Out-of-Network Service Denials
Health insurance is supposed to provide patients with the care they need, but policy rules and network restrictions often make access to quality care more complicated than it needs to be. One of the most common frustrations policyholders encounter is the denial of claims for services rendered by out-of-network providers. Understanding why these denials happen, when they are valid, and what patients can do in response is critical for making informed healthcare decisions and avoiding financial surprises.
If your insurance company is acting in bad faith by unreasonably delaying treatment requests or claim payments, denying claims on grounds that aren’t supported by the facts, or violating California insurance law and the duty to act in good faith, contact Gianelli & Morris in Los Angeles to review your situation with our team of experienced California insurance bad faith attorneys.
Why Insurers Deny Out-of-Network Claims
Health insurance companies negotiate contracts with doctors, hospitals, and clinics to create a network of providers who agree to accept reduced, pre-set rates for services. These agreements help insurers control costs, and in exchange, the providers gain access to a steady stream of patients covered by that insurer.
When patients go outside of this network, insurers may refuse to pay for the service or may only cover it at a much lower level. The reasoning is simple: insurers have not negotiated a contract with that provider, so the provider can bill at higher rates. Insurers respond by passing those costs on to the patient or denying the claim altogether.
Generally speaking, insurers can lawfully deny coverage for out-of-network services if:
- The provider has no contractual relationship with the insurer.
- The patient chose an out-of-network provider when an in-network provider was reasonably available.
- The policy language specifically excludes certain out-of-network services.
However, not all denials are absolute, and there are circumstances where out-of-network services may still be covered.
Why It’s Usually Better to Stay In-Network
As a general rule, patients should always try to stay with in-network providers whenever possible. Out-of-network coverage is rarely generous and often comes with a combination of higher deductibles, higher coinsurance, and “balance billing,” where the provider charges the patient for the difference between their billed amount and whatever the insurer pays.
The typical “equation” for out-of-network coverage looks like this:
- Insurer pays: A percentage (for example, 60%) of what it considers to be the “usual, customary, and reasonable” (UCR) charge for a given service in the geographic area.
- Patient pays: The remaining percentage of the UCR amount plus any amount the provider charges above the UCR.
For example, if an out-of-network surgeon charges $2,000 for a procedure, and the insurer decides the UCR is $1,200, the insurer might cover 60% of $1,200 ($720). The patient would then be responsible not only for the 40% balance of $480 but also the $800 difference between the billed amount and the insurer’s UCR calculation, leaving the patient with $1,280 to pay out of pocket.
This system almost always results in significantly higher bills than patients would face with in-network providers.
When Out-of-Network Services May Be Covered
There are certain situations where insurers are required to treat out-of-network services as if they were in-network, or at least provide greater coverage:
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Emergency Care: Under federal law, insurers must cover emergency services provided at out-of-network facilities at the same cost-sharing level as in-network services. This includes emergency room visits where the patient had no realistic opportunity to select an in-network hospital or doctor.
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Lack of In-Network Specialists: If a needed specialist or service is not available within the insurer’s network, patients may be entitled to see an out-of-network provider at in-network cost-sharing rates. Insurers sometimes require preauthorization for this, but patients can and should push back if the insurer attempts to deny coverage under these circumstances.
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Continuity of Care: In some cases, if a patient is already in the middle of treatment with a provider who later leaves the network, insurers may be required to cover continued treatment for a limited time as in-network, particularly for serious or ongoing medical conditions.
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Network Adequacy Failures: If an insurer’s network is so limited that it fails to provide reasonable access to necessary services, regulators may step in to require coverage for out-of-network care.
What Patients Can Do After an Out-of-Network Denial
If an insurer denies coverage for out-of-network services, patients are not without options. First, it’s important to carefully review the explanation of benefits (EOB) and compare it with the policy language. Sometimes denials are the result of coding errors or misinterpretations that can be corrected with a phone call or appeal.
Patients may also appeal on the grounds that no in-network provider was available, that the service was an emergency, or that denying the claim effectively deprives them of medically necessary care. Documentation from treating physicians, records of attempts to locate in-network providers, and state or federal protections can all be powerful evidence in an appeal.
In other situations, patients may be able to negotiate directly with the provider for a reduced rate, particularly if the insurer’s payment already covered a portion of the bill. Some hospitals and physicians are willing to adjust charges if it means avoiding prolonged billing disputes or collection efforts.
Insurance Claim Wrongly Denied in California? Contact Gianelli & Morris for Help
Out-of-network service denials can feel like a betrayal of what insurance is supposed to provide: security and peace of mind when medical care is needed. While insurers are within their rights to deny many out-of-network claims, there are important exceptions and strategies for challenging denials or reducing costs. The safest route is almost always to remain within an insurer’s network, but when that is not possible, patients should understand their rights, review policy language carefully, and pursue appeals or negotiations where appropriate.
If your insurance company is treating you unfairly or in violation of California’s insurance consumer protections, contact Gianelli & Morris to explore your options for justice, accountability, and the healthcare you need and deserve.
