In-Network vs. Out-of-Network

In health insurance, medical services will either be in-network or out-of-network. An in-network provider has negotiated a contract with the health insurance company, agreeing to offer services at predetermined rates. This arrangement typically results in reduced costs for policyholders. Insurance companies also help cover the cost of in-network services through co-insurance.

Conversely, out-of-network providers don’t have such agreements with insurance companies, so patients will generally pay more for services. In addition, many health insurance plans don't cover out-of-network care outside of emergencies.

Knowing the difference between in-network and out-of-network providers can reduce out-of-pocket costs and prevent unexpected expenses. Here's a breakdown:

An in-network health care provider has an agreement with an insurance company to offer services at set rates, typically lower than those of out-of-network providers. Using in-network health care providers is usually ideal, but there are also some disadvantages. All health insurance plans include a network of providers, but two types of plans generally cover in-network care exclusively: EPOs and HMOs.

The following plan types typically include coverage for only in-network services. The differences between them directly influence health care costs. Let’s look at these different types:

• HMO (Health Maintenance Organization): HMO plans strongly encourage you to use their network of doctors and hospitals. In-network services often come with lower out-of-pocket costs. HMO plans don't generally cover out-of-network care, except in emergencies, and they may require a referral if you need to see a specialist.

• EPO (Exclusive Provider Organization): Like HMOs, EPO plans only cover in-network care, except in emergencies. However, they generally offer a larger provider network than HMOs and don't usually require referrals. They offer no coverage for out-of-network care, making it crucial to use health care providers within the network to avoid high out-of-pocket expenses.

In-network health care typically offers lower out-of-pocket costs and reduced paperwork but may limit provider choices. Below is a table detailing these benefits and drawbacks.

An out-of-network health care provider has no rate agreement with your health insurance company. Choosing such providers alters billing and usually incurs higher costs than in-network services. The following are some reasons you might choose or inadvertently end up with an out-of-network provider:

The following two plan types typically offer some out-of-network coverage in addition to in-network benefits:

• PPO (Preferred Provider Organization): PPO plans grant you more flexibility in choosing providers. They cover both in-network and out-of-network care, though the former typically at reduced rates and a higher percentage. While encouraged to use in-network providers, members can opt for out-of-network care if necessary.

• POS (Point of Service): A POS plan offers you a blend of PPO and HMO features. You'll pick a primary care physician (PCP) within the network, who can then refer you to specialists if needed — even if they’re out-of-network. While in-network care keeps your costs down, you can explore out-of-network care with a referral from your PCP.

Balance billing is when a health care provider bills a patient for the difference between an out-of-network provider's charge and the amount allowed by the patient's insurance. Balance billing happens after the insurance company pays the provider the allowed amount for services rendered.

Example

John visits Dr. Thompson, an out-of-network cardiologist, for a consultation. Dr. Thompson's fee is $300. While John’s policy does cover out-of-network visits, his insurance only reimburses up to $180 for such consultations. Dr. Thompson then bills John for the remaining $120. This remaining charge is an instance of balance billing.

Out-of-network health care provides greater provider flexibility and specialized care access. However, it often comes with higher costs. We detail these benefits and drawbacks below.

Here are four examples illustrating the financial and logistical differences between in-network and out-of-network health care services:

Jane recently moved to a new city and is experiencing persistent headaches. She decides to see a doctor and finds two highly recommended primary care physicians nearby. Dr. Smith, the closer one, is out-of-network, while Dr. Adams, a 30-minute drive away, is in her health insurance network. Her health insurance plan includes limited coverage for out-of-network care.

Bob experienced a severe knee injury during a hiking trip. His orthopedic doctor informed him that surgery was inevitable. While researching, Bob discovers two top-tier hospitals known for orthopedic surgeries. The local Community Hospital is in his insurance network, but the Hillside Orthopedic Center, renowned for its success rate, is out-of-network.

Sarah was diagnosed with a rare neurological disorder and cannot find a specialist within her HMO network. She faces a decision: get referred to an out-of-network neurologist or wait for an in-network specialist to become available.

Understanding in-network and out-of-network providers is essential for health care decisions. This section provides answers to common questions about these provider types.

For further clarity on health insurance topics, consult the following MoneyGeek resources. Each offers specific insights related to in-network and out-of-network considerations.

Choosing and Maximizing Your Plan — This guide offers insights on selecting the best health insurance plan and optimizing its benefits, a foundational step before understanding in-network versus out-of-network distinctions.

Can You Have Two Health Insurance Plans? — Explore the complexities and benefits of holding dual health insurance. Knowing how multiple policies work can influence decisions using in-network or out-of-network providers.

Health Insurance Glossary — Familiarize yourself with key health insurance terms. A solid grasp of industry jargon can enhance comprehension of in-network and out-of-network nuances.