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AgileHealthInsurance Report | 2015-10-19

In-Network and Out-of-Network Coverage: Comparing Obamacare and Term Insurance

Obamacare, Medicaid, premium subsidies, short term health insurance

Provider networks, which are the healthcare professionals and facilities covered by health plans, are one of the most important factors used by Obamacare marketplace consumers for choosing a plan. A recent Deloitte survey found that provider networks were an important factor for 67 percent of Obamacare marketplace consumers.1

Although many plans do not cover providers outside of their network, consumers often seek healthcare outside of their plan’s network. For anyone choosing a health plan, it is important to understand how the plan’s out-of-network coverage works before enrolling in the plan.

Provider Networks

Health plans contract with doctors, specialists, pharmacies, hospitals, labs, and radiology facilities that agree to accept the plan’s contracted rate as complete payment for an enrollee’s healthcare services. The contracted payment rate is equal to the amount that the enrollee pays in out-of-pocket costs plus the cost that the plan pays for the services. For example, if the insurer’s contracted rate for a specialist visit is $300, and the plan makes the enrollee pay 30 percent coinsurance for specialist visits, then the enrollee will pay $90 and the plan will pay $210.

Since the health insurance marketplaces started selling Obamacare plans, consumers have complained about the lack of options in their provider networks. Among the reasons why consumers are not satisfied with their Obamacare plans, 19 percent of respondents in Deloitte’s survey said that network restrictions were the most important reason.2 A recent analysis by Avalere found that Obamacare marketplace plans have 34 percent fewer providers than commercial plans sold outside the marketplaces.3

Going Out-of-Network

Given the smaller provider networks in Obamacare plans, enrollees often want options outside of their network. For example, if an enrollee becomes seriously ill, they may want to see specialists or go to treatment centers that are out-of-network.

Some enrollees live far from their nearest providers. For example, there were enrollees in New York Obamacare plans that lived 15 miles away from their nearest provider.4 Enrollees living in places that are far from their nearest provider may want to visit an out-of-network provider that is not as far away.

It is also easy to go out-of-network by accident. Primary care physicians may refer their patients to a specialist that is not in their plan’s network. Although the primary care physician is in the plan’s network, they will not necessarily know which other providers are in the plan’s network. This is why it is important to confirm that the referred specialist is in the plan’s network before visiting them.

Having medical procedures at an in-network hospital can also lead to out-of-network costs. When patients have surgery at a hospital in their plan’s network, many providers may be involved. If some of the providers are out-of-network, then the patient may have to pay out-of-network costs for the surgery. This can be avoided by asking if all of the providers are in the plan’s network before scheduling the surgery.

Out-of-Network Costs

Enrollees are usually responsible for more costs when they get healthcare outside of their plan’s network. Since out-of-network providers have not agreed to a contracted rate with the plan, they may charge more than the contracted rate. The enrollee may be responsible for the entire cost difference.

If a plan does cover out-of-network services, then usually it will require the enrollee to pay higher deductibles, copayments, and coinsurance than they would have paid for in-network services. The plan will also choose an allowed amount for out-of-network services based on what other providers in the area charge. The plan only pays costs for their share of the allowed amount, so the enrollee is responsible for the cost difference between the allowed amount and the provider’s charge.

If a plan does not have out-of-network coverage, then the enrollee must pay the full cost of the medical services. Last week, a HealthPocket analysis found that only 52.6 percent of Obamacare plans on the federal marketplace at have out-of-network coverage.5 When enrollees get out-of-network healthcare, almost half of Obamacare plans on will not cover the costs, unless there is an emergency or the plan gives prior authorization for the healthcare.

Broader Network Coverage in Term Insurance

Deloitte’s survey found that only 30 percent of Obamacare marketplace consumers were satisfied with their plans overall. This percentage is much lower than the satisfaction rate for Medicare (58 percent) and Medicaid (48 percent).6 Term health insurance plans are a less expensive alternative for dissatisfied Obamacare consumers.

Term insurance plans have broader provider network coverage than most Obamacare plans, so that enrollees can go to any doctors and still be covered. Out-of-network coverage is available in 100 percent of the term insurance plans sold on

In addition to having broader network coverage than Obamacare plans, term health insurance plans are also much less expensive than Obamacare plans for many consumers. An analysis by found that term insurance plans were up to 78 percent less expensive than Obamacare plans for adults without Medicaid that would be eligible for Medicaid if their state had adopted the Medicaid expansion.7

Comparing In-Network and Out-of-Network Costs

Provider network restrictions can be financially devastating for consumers, because they could have to pay their whole medical bill out-of-pocket if they see an out-of-network provider. In order to see how an enrollee’s costs vary depending on whether they go in-network or out-of-network, consider an example with an enrollee that has surgery. In 2012, the average cost for a surgical hospital stay was $21,2008, so assume for this example that the provider charges $21,200 for this surgery.

