-network providers that worked at in-network hospitals. In some states, state laws protected people from these types of surprise balance billing if they had state-regulated health plans.

But not all states had these protections. And the majority of people with employer-sponsored health insurance are covered under self-insured plans, which are not subject to state regulations. This is why the No Surprises Act was so necessary.

How Balance Billing Works

When you get care from a doctor, hospital, or other healthcare provider that isn’t part of your insurer’s provider network  (or, if you have Medicare, from a provider that has opted out of Medicare altogether , which is rare but does apply in some cases ), that healthcare provider can charge you whatever they want to charge you (with the exception of emergencies or situations where you receive services from an out-of-network provider while you're at an in-network hospital).

Since your insurance company hasn’t negotiated any rates with that provider, they aren't bound by a contract with your health plan.

Medicare Limiting Charge

If you have Medicare and your healthcare provider is a nonparticipating provider but hasn't entirely opted out of Medicare, you can be charged up to 15% more than the allowable Medicare amount for the service you receive (some states impose a lower limit).

This 15% cap is known as the limiting charge, and it serves as a restriction on balance billing in some cases. If your healthcare provider has opted out of Medicare entirely, they cannot bill Medicare at all and you'll be responsible for the full cost of your visit.

If your health insurance company agrees to pay a percentage of your out-of-network care, the health plan doesn’t pay a percentage of what’s actually billed . Instead, it pays a percentage of what it says should have been billed, otherwise known as a reasonable and customary amount.

As you might guess, the reasonable and customary amount is usually lower than the amount you’re actually billed. The balance bill comes from the gap between what your insurer says is reasonable and customary, and what the healthcare provider or hospital actually charges.

Let's take a look at an example in which a person's health plan has 20% coinsurance for in-network hospitalization and 40% coinsurance for out-of-network hospitalization. And we're going to assume that the No Surprises Act does not apply (ie, that the person chooses to go to an out-of-network hospital, and it's not an emergency situation).

In this scenario, we'll assume that the person already met their $1,000 in-network deductible and $2,000 out-of-network deductible earlier in the year (so the example is only looking at coinsurance).

And we'll also assume that the health plan has a $6,000 maximum out-of-pocket for in-network care, but no cap on out-of-pocket costs for out-of-network care:

When Does Balance Billing Happen?

In the United States, balance billing usually happens when you get care from a healthcare provider or hospital that isn’t part of your health insurance company’s provider network or doesn’t accept Medicare or Medicaid rates as payment in full.

If you have Medicare and your healthcare provider has opted out of Medicare entirely, you're responsible for paying the entire bill yourself. But if your healthcare provider hasn't opted out but just doesn't accept assignment with Medicare (ie, doesn't accept the amount Medicare pays as payment in full), you could be balance billed up to 15% more than Medicare's allowable charge, in addition to your regular deductible and/or coinsurance payment.

Surprise Balance Billing

Receiving care from an out-of-network provider can happen unexpectedly, even when you try to stay in-network. This can happen in emergency situations—when you may simply have no say in where you're treated or no time to get to an in-network facility—or when you're treated by out-of-network providers who work at in-network facilities.

For example, you go to an in-network hospital, but the radiologist who reads your X-rays isn’t in-network. The bill from the hospital reflects the in-network rate and isn't subject to balance billing, but the radiologist doesn’t have a contract with your insurer, so they can charge you whatever they want. And prior to 2022, they were allowed to send you a balance bill unless state law prohibited it.

Similar situations could arise with:

• Anesthesiologists
• Pathologists (laboratory doctors)
• Neonatologists (doctors for newborns)
• Intensivists (doctors who specialize in ICU patients)
• Hospitalists (doctors who specialize in hospitalized patients)
• Radiologists (doctors who interpret X-rays and scans)
• Ambulance services to get you to the hospital, especially air ambulance services, where balance billing was frighteningly common
• Durable medical equipment suppliers (companies that provide the crutches, braces, wheelchairs, etc. that people need after a medical procedure)

These "surprise" balance billing situations were particularly infuriating for patients, who tended to believe that as long as they had selected an in-network medical facility, all of their care would be covered under the in-network terms of their health plan.

To address this situation, many states enacted consumer protection rules that limited surprise balance billing prior to 2022. But as noted above, these state rules don't protect people with self-insured employer-sponsored health plans, which cover the majority of people who have employer-sponsored coverage.

There had long been broad bipartisan support for the idea that patients shouldn't have to pay additional, unexpected charges just because they needed emergency care or inadvertently received care from a provider outside their network, despite the fact that they had purposely chosen an in-network medical facility. There was disagreement, however, in terms of how these situations should be handled—should the insurer have to pay more, or should the out-of-network provider have to accept lower payments? This disagreement derailed numerous attempts at federal legislation to address surprise balance billing.

