Explanation of Benefits 101
Health insurance plans can be difficult to navigate. If you’re new to filing claims or have been filing and not understanding the denials you’ve received, it’s helpful to understand what an EOB (explanation of benefits) is and why it’s important.
What Is an EOB?
EOB stands for explanation of benefits. This is the paperwork that comes in the mail in response to every claim filed by you or by your child’s provider. Leslie Lobel, Head of Health Plan Advocacy Services at Undivided, tells us that as tempting as it can be, don’t ignore these envelopes. “Start thinking of the EOB as a roadmap to the financial story of every medical encounter you and your child will have, and the mechanism by which to pursue correct payments,” Lobel says.
Why Are EOBs Important?
EOBs contain the information you will need to be on equal footing with your health plan. Some of the envelopes you receive may contain checks, but even without a check attached, every envelope contains valuable information. “Don’t trust the health plan to get it right,” Lobel says. “If you are reading your EOBs carefully, you can sometimes catch your insurance company’s mistakes.” In 2013, major health insurance providers had to reprocess 5 to 20 percent of claims for accuracy. In 2019, nearly one in five claims (17 percent) were denied among healthcare.gov carriers.
“Holding your health plan accountable for accurate reimbursement is good for your financial health and can, in the long run, reduce your stress and anxiety about medical expenses, and even give you a sense of control. You may not like what the plan is paying, but you need to understand how it is paying,” Lobel explains.
When Will You Receive an EOB?
EOBs are generated in two ways:
- When a network claim is billed by the provider
- When an out-of-network claim is submitted by you or by your out-of-network provider
What Does an EOB Contain?
An EOB varies in format from plan to plan, but it always serves to identify the following:
- The patient and provider
- The network status and claim number
- The date(s) of service and the services provided
- The reason code
- The charges or the amount you pay the out-of-network provider
- “Due to your doctor” or the allowed amount, generally a much lower number
Check out these example EOBs:
Important Terms to Understand
Here are some terms to know when examining an EOB:
- Deductible: The cost for covered and approved services you have to pay annually before the plan begins to pay.
- Share of cost/copay: The percentage or fixed dollar rate of the allowed amount you pay for covered services after the deductible.
- Out-of-pocket maximum: The cap in your total annual share of cost, after which the plan pays 100% of the allowed amount.
What Should You Verify When You Receive an EOB?
- Study the dates of service, patient name, and provider name. You want this information to be accurate, as it is part of your child’s medical history.
- Check the network status to be sure that it is recorded properly, and note the location of the claim number. This will come in handy during communication with the health plan.
- Take a look at the reason code. With a denied claim, it will show the basis for the denial. “Knowing this can put you ahead of the game when communicating with customer service representatives,” Lobel explains.
- Note the doctor’s charges and “due to your doctor.” This is also known as the allowed amount or the MRA (maximum reimbursable amount). This is not what is actually due to the doctor but rather what your health plan has decided is 100% of their obligation for an out-of-network provider. For example, if you have 80% coverage, you will not receive 80% of the amount that you actually paid but instead will receive 80% of what the health plan decides to allow for out-of-network reimbursement. Note that this is after the deductible has been met and continues until the out-of-pocket maximum is met.
Talk to your Navigator if you’re interested in a support evaluation call to discuss a health plan audit and claims management services. To learn more about claim denials and appeals, read our article here.