Everything you need to know about EOBs in Medical Billing

eob in medical billing

An explanation of benefits or EOBs is an important factor in patient billing. If you are hearing this word for the first time then let me tell you as the name shows it’s not a tool. EOB is simply a document that you receive from your insurance company after taking healthcare services for which a claim was submitted to your insurance plan. But do you know this document can be useful in your financial planning for the year? This is also helpful to make sure that all of your billing details are accurate or not. It’s not enough here there are also some other benefits of EOBs. Let’s see in detail about the EOBs and everything that you need to know so let’s start it. 

What is an Explanation of Benefits (EOB)?

An Explanation of Benefits (EOB) is a document that health insurance companies send to their policyholders outlining the services and treatments that are covered by their policy. The EOB is not a bill but an informational document that helps patients understand their healthcare costs and the insurance company’s contribution. If you have Medicare, an employer-sponsored health plan, or insurance that you bought on your own, you should receive an EOB. 

Importance of EOBs in Medical Billing

EOBs have a very important role in the medical billing process because they provide detailed analysis of medical expenses and offer transparency that helps patients understand what services were covered and what they need to pay out of pocket. EOBs are available for patients to check the accuracy of their bills. Incorrect charges can result from billing or coding problems and EOBs help in identifying and fixing those errors. EOBs help patients in better financial planning for healthcare costs by tracking the amount of their deductible that has been reached and keeping an eye on their out-of-pocket maximums. In case of disputes over billing, EOBs give thorough documentation that provides complete information about the services billed and the payment received. 

Common Terms Found in EOBs

EOBs contain different terms that most the people don’t know so let’s see those terms:

  • Allowed Amount: The maximum amount an insurance company will pay for a covered service. This is often less than the amount billed by the provider.
  • Copayment (Copay): A fixed amount the patient pays for a covered service, typically at the time of service.
  • Coinsurance: The percentage of costs the patient pays after the deductible has been met.
  • Deductible: The amount the patient must pay out of pocket before the insurance company begins to cover expenses.
  • Out-of-Pocket Maximum: The most a patient has to pay for covered services in a plan year. After reaching this amount, the insurance company pays 100% of the allowed amount.

Information on EOB

Now let’s see in detail about the information listed on EOB. It includes:

Patient Information

The first section of your EOB will typically include basic information about the patient like the name and insured ID number. This information ensures that the statement corresponds to the correct individual and their health insurance policy.

Insured ID Number

Your insured ID number is a unique identifier assigned by your health insurance company. It helps the insurer track your claims and coverage details accurately.

Claim Number

The claim number is a unique identifier for each specific claim submitted by your healthcare provider. This number is essential when referencing or inquiring about a particular claim with your insurance company.

Provider Information

This section lists the healthcare provider who delivered the services. It includes the provider’s name, address, and sometimes the National Provider Identifier (NPI). Knowing your provider’s information is crucial for verifying the authenticity of the services billed.

Detailed Breakdown of Services

Type of Service

The EOB will specify the type of service received, such as an office visit, surgery, lab test, or physical therapy. This detail helps you understand the nature of the medical services provided.

Date of Service

The date of service indicates when the medical care was provided. It is essential to keep track of your medical history and ensure that the services billed match your records.

Charge (Billed Charges)

This section lists the total amount charged by the healthcare provider for the services rendered. It is often higher than the amount your insurance will pay, as it includes the provider’s full fees before any insurance adjustments.

Not Covered Amount

The not covered amount represents the portion of the billed charges that your insurance plan does not cover. This amount may be due to services not covered by your plan, exceeding plan limits, or receiving care from an out-of-network provider.

Amount the Health Plan Paid

This section shows how much your health insurance plan paid towards the billed charges. It reflects the negotiated rates between your provider and the insurance company and any applicable co-pays, deductibles, or co-insurance.

Total Patient Cost

The total patient cost is the amount you are responsible for paying out of pocket. It includes deductibles, co-pays, co-insurance, and any non-covered charges. This section is crucial for understanding your financial responsibility for the healthcare services received.

Example EOB Breakdown

To make this concept more clear let’s see an example of EOB:

  • Patient: John Doe
  • Insured ID Number: 123456789
  • Claim Number: ABCD123456
  • Provider: XYZ Medical Center
  • Type of Service: Outpatient Surgery
  • Date of Service: June 1, 2024
  • Charge (Also Known as Billed Charges): $5,000
  • Not Covered Amount: $1,500
  • Amount the Health Plan Paid: $3,000
  • Total Patient Cost: $500

How to Read an EOB

Now that you get the idea about the basics of the EOBs document. Now let’s see if you received the EOB and how you started reading it because most people get confused. 

Start with the Basics

When you receive EOB then start by verifying the patient and provider information to ensure the EOB is relevant to the right person and services.

Review the Service Descriptions

Check the dates and descriptions of services to confirm they match the treatments you received. This section focuses on the procedure codes as these can indicate specific treatments or services.

Analyze the Financial Breakdown

Look at the billed amount, allowed amount, adjustments, and insurance payments. Ensure that the calculations are correct and that you are not being overcharged.

Understand Your Responsibility

Review the section detailing your responsibility to know exactly what you owe. Compare this with any previous payments you have made to avoid duplicate payments.

Look for Explanations and Remarks

Read any notes or remarks that explain the reasoning behind the insurance company’s payment decisions. This can provide the reasons why certain services were not fully covered.

Frequently Asked Questions

An Explanation of Benefits (EOB) is a statement from your health insurance company that details the medical services you received, the amount billed, the insurance coverage, and any out-of-pocket costs you may owe. 

No, an EOB is not a bill. It is a summary of the charges for medical services and how much your insurance has paid. Any amount you owe will be billed separately by the healthcare provider. 

An EOB typically includes patient information, insured ID number, claim number, provider information, type of service, date of service, charge (billed charges), not covered amount, amount the health plan paid, and total patient cost.

The “not covered amount” represents the portion of the billed charges that your insurance plan does not cover. This could be due to services not being covered by your plan, services exceeding plan limits, or care from an out-of-network provider.

You should verify the patient and provider information, check the dates and types of services listed, review the billed charges and payments, and understand any not covered amounts. Contact your provider or insurance company if you notice any discrepancies.

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