But the Consolidated Appropriations Act, 2021, which was enacted in December 2020, included broad provisions (known as the No Surprises Act) to protect consumers from surprise balance billing as of 2022. The law applies to both self-insured and fully-insured plans, including grandfathered plans, employer-sponsored plans, and individual market plans.

It protects consumers from surprise balance billing charges in nearly all emergency situations and situations when out-of-network providers offer services at in-network facilities, but there's a notable exception for ground ambulance charges.

This is still a concern, as ground ambulances are among the medical providers most likely to balance bill patients and least likely to be in-network, and patients typically have no say in what ambulance provider comes to their rescue in an emergency situation. But other than ground ambulances, patients are no longer subject to surprise balance bills as of 2022.

The No Surprises Act did call for the creation of a committee to study ground ambulance charges and make recommendations for future legislation to protect consumers. The Biden Administration announced the members of that committee in late 2022, and the committee began holding meetings in May 2023.

Balance billing continues to be allowed in other situations (for example, the patient simply chooses to use an out-of-network provider). Balance billing can also still occur when you’re using an in-network provider, but you’re getting a service that isn’t covered by your health insurance. Since an insurer doesn’t negotiate rates for services it doesn’t cover, you’re not protected by that insurer-negotiated discount. The provider can charge whatever they want, and you’re responsible for the entire bill.

It is important to note that while the No Surprises Act prohibits balance bills from out-of-network working at in-network facilities, the final rule for implementation of the law defines facilities as "hospitals, hospital outpatient departments, critical access hospitals, and ambulatory surgical centers." Other medical facilities are not covered by the consumer protections in the No Surprises Act.

Balance billing doesn’t usually happen with in-network providers or providers that accept Medicare assignment . That's because if they balance bill you, they’re violating the terms of their contract with your insurer or Medicare. They could lose the contract, face fines, suffer severe penalties, and even face criminal charges in some cases.

If You Get an Unexpected Balance Bill

Receiving a balance bill is a stressful experience, especially if you weren't expecting it. You've already paid your deductible and coinsurance and then you receive a substantial additional bill—what do you do next?

First, you'll want to try to figure out whether the balance bill is legal or not. If the medical provider is in-network with your insurance company, or you have Medicare or Medicaid and your provider accepts that coverage, it's possible that the balance bill was a mistake (or, in rare cases, outright fraud).

And if your situation is covered under the No Surprises Act (ie, an emergency, or an out-of-network provider who treated you at an in-network facility), you should not be subject to a balance bill. So be sure you understand what charges you're actually responsible for before paying any medical bills.

If you think that the balance bill was an error, contact the medical provider's billing office and ask questions. Keep a record of what they tell you so that you can appeal to your state's insurance department if necessary.

If the medical provider's office clarifies that the balance bill was not an error and that you do indeed owe the money, consider the situation—did you make a mistake and select an out-of-network healthcare provider? Or was the service not covered by your health plan?

If you went to an in-network facility for a non-emergency, did you waive your rights under the No Surprises Act (NSA) and then receive a balance bill from an out-of-network provider? This is still possible in limited circumstances, but you would have had to sign a document indicating that you had waived your NSA protections.

Negotiate With the Medical Office

If you've received a legitimate balance bill, you can ask the medical office to cut you some slack. They may be willing to agree to a payment plan and not send your bill to collections as long as you continue to make payments.

Or they may be willing to reduce your total bill if you agree to pay a certain amount upfront. Be respectful and polite, but explain that the bill caught you off guard. And if it's causing you significant financial hardship, explain that too.

The healthcare provider's office would rather receive at least a portion of the billed amount rather than having to wait while the bill is sent to collections. So the sooner you reach out to them, the better.

Negotiate With Your Insurance Company

You can also negotiate with your insurer. If your insurer has already paid the out-of-network rate on the reasonable and customary charge, you’ll have difficulty filing a formal appeal since the insurer  didn’t actually deny your claim . It paid your claim, but at the out-of-network rate.

Instead, request a reconsideration. You want your insurance company to  reconsider the decision to cover this as out-of-network care , and instead cover it as in-network care. You’ll have more luck with this approach if you had a compelling medical or logistical reason for choosing an out-of-network provider .

If you feel like you’ve been treated unfairly by your insurance company, follow your health plan’s internal complaint resolution process.

You can get information about your insurer’s complaint resolution process in your benefits handbook or from your human resources department. If this doesn’t resolve the problem, you can complain to your state’s insurance department.

• Learn more about your internal and external appeal rights.
• Find contact information for your Department of Insurance using this resource .

