Participating Provider Versus Non-Participating (Out-of-Network) Provider

Participating (par) providers are healthcare providers who have entered into an agreement with your insurance carrier. Your insurance carrier agrees to direct "clients" to the provider and, in exchange, the provider accepts a lower fee for their services.

Your insurance carrier screens interested healthcare providers to insure they meet certain standards of quality. If the healthcare applicant meets these standards, your insurance company and the healthcare provider enter into a contract.

For various reasons, non-participating (non-par) providers have declined entering into a contract with your insurance company. One reason may be the fee offered by your carrier is less than what they are willing or able to accept.

Non-par providers may be just as qualified as the participating providers. So why should you use a par provider over a non-par provider?

Your insurance carrier provides you the incentive of paying a lower co-pay if you use a contracted provider. The contract also protects you from having to pay for services which are not considered medically necessary or fees which are above what is considered to be usual and customary.

How it works:

Again we will use the example of your unfortunate skiing accident. Let’s look at your orthopedic surgeon’s claim. He/she has submitted a claim for what he/she feels is a reasonable rate of $7500 for your surgery. Because he/she has a contract with your insurance company, he/she can only change $5000.

You might wonder what happens to the remaining $2500. Will the surgeon expect you to pick of the remainder of the claim? The surgeon may want you to pick-up the remaining $2500 but, because of the contract in place, he/she is not able to "back bill" you for the remaining amount.

What happens if you decide to use a nonparticipating provider?

Continuing with the example of your skiing accident, we will look at the claim for the company that provided you with your cane, wheelchair and commode (durable medical equipment also known as DME).

In this case, the company did not have a contract with your insurance carrier. They submit a claim totaling $2500. Your insurance provider researches their charges and determines the usual and customary amount to charge for the equipment provided is $1500.

Because you used a non-contracting or non-participating provider, your insurance carrier will only be responsible for 50% of the usual and customary amount of $1500 instead of the 75% it would have paid if you used a participating provider. The total amount paid by your insurance carrier is $750, half of the usual and customary rate of $1500.

After receiving your insurance company’s co-payment, the DME provider submits their bill to you for the remaining $1750 (the 50% co-payment of $750 plus the $1000 above the usual and customary rate). Because they are not contracted with your provider, you are not protected from the agency going back to bill you for the amount over what is considered usual and customary.

Beware when you ask a provider if they "take" your insurance!!!!!

You may be thinking that, by their saying "yes we take your insurance" they are participating with your insurance carrier. WRONG!!!!! This only confirms that they will take/accept your insurance company’s payment and perhaps submit their claim to your carrier on your behalf. It does not mean they actually have a contract with your carrier.

To be safe, you should always ask any healthcare provider if they are contracted as a participating provider with your insurance carrier. Are there unscrupulous providers out there who will play this little word game? Sadly, yes, this has happened more times than you can imagine.

Without a contract in place, there is nothing your insurance carrier can do to try to protect you. Please be careful!

What happens if you are not able to locate a participating provider?

If you are unable to locate a participating provider in your area, you should contact your insurance carrier to see if they are able track one down for you. If your insurance carrier can locate a participating provider within a thirty mile radius, they will direct you to this provider.

If your insurance carrier is unable to locate a contracted provider in your area, you can access the services of the non-participating provider and the claims will be covered at the participating rate. Your insurance carrier should issue a letter which gives you "permission" to access the service of an out-of-network provider over a specific time period (usually six months). This letter should be kept handy in case there are any claims related issues.

How this works:

For this example, you were unable to find a contracted physical therapist in your area. To be on the safe side, you contacted your insurance carrier’s customer service department and confirmed there were no par-providers within a thirty mile radius.

You inform the customer service representative that you have identified a therapist you would like to use. The customer service representative states they will issue an out-of-network referral for this therapist for a six month period. During this time, your insurance carrier will pay 75% of the usual and customary rate for services provided. In other words, they will pay the claims as if the non-par provider is a par-provider.

Please be aware, you may still be responsible for charges above the usual and customary rate!

Return to Understanding Your Medical Insurance


Continue to Out-of-Pocket (OOP) and OOP Maximum

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