Understanding the Cost of Healthcare: Explanation of Benefits Statement

A seated couple reviews their explanation of benefits statement.
It is important to understand Explanation of Benefits statements because they provide a picture of your billing history.

After you visit a healthcare provider, their office submits a claim to your insurance company. The claim lists the services your doctor provided to you. Then, the insurance company uses the information in the claim to pay your doctor for those services. When the insurance company pays your doctor, it will send you a report called an Explanation of Benefits, or EOB.

What is an Explanation of Benefits (EOB) and why does it matter?

A young woman tries to understand an Explanation of Benefits statement
It can be shocking to get an Explanation of Benefits statement in the mail. Many people confuse it with a medical bill and don’t understand the terminology.

You need to be able to read and understand the EOB to know what your insurance company is paying for, what it’s not paying for, and why.

An EOB is not a bill. It is a statement that comes directly from your health insurance plan, not from your healthcare provider. It describes what costs your insurance plan will cover for medical care and devices you have received. An EOB is generated each time a healthcare provider submits a claim to an insurance company for the services you have received.

You should get an EOB regardless of the portion of the bill that the insurance company paid (it might be none of it, if the service wasn’t covered by your plan or if the cost was applied to your deductible).

The insurance company sends you EOBs to help make clear the cost of the care you receive, any money you saved by visiting in-network providers, and any out-of-pocket medical expenses you’ll be responsible for.

Information in an Explanation of Benefits

Your EOB has a lot of useful information that may help you keep track of your healthcare costs. A typical EOB has the following information and will tell you how much of your annual deductible and out-of-pocket maximum have been met. The way the information is shown will vary from one insurance plan to another:

  • Member Information: This shows the patient’s full name and ID number.
  • Patient Account Number: This is the unique identification number used by your healthcare provider to track your account.
  • Provider Name: The name of the hospital, physicians’ office, or healthcare professional you visited during your appointment.
  • Claim Number: This unique identification number is used by your insurance provider to track your account.
  • Date of service: The date you received the medical services, procedures, or supplies.
  • Service Code: This identifies the specific services, procedures, or supplies you received from a healthcare provider.
  • Total Amount: This dollar amount shows the full cost of the procedures, services, or supplies.
  • Not Covered: This is the amount your health insurance does not cover. You are responsible for this amount.
  • Reason Code Description: This code provides the reason(s) why your insurer did not cover a charge.
  • Covered by Plan: This is the total amount your health insurance provider has saved you.
  • Deductibles and Copayments: Adjustments added based on the deductible and copay features of your insurance plan.
  • Total Net Payment: This includes the full dollar amount your insurance company has paid to your healthcare provider.
  • Total Patient Responsibility: This is the total amount you owe your healthcare provider.
  • Checks Issued: This section gives you a detailed record of the payment transactions from your insurer to your healthcare provider. These lists generally contain the payee’s name, check number, and check amount.

Why is this important?

Doctors’ offices, hospitals, and medical billing companies sometimes make billing errors. These mistakes can have annoying and potentially serious financial consequences. Fortunately, your EOB is a window into your medical billing history.

So, review it carefully to make sure you actually received the service being billed, that the amount your doctor received, and your share are correct, and that your diagnosis and procedure are correctly listed and coded.

Did you find this post helpful? Be sure to read our other guides on how to understand your medical bill and how to appeal a claim.

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