It’s a terrible feeling to open a bill and find a balance that’s way higher than you expected. But it’s even worse when you’re recovering from an illness or injury that landed you in the hospital – something you didn’t plan and now can’t afford.

Health care is expensive, but it’s also common to be overcharged for it. Insurance coverage gaps and billing errors also play a part in high health care costs, but the little-known practice of balance billing is all too common.

Here’s how balance billing works, who’s protected from the practice and what to do if you find yourself balance billed.

What Is Balance Billing?

To understand balance billing, you must first understand health insurance networks. Any time you see a doctor, have blood work done or use medical services in general, you use a health care provider that may or may not be in your insurance network. If the provider is in your insurance network, your health insurer and provider have agreed upon rates for services, and that provider “accepts” your insurance coverage. If not, that provider is considered out-of-network for you.

In this case, your insurer has not agreed upon rates with your care provider; therefore your provider can submit a claim in any amount. Many insurance plans still cover out-of-network providers, but at a lower rate – usually a small percentage of charges. Often, when your insurer sends a percentage of the claim to the provider, the doctor or hospital writes off the unpaid amount.

But when your provider holds you responsible for the remaining claim, it’s called balance billing. Even if it seems straightforward on the surface, it’s not – a hospital admission often includes work by several health care providers who aren’t in your insurance network.

In an emergency situation, you won’t have time to confirm who on the hospital staff is covered by your insurance. Additionally, you might not even know what services you need or who will have to perform it. It’s entirely possible in many states to be balance billed in such an emergency situation, even if it’s not entirely fair.

Why It Happens

On a federal level, balance billing is still legal and has been around for a while. And though the Affordable Care Act was enacted to help end unfair billing practices, it doesn’t address this one. In fact, in some ways the ACA helped make balance billing more prevalent.

Before the ACA, health insurers could keep costs down and profits high by passing price increases along from providers to employers and charging riskier, less healthy people more for insurance. The ACA, enacted in March 2010, mandated that individuals could no longer be refused or charged more for insurance premiums based on age or health status. It also enacted a mandatory medical loss ratio of 80 to 85 percent, meaning that's the percentage of premiums that must be spent directly on medical expenses.

With no other way to keep costs down, health insurers have turned to removing high-charging doctors and hospitals from their networks. You can imagine how happy that makes those higher-cost providers, who are accustomed to that income. Since they don’t often want to take a loss themselves, the only remaining option some providers see is to pass that expense onto the consumer.

But when that expense is thousands, consumers are far less equipped than hospitals and outpatient facilities to handle the loss. According to the National Bureau of Economic Research, only 44 percent of Americans could come up with $2,000 in an emergency without taking payday loans or selling possessions. It’s no surprise then that medical bills are the nation’s largest contributor to personal bankruptcy.

What to Do If You’ve Been Balance Billed

Always check any medical bill against your insurance explanation of benefits before paying it. The EOB should arrive in the mail (or online in the insurer’s customer portal) around the same time as the medical bill. If the provider was outside your insurance network, it will be noted on your EOB, along with the portion of the bill your insurer denied payment for. If that amount has been charged to you by your provider, you’ve been balance billed.

Before you bring your bill to the attention of your insurer or provider, you’ll want to know everything that could be incorrect. Look for errors in date, your identifying information and services rendered – medical bills are notoriously error-prone. Note anything suspicious and bring it to the attention of the hospital, first by phone and then in person if you can. You’ll want them to know right away that you want to pay the bill but you’re challenging the charges so they don’t send it to collections.

If they do not agree to change the charges, you’ve got a dispute on your hands. Luckily, if the cause is balance billing, some states have stepped in to protect their citizens from this unfair practice. Colorado, for example, instructs insurers that beneficiaries must be “held harmless” in disputes between hospital and insurer. In New York, patients must be told when a provider is out-of-network before services are rendered so they can give permission to be billed the higher rate.

Before you pay any amount you suspect as being balance billed, check to see which laws apply in your state, starting here if you have an HMO or PPO. You can also check with your state’s insurance commissioner, who can tell you how laws apply to health insurance in your state.