In the example, suppose that there are two different types of plans. One plan is an Obamacare plan that does not offer out-of-network coverage. The Obamacare plan has a $5,000 deductible, a $6,000 cap on annual out-of-pocket costs, and 30 percent coinsurance for surgery. For 2015 Obamacare bronze plans on the federal marketplace, the average deductible was $5,181 and the average cap on annual out-of-pocket costs was $6,373 for an individual.9 The Obamacare plan in this example has a contracted rate of $15,000 for the surgery in-network.

The second plan is a term insurance plan that has out-of-network coverage. Like the Obamacare plan, the term insurance plan has a $5,000 deductible, a $6,000 cap on annual out-of-pocket costs, a 30 percent coinsurance for in-network surgery, and a contracted rate of $15,000 for the surgery in-network. For out-of-network surgery, the term insurance plan has a $5,000 deductible, 50 percent coinsurance, no cap on annual out-of-pocket costs, and an allowed amount of $20,000 for the surgery.

The table below shows what the enrollee and the plans pay when the surgery happens in-network and out-of-network. When the surgery is in-network, the enrollee has to pay the same costs, $6,000, for both the Obamacare and term insurance plans. When the surgery is out-of-network, however, the enrollee pays $21,200 if they have the Obamacare plan without out-of-network coverage. With the term insurance plan, the enrollee would pay $13,700 for out-of-network surgery.

 Obamacare plan / out-of-network surgeryObamacare plan / in-network surgeryTerm insurance plan / out-of-network surgeryTerm insurance plan / in-network surgery
Provider’s Charge$21,200$21,200$21,200$21,200
Contracted Rate--$15,000--$15,000
Allowed Amount----$20,000--
Enrollee Cost Sharing100%$5,000 deductible, $6,000 cap, 30% coinsurance$5,000 deductible, 50% coinsurance$5,000 deductible, $6,000 cap, 30% coinsurance
Enrollee Pays100% of $21,200Minimum of $6,000 and ($5,000 + 30% of ($15,000 - $5,000))($21,200 -$20,000) + $5,000 + 50% of ($20,000 - $5,000)Minimum of $6,000 and ($5,000 + 30% of ($15,000 - $5,000))
Plan Pays$0$9,000$7,500$9,000
Total Cost for Enrollee$21,200$6,000$13,700$6,000


The comparison between in-network and out-of-network costs shows that consumers can save thousands of dollars by making sure their plan has out-of-network coverage. Nearly half of Obamacare plans on the federal marketplace lack out-of-network coverage, while every term insurance plan sold on has out-of-network coverage. Many term insurance plans are less than half the cost of Obamacare plans that are available in the same location.

Premium costs, out-of-pocket costs, and network restrictions were the main reasons cited for dissatisfaction with Obamacare plans in Deloitte’s survey.10 Given the lower premiums and broader network coverage available in term health insurance plans, consumers choosing a health insurance plan should compare the costs and network restrictions in both Obamacare and term insurance plans to determine which plan will give them the best coverage for their personal needs.

  1. Gregory Scott, Paul Lambdin, Rod Kleinhammer. Public health insurance exchanges. Deloitte.
  2. Ibid.
  3. Chris Sloan, Elizabeth Carpenter. Exchange Plans Includee 34% Fewer Providers than the Average for Commercial Plans. July 15, 2015. Avalere.
  4. Elisabeth Rosenthal. Insured, but Not Covered. February 7, 2015. New York Times.
  5. Almost Half of Obamacare Plans on Federal Marketplace Lack Out-of-Network Coverage. October 7, 2015. HealthPocket.
  6. Gregory Scott, Paul Lambdin, Rod Kleinhammer. Public health insurance exchanges. Deloitte.
  7. Term Insurance Less than Half the Cost of Obamacare for Consumers in the Medicaid Gap. September 16, 2015.
  8. Moore et al. Costs for hospital stays in the United States, 2012. October 2014. HCUP.
  9. Kev Coleman. 2015 Obamacare Deductibles Remain High But Don’t Grow Beyond 2014 Levels. November 20, 2014. HealthPocket.
  10. Gregory Scott, Paul Lambdin, Rod Kleinhammer. Public health insurance exchanges. Deloitte.