If your health plan is self-funded , meaning your employer is the entity actually paying the medical bills even though an insurance company may administer the plan, then your health plan won't fall under the jurisdiction of your state’s department of insurance.

Self-funded plans are instead regulated by the Department of Labor’s Employee Benefit Services Administration. Get more information from the  EBSA’s consumer assistance web page  or by calling an EBSA benefits advisor at 1-866-444-3272.

If You Know You’ll Be Legally Balance Billed

If you know in advance that you’ll be using an out-of-network provider or a provider that doesn’t accept Medicare assignment, you have some options. However, none of them are easy and all require some negotiating.

Ask for an estimate of the provider’s charges. Next, ask your insurer what they consider the reasonable and customary charge for this service to be. Getting an answer to this might be tough, but be persistent.

Once you have estimates of what your provider will charge and what your insurance company will pay, you’ll know how far apart the numbers are and what your financial risk is. With this information, you can narrow the gap. There are only two ways to do this: Get your provider to charge less or get your insurer to pay more.

Ask the provider if he or she will accept your insurance company’s reasonable and customary rate as payment in full. If so, get the agreement in writing, including a no-balance-billing clause.

If your provider won’t accept the reasonable and customary rate as payment in full, start working on your insurer. Ask your insurer to increase the amount they’re calling reasonable and customary for this particular case.

Present a convincing argument by pointing out why your case is more complicated, difficult, or time-consuming to treat than the average case the insurer bases its reasonable and customary charge on.

Single-Case Contract

Another option is to ask your insurer to negotiate a  single-case contract   with your out-of-network provider for this specific service.

A single-case contract is more likely to be approved if the provider is offering specialized services that aren't available from locally-available in-network providers, or if the provider can make a case to the insurer that the services they're providing will end up being less expensive in the long-run for the insurance company.

Sometimes they can agree upon a single-case contract for the amount your insurer usually pays its in-network providers. Sometimes they’ll agree on a single-case contract at the discount rate your healthcare provider accepts from the insurance companies she’s already in-network with.

Or, sometimes they can agree on a single-case contract for a percentage of the provider’s billed charges. Whatever the agreement, make sure it includes a no-balance-billing clause.

Ask for the In-Network Coinsurance Rate

If all of these options fail, you can ask your insurer to cover this out-of-network care using your in-network coinsurance rate. While this won’t prevent balance billing, at least your insurer will be paying a higher percentage of the bill since your coinsurance for in-network care is lower than for out-of-network care.

If you pursue this option, have a convincing argument as to why the insurer should treat this as in-network. For example, there are no local in-network surgeons experienced in your particular surgical procedure, or the complication rates of the in-network surgeons are significantly higher than those of your out-of-network surgeon.

Balance billing refers to the additional bill that an out-of-network medical provider can send to a patient, in addition to the person's normal cost-sharing and the payments (if any) made by their health plan. The No Surprises Act provides broad consumer protections against "surprise" balance billing as of 2022.

A Word From Verywell

Try to prevent balance billing by staying in-network, making sure your insurance company covers  the services you’re getting, and complying with any pre-authorization requirements. But rest assured that the No Surprises Act provides broad protections against surprise balance billing.

This means you won't be subject to balance bills in emergencies (except for ground ambulance charges, which can still generate surprise balance bills) or in situations where you go to an in-network hospital but unknowingly receive care from an out-of-network provider.

Congress.gov. H.R.133—Consolidated Appropriations Act, 2021 . Enacted December 27, 2021.

Kona M. The Commonwealth Fund. State balance billing protections . April 20, 2020.

Data.CMS.gov. Opt Out Affidavits .

Chhabra, Karan; Schulman, Kevin A.; Richman, Barak D. Health Affairs. Are Air Ambulances Truly Flying Out Of Reach? Surprise-Billing Policy And The Airline Deregulation Act . October 17, 2019.

Kaiser Family Foundation. 2022 Employer Health Benefits Survey .

Centers for Medicare and Medicaid Services. Members of New Federal Advisory Committee Named to Help Improve Ground Ambulance Disclosure and Billing Practices for Consumers . December 13, 2022.

Centers for Medicare and Medicaid Services. Advisory Committee on Ground Ambulance and Patient Billing (GAPB) .

Internal Revenue Service; Employee Benefits Security Administration; Health and Human Services Department. Requirements Related to Surprise Billing . August 26, 2022.

National Conference of State Legislatures. States Tackling "Balance Billing" Issue . July 2017.

By Elizabeth Davis, RN Elizabeth Davis, RN, is a health insurance expert and patient liaison. She's held board certifications in emergency nursing and infusion nursing.