What Is an Explanation of Benefits (EOB) in Insurance?

An Explanation of Benefits (EOB) is a statement provided by your health insurance company after you receive medical services. This document details how your health insurance plan processed a medical claim submitted by a healthcare provider on your behalf. Its purpose is to communicate financial information regarding your healthcare costs and coverage. The EOB helps you understand the financial aspects of your medical care.

Understanding What an EOB Is

An Explanation of Benefits serves as a detailed summary from your health insurance company, outlining how a medical claim was processed for services you received. It clarifies the charges submitted by your healthcare provider, the amount your insurance covered, and any portion you may be responsible for paying. An EOB is not a medical bill. While it specifies amounts you might owe, it is primarily an informational statement and does not require immediate payment. The actual bill, if any outstanding balance remains, will be sent separately by your healthcare provider. Insurance companies send EOBs to help you track your healthcare expenses, verify that claims are processed according to your plan benefits, and to inform you about how your deductible, copayment, and coinsurance apply.

Key Information on Your EOB

An EOB contains several categories of information to help you understand the claim processing. It usually begins with patient information, including your name and policy number, and details about the healthcare provider who rendered the services. The date of service, which indicates when the medical care was provided, is also prominently displayed. The document then lists specific service codes, often Current Procedural Terminology (CPT) codes, along with descriptions of the medical services you received. You will also see the charges submitted by the provider, known as the billed amount, which is the initial cost for the services. Following this is the allowed amount, which is the maximum amount your insurance company agrees to pay for a particular service, often based on negotiated rates. The EOB further indicates the amount paid by your insurance company towards the allowed amount. Finally, it details your patient responsibility, which is the portion of the cost you are expected to pay. This responsibility may include amounts applied to your deductible, copayment, or coinsurance. If a claim or service line was not covered or was adjusted, the EOB will often include reason codes to explain the decision.

How to Read Your EOB

Begin by confirming that the patient and provider information, as well as the dates of service and descriptions of care, accurately reflect the services you received. This initial verification ensures the EOB pertains to your specific visit. Next, focus on the distinction between the “billed amount” and the “allowed amount”. The billed amount is what the provider initially charged, while the allowed amount is the negotiated price your insurance will consider for payment. Any difference between these two figures, particularly if you used an in-network provider, often represents a network discount that benefits you. Locate the section detailing the amount paid by your insurer, as this shows how much of the allowed amount your plan covered. Your remaining patient responsibility will be clearly outlined, specifying how much is attributed to your deductible, copayment, or coinsurance. The deductible is the amount you pay out-of-pocket before your insurance begins to cover costs, while copayments are fixed amounts for specific services, and coinsurance is a percentage of the cost you share after meeting your deductible. Additionally, pay attention to any reason codes listed on the EOB, especially if a claim was denied or adjusted. These codes, such as Claim Adjustment Reason Codes (CARCs) or Remittance Advice Remark Codes (RARCs), provide specific explanations for payment modifications or denials. Understanding these codes can clarify why certain amounts were or were not covered, helping you comprehend your financial obligation.

Actions After Receiving Your EOB

Once you receive an EOB, compare it against the actual medical bill you receive from your healthcare provider. This comparison helps ensure that the services, dates, and patient responsibility amounts match between both documents, identifying any inconsistencies before you make a payment. Discrepancies can occur due to timing differences in processing or other administrative factors. You should meticulously check the EOB for accuracy, looking for potential errors such as incorrect dates of service, services you did not receive, or duplicate charges for the same treatment. Medical coding errors, like a typo in a Current Procedural Terminology (CPT) code, can lead to incorrect billing and should be identified. If you find any services listed that you do not recognize, it is important to investigate them. If you identify discrepancies or have questions after reviewing your EOB, contact the provider’s billing department first for clarification. If the issue remains unresolved or pertains to your insurance coverage, then reach out to your insurance company’s member services department. When communicating, have your EOB, the medical bill, and dates of service readily available to facilitate the discussion. Maintaining a record of your EOBs is also an important practice for personal financial management and potential future reference. While many insurers offer online access to EOBs, keeping paper or digital copies can be beneficial for tracking your healthcare spending, monitoring your deductible progress, and for tax purposes if medical expenses are itemized. Most healthcare professionals recommend retaining EOBs for at least three years, with some suggesting up to five to seven years for chronic conditions or for audit purposes.