What is an Explanation of Benefits letter?

This is the first article in a series about the Explanation of Benefits summaries that the patient receives after their provider files a medical claim. To read the rest of the series, please check out the links below.

What is an Explanation of Benefits letter?

Whenever you receive medical services and your provider files a claim with your health insurance, you will receive an Explanation of Benefits (EOB) letter in the mail from your insurer a few weeks after your appointment. If you are enrolled in an online membership account with your insurer, you may receive your EOBs electronically, instead. The EOB is an itemized statement of the claim filed on your behalf by your provider and gives a detailed summary of the amounts that are required to be paid by the patient. This summary includes all negotiated discounts and reflects the amount still outstanding after the insurer has processed the claim and assigned whatever insurance policy benefits the patient has through their insurance plan. This letter is meant to make sure that the patient is aware of the charges that have been filed on their behalf, thereby decreasing medical fraud and making patients aware of the true costs of their medical care.

Do not throw your EOB away! Even though the headline starts with “This Is Not A Bill,” the EOB essentially acts as a preliminary warning of any potential incoming medical bills and provides the necessary information you will need to appeal any adverse decisions. There are a few primary reasons why the Explanation of Benefits is important to the patient.

  1. The patient is able to see what the provider is billing them for.  By reviewing the EOB from the insurer, the patient can double check to see if there are any discrepancies between the services the patient received, what the provider claims the patient owes, and what the patient’s insurer states they actually owe the provider. The amount you have paid to your provider, or will owe to your provider if you did not pay in full at the time of service, should equal the amount that your EOB states you should have owed in the “Patient Responsibility” column.
  1. The patient is able to see how much their healthcare really costs. For many patients, especially those with employer sponsored health plans, the structure of their health insurance plan insulates them from the true cost of their healthcare. If all patients made decisions as if they would have to pay 100% of the total costs of their care, price shopping would increase, unnecessary expenses would vanish, and healthcare expenses would be reduced for everyone. However, when patients are able to get anything they want for just their $20 copay, for example, they have no real need to discern value when utilizing their health insurance. These patients are often the ones most shocked by rising health care costs when an unexpected job change or life event causes them to have to seek an alternative method of health insurance coverage. By keeping the patient up to date on how much their insurance benefits are being utilized and how much the insurer is paying out on their behalf, the insurer not only wants the patient to be aware of their true cost of care, but they also want to make sure the benefits the patients receives are being noticed. In their minds, this will encourage your continued participation in their plan, in equal parts due to appreciation of their previous payments and the fear of having to make future payments on your own.
  1. The patient can verify their provider, and insurer, is processing their claims correctly. Insurance EOBs include a lot of information that the patient can use to determine their current insurance plan benefits and make sure they have been signed up for the plan they were expecting. The EOB generally includes a summary section that details the amount of your deductible, if any, the amounts applied towards the deductible for the current benefit period, copayment amounts owed, and out of pocket maximum limits on your current insurance plan. This is generally useful information for the patient to know when planning for expected healthcare expenses. The EOB also includes the amount you will owe your provider. The practice of “balance billing” patients for amounts not covered by their insurance is illegal in most states, but it is theoretically easy to get away with if the patient and insurance company never discuss the actions of the provider with each other. Some providers have also been accused of charging their patients for services they never received, which is obviously just as illegal. It is best to discuss the discrepancy with your provider first, just to make sure it is not an easily correctable mistake. If the amount differs, you may be either entitled to a refund for over-payments or possibly even subject to a larger balance than expected.
  1. The patient can attempt to appeal a denial. After your provider files your claim, the provider receives an Explanation of Payments (EOP) letter. The EOP is essentially the same thing as an EOB, just formatted slightly different for providers. The patient usually receives their EOB about a week before the provider receives their EOP. This gives the patient some time to initiate an appeal for a claim denial before the provider even knows it was denied, thereby reducing the amount of wasted administrative time and expenses for both parties. Ideally, this is supposed to give the patient enough time to get the claim corrected before the patient is ever even contacted by their provider about the denial, but the process rarely happens that fast. The EOB that the patient receives has detailed instructions on what they should do if they disagree with the insurer’s decision to assign responsibility to the patient. The patient may also be required to submit a copy of the EOB with their appeal, so it can reduce the amount of time and effort required if the patient saves the original version.

There are obviously a lot of steps in the insurance claim process, and definitely too many to cover in one post. Because of that, this topic will be expanded into a series, with one post being released each week. Unfortunately, most patients do not fully understand their benefits and are reluctant to learn them because the entire system seems too difficult or frustrating to deal with. I decided to write this series because most of our patients want to be actively involved in every aspect of their healthcare and deserve a better answer to their insurance questions than the ones they usually receive from their insurers and other providers. Hopefully, this series will enable our patients to understand the entire claim process a little better.

In the rest of the blog posts in this series, I will explain the specifics involved in your EOB, including detailed information on the following topics:

  1. What is an Explanation of Benefits Letter?
  2. Basic EOB Terminology
  3. Determining Patient Responsibility
  4. Determining Plan Details
  5. Accessing Online EOBs
  6. Understanding Denials and Denial Codes
  7. How To File an Appeal

If you have any specific questions or topics you would like us to discuss, please mention them in the comments below and we will address them in future posts. If you are a patient at Family Care and have any questions about EOBs you received for claims from our office, please let us know by filling out our contact form. Thank you!