Ask a Zenefits Advisor: Why is it Better to See an In-Network Healthcare Provider?

Bud Bowlin has been advising business owners about health insurance and benefits for more than 35 years. For his 70th birthday, we gave him his own advice column. Got a burning benefits question for Bud? Send it to [email protected].

Hi Bud,

My employee’s husband has a rare condition, and she’s concerned about the limits of our company’s provider network. I’ve explained the basic differences between in-network and out-of-network providers (and I even directed her to your company’s page on this), but I’m curious if you can give me some backstory on this. Why is it better for her husband to see someone who’s in-network, and how do insurance carriers create these networks?

Wondering About Network Designation & Assessment

Dear W.A.N.D.A.,

Have you ever moved houses and looked to your local social network for some help? If so, you’ve probably found that going “in-network” costs less (maybe as little as a few pizzas) and has extra benefits (your friends won’t judge your furniture) compared to going “out-of-network.” Of course this is a pretty rudimentary comparison, but the same cost and benefits factors can be applied to in-network and out-of-network healthcare.

Here’s how insurance carriers create their networks: Every major carrier has a group of specialists called the managed care department. These specialists visit doctors, hospitals, and other facilities in an attempt to get those providers to contract with the insurance carrier and provide their services at a rate lower than what they typically charge the general public. Sometimes these discounts can amount to a 50-80% discount from “normal” rates. The contracts run for 1-3 years, and the renegotiation can be very climatic and sometimes quite strategic for both the patients of the providers and for the carriers’ clients!

It’s the patient’s responsibility to determine if a provider is in-network or not. If you call the medical office and ask, “do you treat patients with BCBS insurance?” the answer will usually be yes—whether the provider is contracted or not. It’s better to confirm this by phrasing the question: “Are you a contracted provider with BCBS for my health plan?” This way you can expect the insurance carrier to pay the claim on the basis of having used an “in-network” provider.

By staying with in–network providers, insured patients can avoid adverse costs and lesser benefits in the out-of-network environment. The purpose of higher deductibles and lesser benefits in the out-of-network side of benefits is to encourage patients to use in-network providers. Out-of-network providers can charge insurance carriers any amount in excess of in-network agreed-upon pricing—exposing carriers to higher payments and greater claims costs. Carriers pass the higher costs onto the patient and sometimes the covered group employer.

Of course, when it comes to a person’s health, pricing may not be the ultimate deciding factor, and there can be times when it’s necessary to see an out-of-network provider. If an insured patient has a PPO or POS insurance plan, the carrier will pay a percentage of the out-of-network provider’s rate, and the insured will be responsible for paying the difference. Other plans, such as HMO and EPO plans, do not cover any portion of services rendered from an out-of-network provider. For information on finding an in-network primary care physician or specialist, I recommend this article from the Zenefits Help Desk.

In closing, let’s compare notes on the differences between in- and out-of-network providers:

In-Network Providers	Out-of-Network Providers
Fixed contracted costs	No limit to charges per procedure
Lower deductibles	Higher deductibles
Lower co-insurance %	Higher coinsurance %
Faster claims settlement	Slower claim settlement