How an Explanation of Benefits Will Save You Money

By Jeff Besada

Nothing puts a strain on your bank account like a hefty medical bill. We all have to deal with them eventually, since we all need healthcare. While there are a wide range of different policies available in the health insurance world, they all use a common form to detail claim information. This form is called an explanation of benefits (EOB). Once a claim is processed by the health plan, this document is sent to the patient describing how the plan handled payment. It is essential to understand this document since it will help you from overpaying your medical provider.

The first thing to note about the EOB is that it is not a bill. Most health plans list this important fact at the top of the document. On the left side of the EOB you can find a list of each service that was billed for, accompanied by a code. The provider who is billing then has their list price for the service and the allowed amount by your insurance. When patients have health insurance and stay in network, they are allowed to take advantage of a much lower rate for nearly every medical service than someone would if they paid out of pocket. This is what the allowed amount is, the actual contracted rate between the provider and your insurance company. The amount paid for the service will then depend on the subtleties of your policy such as deductible and coinsurance. Finally on the far right is a column that will indicate the amount owed.

It’s a good idea to be familiar with the parameters of your health insurance policy so some simple arithmetic can tell you if the insurance paid correctly. If they did not, you need to call the member hotline and speak to someone in the claims department as soon as possible. Make sure you get the name of the person you speak to so you can follow up if they don’t address the error right away. When you’re proactive and make a phone call early, the health plan can update your EOB and get a correct copy to the provider so you don’t receive an incorrect bill from them.

If a mistake is made and said to be corrected, make sure you get a correct EOB sent to you for record keeping purposes. In some states like Florida, hospitals and other medical providers have up to 5 years to reconcile their bills. Just because a health plan says the mistake is corrected, doesn’t mean it is until you have it in writing. Their mistake can still come back to haunt you years later.

One of the most important facts about an EOB is that it’s the official document associated with billing as far as an insurance carrier and medical provider are concerned. It is the only document you should reference when paying medical bills. Some providers incorrectly send you bills before the EOB is generated with a demand for payment at their list price. This should prompt an immediate call to the provider to alert them of the inaccuracy so you don’t inadvertently get sent to collections. You should also be aware that some places do this out of habit to try and collect extra money and take advantage of uninformed consumers.

The main benefit to understanding the aspects of an EOB is that it can save patients money. The healthcare system in general is very confusing and it’s difficult to stay up to date on all the changes, especially with regards to billing. If you can remember these simple tips they will help you avoid paying a bill in error. For anyone who has dealt with medical bills before, one rectified bill can mean a difference of thousands of dollars.

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