What Is Assignment of Benefits (AOB) in Medical Billing?

Medical billing involves various forms and agreements. One such document, frequently used in the healthcare system, is the Assignment of Benefits (AOB). This article aims to clarify what an AOB entails and how it influences the medical billing process for individuals.

Understanding Assignment of Benefits (AOB)

An Assignment of Benefits (AOB) is a legal agreement where an individual directs their health insurance company to pay their medical benefits directly to a healthcare provider. The main purpose of an AOB is to simplify the payment process for healthcare providers by enabling them to bill the insurance company directly, rather than requiring the patient to pay upfront and then seek reimbursement.

The AOB involves three primary parties. The patient acts as the assignor, granting permission for their insurance benefits to be directed elsewhere. The healthcare provider, who is the recipient of the direct payment, is known as the assignee. The third party is the insurance company, which processes the claim and disburses the payment. This arrangement helps streamline financial transactions in healthcare.

How AOB Works in Medical Billing

When a patient receives medical services, they typically sign an AOB form during registration or check-in. This signed document authorizes the healthcare provider to submit claims and collect payments directly from the patient’s insurance company for the services rendered.

Once the AOB is in place, the healthcare provider submits the bill directly to the patient’s insurance company. The insurance company then reviews the claim, checking it against the patient’s insurance plan to determine coverage. If the claim is approved, the insurer sends the payment for the covered services directly to the provider. This direct payment mechanism largely removes the patient from the day-to-day transaction between the insurer and the provider for the covered portion of the medical bill.

Patient Responsibilities and Protections

Even when an Assignment of Benefits is signed, patients retain financial responsibilities. Patients are still accountable for deductibles, co-payments, co-insurance, and any services not covered by their insurance policy. These out-of-pocket costs must be paid by the patient even after the AOB facilitates direct payment for covered benefits. It is important for patients to understand their specific insurance policy’s coverage details and potential out-of-pocket expenses.

In some situations, particularly with out-of-network providers, a practice known as “balance billing” might occur. This is where a provider bills the patient for the difference between their total charge and the amount the insurer approved for payment. While certain federal laws, such as the No Surprises Act, protect patients from unexpected balance bills in specific emergency and in-network facility scenarios, patients should still review their Explanation of Benefits (EOB) from their insurer. The EOB details what the insurer paid, what was covered, and any remaining balance the patient owes, helping ensure accuracy and preventing unexpected charges.