What Are Explanation of Benefits & How Do They Work?

An Explanation of Benefits (EOB) is a statement issued by your health insurance company after you receive medical care. Its primary function is to detail how your healthcare services were processed and paid for by your insurer. This document is typically sent after a healthcare provider submits a claim for services rendered, providing a transparent breakdown of costs. It serves as an informational statement, not a bill, outlining the financial transactions related to your medical treatment.

Key Sections of an Explanation of Benefits

An EOB outlines the financial details of a processed medical claim, providing a comprehensive summary of how your insurance benefits were applied. While the format may vary among insurers, most EOBs contain similar information designed to help you understand the charges and payments.

The EOB begins with basic identifying information, including the patient’s and provider’s names, identification numbers, and addresses. It also lists the date or dates when services were rendered and may include Current Procedural Terminology (CPT) or Healthcare Common Procedure Coding System (HCPCS) codes, along with diagnosis codes, which describe the specific services and conditions.

It details the charges billed, which is the initial amount the healthcare provider requested for the service. The EOB then specifies the “allowed amount,” the maximum your insurance company will pay for a covered service, often a negotiated rate between the insurer and the provider.

The EOB indicates any portion applied towards your deductible, the amount you must pay out-of-pocket before your insurance coverage begins to contribute to costs. It also shows your copayment (a fixed amount for a service) or coinsurance (a percentage share of the cost) that you are responsible for after meeting your deductible.

The amount paid by the insurer is clearly stated, reflecting the portion the insurance company directly disbursed to the provider. The EOB specifies the patient responsibility, the remaining amount you are accountable for paying to the provider. EOBs often include reason codes or brief descriptions that clarify why a service was denied, adjusted, or not fully covered, offering insights into the insurer’s decision.

Why Reviewing Your EOB is Crucial

Carefully reviewing every EOB you receive is important for managing your healthcare expenses and ensuring accuracy in billing. This practice allows you to verify that the information aligns with the medical services you actually received.

Checking for accuracy involves confirming that dates of service, types of services, and provider information match your personal records. This helps identify potential billing errors, such as duplicate charges for the same service or charges for services you did not receive, which could indicate fraudulent activity.

Reviewing the EOB also helps you understand your financial responsibility by confirming the amount you owe and how it corresponds with your health plan’s benefits. This allows you to anticipate and prepare for any upcoming medical bills. EOBs provide updates on your progress towards meeting your annual deductible and out-of-pocket maximums, allowing you to track your financial contributions throughout the plan year.

If you discover an error or discrepancy on your EOB, compare it against your own records, such as appointment confirmations or personal notes. If the discrepancy persists, contact the healthcare provider’s billing department for clarification and resolution. Should the issue remain unresolved with the provider, reach out to your insurance company’s customer service department; they can often provide further explanation or initiate an investigation. Many insurers also have an appeal process for denied claims, which you can inquire about if necessary.

Distinguishing Your EOB from a Medical Bill

Distinguishing between an Explanation of Benefits and a medical bill is important. An EOB is an informational statement, not a request for payment.

An EOB originates from your health insurance company, detailing how a claim was processed. It outlines what the insurer paid, any discounts applied, and your estimated financial responsibility; you do not submit payment based on this document.

Conversely, a medical bill is a direct request for payment from the healthcare provider, such as a doctor’s office, hospital, or laboratory. This document specifies the exact amount you are required to pay for services rendered. Only pay based on a medical bill received directly from your provider, and only after reviewing the corresponding EOB to ensure charges are accurate and consistent. Comparing the medical bill to the EOB before payment helps confirm amounts match and benefits were applied correctly.