Many working-age adults lacked stable health coverage in the first half of 2020, according to a report by The Commonwealth Fund.1 “What is surprising is the large share of people in employer plans who are underinsured,” says Sara R. Collins, PhD, vice president of health care coverage and access at The Commonwealth Fund and report co-author.

About one-quarter of people with employer coverage pay high out-of-pocket costs or deductibles relative to their income. “This trend has been driven by growth in deductibles over time,” Collins says.

The number of underinsured adults has increased since 2010, when only 7% of people with private health insurance paid deductibles that were 5% or more of their income (a key indicator of underinsurance). Privately insured adults with deductibles of at least $1,000 more than doubled from 2010 to 2020 (from 22% to 46%). “The larger problem is in the individual market and marketplaces, where about 40% of enrollees are underinsured,” Collins explains.

Benefit requirements under the Affordable Care Act have improved insurance coverage. “But, clearly, more work is needed from federal policymakers to protect people against high out-of-pocket costs and encourage access to timely care,” Collins offers.

Early identification of underinsured patients buys time to find solutions. “A facility should be financially clearing 100% of its patients preservice — or, at the very latest, before discharge,” says Jonathan Wiik, MHA, MBA, principal of healthcare strategy at TransUnion Healthcare.

Huge hospital bills for people with insurance often happen because somewhere along the way, a provider was out of network. “This is often discoverable in preservice eligibility and estimation processes,” Wiik says. The following are some contributing factors to surprise hospital bills for underinsured patients:

Health plans do not properly communicate which providers or facilities are in network. It is the patients’ responsibility to understand the providers contracted for their health plan, but it does not always happen. Hospitals also keep a list of contracted providers, but these are not always up to date. “This leads to frustration and confusion, as the patient, provider, and payer could have three different lists,” Wiik observes.

Hospitals do not always properly communicate which providers are in network for admitted patients. This prevents the underinsured person from making an informed decision. “Admitted patients are more challenging, as many [admissions] are not planned,” Wiik says. This makes it difficult for providers to engage in financial discussions with patients in advance about coverage, network status, and costs.

Some hospital contracts do not include reciprocity language for noncontracted physicians. “Reciprocity is a Medicare rule that is loosely followed in some cases, where hospitals can align their reimbursement rates with their independently contracted physicians,” Wiik says. Under this rule, if certain conditions are met, Medicare will accept and pay claims for a substitute physician at the Medicare rate. “In the case of commercial insurance, payer-provider contracts can reverse this,” Wiik says.

For example, contracts can state: “In the event a patient presents to the facility with in-network benefits, and the attending physicians are out of network, the out-of-network physicians agree to the reciprocal usual and customary in-network rate for the service.”

“In most cases, hospitals encourage — and many require — that as part of the credentialing process, when a provider receives admitting privileges at that facility, they also receive rate reciprocity or the prevailing in-network benefit rate,” Wiik says.

These agreements between the hospital and providers can be enigmatic. “Hospitals should look for gaps,” Wiik offers. “This is especially important for hot spots of out-of-network care.”

These “hot spots” include radiology, pathology, surgery, anesthesiology, and emergency medicine. Physicians from these specialties most often are out of network with the hospital. “These physicians, if credentialed to practice medicine at the provider facility, should also be matrixed to the facility insurance contracts where possible,” Wiik suggests.

Patient access staff do not always detect the out-of-network providers before the bill is sent. Most insurance contracts use the terms “fair market value” and “usual and customary rates” for how patients should be charged when the health plan offers some out-of-network benefit. “In the absence of this, 100% of the charges fall to the patient,” Wiik observes.

Most providers have a sliding scale discount fee policy for self-pay patients. This same discount should be given to patients who receive out-of-network bills, according to Wiik: “In these cases, the difference, or nonpayment, is classified as a bad debt adjustment.”

Hospital charge masters often are not an accurate reflection of the cost of care. “As such, holding the patients responsible for the inflated charge is not ethical,” Wiik explains.

Many organizations discount the charges down to the net deduction in revenue to reflect the average insurance discounts. “There is still a gap between what the patient can afford and what is owed,” Wiik says. For instance, a patient may present to the ED at a hospital that is out of network, and the charges are $35,000. The insurance net deduction in revenue may be $10,000. The patient is billed $10,000, but pays an in-network $150 copay.

Patients do not understand the scope of the coverage and network of their insurance plans. “[Plans] were not designed to cover care anywhere for anything. They do have limits,” Wiik says.

Patient access departments cannot control all this, but education is one way to stop surprise hospital bills for underinsured patients. At Stony Brook (NY) Medicine, education has become a major part of the patient access role. “We have increased patient access staffing considerably compared to five years ago to respond to the many variations in benefit designs and cost-sharing responsibilities we need to communicate to our patients,” says Laurene Molino, interim director of patient access services.

Registrars explain copays, deductibles, or co-insurance when preregistering patients for elective procedures and in the ED. Patients generally do not know too much about their coverage. Some are shocked at the dollar amount of their cost-share. “Many patients produce their insurance card, but really do not fully understand the type or scope of coverage their individual policy provides,” Molino says.

One thing that commonly confuses patients is the difference in cost between freestanding diagnostic centers, outpatient centers, or inpatient hospital settings. This can lead to surprise bills for insured patients. It is one of the many issues registrars have to explain to patients. “Benefits may vary significantly depending upon the site of service,” Molino says.


  1. Collins SR, Gunja MZ, Aboulafia GN. U.S. health insurance coverage in 2020: A looming crisis in affordability: Findings from the Commonwealth Fund Biennial Health Insurance Survey, 2020. Aug. 19, 2020.