Health Insurance Provider Network Overview

A health insurance provider network is a group of healthcare providers that have contracted with a health insurance plan (via an HMO, EPO, PPO, or POS plan) to provide care at a discount and accept the discounted price as payment in full.

This article will explain how health insurance networks function, and what you can expect from your health plan.

A health plan’s network includes healthcare providers like primary care physicians, specialty physicians, hospitals, urgent care clinics, labs, X-ray facilities, home healthcare companies, hospice, medical equipment providers, infusion centers, chiropractors, podiatrists, and same-day surgery centers.

Health insurance companies want you to use the providers in their network for two main reasons:

• These providers have met the health plan’s quality standards.
• They've agreed to accept a negotiated discount rate for their services, in trade for the patient volume they'll receive by being part of the plan's network.

Why Your Health Plan’s Network Matters

You will pay lower copays and coinsurance when you get your care from an in-network provider, as compared to when you get your care from an out-of-network provider, and your maximum out-of-pocket costs will be capped at a lower level.

In fact, HMOs and EPOs generally won’t even pay for any care you receive from an out-of-network provider unless it's an emergency situation.

And even the less restrictive PPOs—which do pay for out-of-network care—commonly require you to pay 20% or 30% coinsurance for in-network providers versus 50% or 60% coinsurance for out-of-network providers.

And plans that cover out-of-network care also tend to have higher deductibles and out-of-pocket maximums when you go outside the network. In some cases, these plans don't limit out-of-pocket costs at all if you see an out-of-network provider.

(The ACA requires non-grandfathered health plans to limit out-of-pocket costs for essential health benefits, but only in-network; there's no restriction on how high out-of-pocket costs can be if you go outside the network.)

An in-network provider will bill your health plan directly, collecting only the copay or deductible amount from you at the time of services (for coinsurance, which is a percentage of the total amount—rather than a flat rate like the copay and deductible—it's generally better to ask the provider to bill the insurance first, and then your bill will be determined based on a percentage of the negotiated rate that the carrier has with the provider).

However, an out-of-network provider might not file an insurance claim for you. In fact, many require that you pay the entire bill yourself and then submit a claim with your insurance company so that the insurance company can pay you back. That's a lot of money upfront from you, and if there is a problem with the claim, you are the one who's lost the money.

An in-network provider is not allowed to balance-bill you. They must accept the contracted rate as payment in full or they’ll be in violation of their contract with your health insurance company. Note that the contracted rate will include your deductible, copay and/or coinsurance, as well as the portion of the claim, if any, that your insurer pays.

But since out-of-network providers don't have any contract with your insurance company, those rules do not apply to them. In general, an out-of-network provider may charge you whatever their billed rate is, no matter what your health insurance company says is a reasonable and customary fee for that service. Since your insurance company will only pay a percentage of the reasonable and customary fee (assuming your plan covers out-of-network care at all—many don't), you will be on the hook for the entire rest of the bill with an out-of-network provider. Thus, an in-network provider is usually the best option.

As discussed in more detail below, there are different rules when it comes to "surprise" balance billing, which refers to situations in which you used an out-of-network provider because you had no other choice.

Provider Network Changes Under the ACA and Other Federal Rules

Over the last several years, there have been various changes related to provider networks. We'll look at a few of them here:

Emergency Care and Surprise Balance Billing

The Affordable Care Act requires health plans to cover out-of-network emergency services with the same cost-sharing they would use if the provider had been in-network. This means your applicable deductible, copays, and coinsurance for the emergency care will be the same as they would have been if you'd received the emergency care in-network.

But prior to 2022, federal rules did not prevent out-of-network hospitals and emergency medical providers from balance billing patients for emergency care. This is known as "surprise balance billing," because the emergency nature of the medical treatment prevented the patient from actively determining beforehand whether all of the participants in their care were in-network. Surprise balance billing also refers to situations in which a patient goes to an in-network hospital but unknowingly receives care from an out-of-network provider (such as an anesthesiologist) while at the facility.

Numerous states had stepped in with laws and regulations to address surprise balance billing, opting for various provisions that hold the patient harmless in situations like this. But these laws were only applicable to state-regulated plans in that particular state, and they didn't apply to self-insured health plans, which are regulated at the federal level instead.

Fortunately, the federal No Surprises Act took effect in 2022, prohibiting surprise balance billing in most circumstances (it can still apply to ground ambulance charges).

Narrow Networks Become More Common in the Individual Market

In the individual/family market (health insurance you buy for yourself, rather than obtaining from an employer or from a government program like Medicare or Medicaid), provider networks have narrowed over the last few years. There are a variety of reasons for this, including:

• Health insurance carriers have focused on seeking providers that offer the best value.
• Smaller networks give carriers more bargaining power in terms of pricing.
• Broad-network PPO plans tend to attract sicker patients, and the resulting claims costs are higher.
• HMOs with gatekeeper requirements help insurers keep costs down, as opposed to PPOs where patients can opt to go directly to a higher-cost specialist.

Insurance carriers in the individual market can no longer use medical underwriting to deny coverage to people with pre-existing conditions. And the coverage they must provide is fairly uniform and extensive, thanks to the ACA's essential health benefits requirements. Carriers are also limited in terms of the percentage of premium dollars they can spend on administrative costs, thanks to the ACA's medical loss ratio requirements.

All of this has left them with fewer options for competing on price. One avenue that they do still have is switching from more expensive broad network PPO plans to narrow network HMOs and EPOs. That has been a trend in many states over the last few years, and some states no longer have any major carriers offering PPO plans in the individual market.

For healthy enrollees, this is generally not a problem, as they don't tend to have an extensive list of existing providers they want to keep using. But broad network PPOs tend to appeal to sick enrollees—despite the higher premiums—because they allow access to a wider range of specialists and medical facilities. Since health plans can no longer discriminate against sick enrollees by denying them coverage, many carriers have opted to limit their networks instead.

In some states, tiered networks are available, with lower cost-sharing for patients who use providers in the carrier's preferred tier.

Summary

A health insurance provider network is a network of medical professionals and facilities that have agreed to accept a discounted rate for members of a particular health plan. Health plans can be structured as HMOs, EPOs, PPOs, or POS plans. All of them have provider networks, but their coverage rules vary. HMOs and EPOs generally don't cover non-emergency care from an out-of-network provider, while PPOs and POS plans generally will (albeit with higher out-of-pocket costs than the person would pay if they saw an in-network provider).

A Word From Verywell

It's important to review the details of your health plan's network, preferably before you need to use your coverage. Make sure you understand whether your plan will cover out-of-network care (many don't) and if they will, how much it will cost you.

This involves talking with the medical provider as well as your health plan, since your insurer would only be able to provide their reasonable and customary amounts and the portion of that they will pay under the terms of your plan, but balance billing could push your out-of-pocket costs higher.

Make sure you know whether your plan requires you to get a referral from your primary care physician before you see a specialist, and for what services pre-authorization is required. The more you know about your plan's network, the less stressful it will be when you eventually need to use your coverage for a significant medical claim.