For most of the last few decades, the billing sequence in American healthcare was predictable. You received care, the provider billed your insurer, the insurer paid its share, and then you got a bill for whatever was left. That order is changing. A growing number of hospitals and medical providers now want money before they treat you.
What is happening
Preservice deposits, sometimes called point of service payments, are requests for payment collected at or before the appointment. The amount might represent the balance remaining on your deductible, or it might be a percentage of what the provider expects the visit to cost. Practices vary widely, and so does the math behind the number.
A recent KFF Health News report described a Colorado man who flew to Arizona for a neurosurgical consultation after being told the facility was in his network. On arrival he was sent to the financial office and asked for a 5,000 dollar deposit, because the facility had determined it did not accept his plan and had classified him as self pay. He had earlier received an estimate of 565 dollars through his insurer’s portal. He refused, his appointment was canceled, and he later won an arbitration award of 47,500 dollars in damages and fees under Arizona consumer protection law.
That case is unusual in its outcome. The underlying billing practice is not. Major systems including Mayo Clinic, Johns Hopkins Medicine, and MD Anderson publish policies describing prepayment or deposit requirements for certain non emergency situations.
Why now
Two pressures are converging.
First, deductibles keep climbing. The average per person deductible in employer family coverage is roughly 3,762 dollars. Average deductibles in ACA marketplace plans rose about 37 percent this year to approximately 3,786 dollars. As hospital prices, drug costs, and labor expenses rise, insurers hold premiums down by shifting more exposure onto members. One industry finance executive quoted in the report described the effect as asking patients to self insure.
Second, hospitals know that larger patient balances are harder to collect. Analysis from more than 2,300 hospitals shows that uncollected patient debt is rising even as upfront collection increases. Providers respond by capturing what they can before the service is delivered. On average, hospitals now collect roughly a quarter of the amount they expect the patient to owe, up from a smaller share in prior years. Collection rates also differ by geography, with some states considerably more aggressive than others.
What the rules actually say
There is one firm protection. Under federal law, a hospital that participates in Medicare cannot demand payment before stabilizing a patient who presents to the emergency department.
Outside of emergencies, protections thin out quickly. In network patients may have recourse through the provider contract with their insurer, so the plan documents are worth reading. For out of network care, there is generally nothing stopping a provider from asking for money in advance. How the amount gets calculated is largely the provider’s discretion, and patients often cannot tell whether a figure represents a deductible balance, a percentage estimate, or something else. A provider scheduling a procedure three months out has no reliable way to know what a deductible balance will be on the service date.
Refunds are the other soft spot. Overpayments happen routinely, especially when other bills tied to the same episode, such as anesthesia or surgeon fees, hit the deductible first. Timelines for returning the money depend on state law, and few states address the issue directly. Florida now requires refunds within 30 days of a determined overpayment. Arizona’s attorney general brought a consumer protection action against a large imaging chain over delayed refunds, which settled with a commitment to issue refunds within an average of 60 days. Some states, including Maryland, bar certain hospitals from using prepayment demands to sidestep financial assistance obligations.
What to do about it
Before a scheduled procedure, verify network status directly with your carrier rather than relying on the provider’s front desk. Get a written good faith estimate. If you are asked for a deposit, ask for an itemized explanation of how the number was calculated and call your insurer to confirm whether the request is consistent with your plan’s terms. Keep records of every payment made before service, and follow up in writing if the final claim adjudication shows you paid too much.
For employers, this trend is one more reason to look closely at plan design. Higher deductibles reduce premium, but they also change how and when employees encounter cost. A workforce facing five figure deposits at the point of care will feel that long before they read the summary of benefits.
If you want help evaluating how your current plan exposes employees to upfront costs, or reviewing alternatives, we are glad to walk through it with you.