A Rosetta Stone for Deciphering Insurance Billing Statements

Is paperwork from your medical insurance provider leaving you confused? You’re not alone.

When it comes to healthcare expenses, the insurance billing system is a major pain point for patients. Billing woes are one of the main reasons so many people remain confused about health insurance in general — a whopping 41% of Americans don’t understand their medical bills. Roughly one out of every three people in the U.S. have had a medical bill go to collections, and about a quarter of those individuals were not even aware that they owed anything.

Understanding your medical bill and the mechanics of your insurance coverage can empower you to know what to expect ahead of time. Luckily, we can help with that! Let’s start with the basics.

This Is Not a Bill: What is an EOB?

Let’s take a look at one of the more fundamental parts of your insurance bill: the explanation of benefits, or “EOB.” It’s the core document insurance providers use to explain the services your doctor billed, when that service took place, and the amount insurance will cover — along with how much you’ll be expected to pay.

When visiting your doctor, you’ll likely be asked whether the service should be billed to your insurance. If you say yes, the office submits an insurance claim requesting that your insurance company covers the cost of the visit and any services. Remember that some providers require upfront payment, in which case you’d have to be reimbursed by the insurance company later.

Once your insurer receives the claim, they’ll evaluate it, build an EOB, and mail that to you. Many companies keep digital versions, too, and make them available for easier reference online. You can expect an EOB for services if you have private insurance, insurance through work, or Medicare. If you have an HMO, however, you might not receive one because patient care is built around a recurring monthly fee.

Now that you know what an EOB is, let’s talk about how to read an EOB so you can turn that knowledge into action.

EOBs Aren’t Bills — But They Still Matter

While the EOB tells you how much you’re responsible for paying, it’s just for reference. Your medical bill will come separately — from your doctor rather than your insurance company. Once your EOB arrives, review it closely while checking for potential errors.

Here are a few common errors to watch for:

• Billing for services you didn’t receive.

• Double billing for a single service.

• The provider billing the wrong amount for a service.

• Your insurance company not covering a service as it should have.

• Incorrect dates of service.

• An error with your deductible.

Breaking Down Your EOB

To better understand your EOB, go through each section individually. Start by confirming any identifying information and that the doctor listed is actually the one who treated you. From there, review each column or box with the help of this handy guide.

Service Description: This shows where your doctor is seeking reimbursement for the service provided. You should see a description of the service and a corresponding code and date of completion.

Submitted Charges: This is the amount your provider billed you or your insurer for the service.

Negotiated Amount (aka “allowed charges” or “allowed amount”): This is the amount your insurance plan agreed to pay for the service. If your doctor is out of network, this is the price your insurer will base reimbursement on.

Not Payable: Other times labeled as “not covered” or “pending,” these are the charges your plan will not cover. Typically, it is the difference between what your provider billed and the negotiated amount covered by the plan. You’re responsible for paying this amount.

Copays, Deductibles, etc.: The copay is the amount you have to pay for most doctor visits — generally when you’re still in the office. The deductible is an annual total that you have to pay for services before your coverage kicks in.

Payable Amount (or “plan pays”): These columns add and subtract the charges and deductions. The total figure is equal to the negotiated amount minus your deductible, coinsurance (the percentage of covered charges you’re responsible for), and copayments.

Patient Responsibility (or “member pays”): This is the amount you’re responsible for paying your provider directly.

Knowing how to read an EOB is a bit like speaking a second language. Making sure the details of service are correct and understanding how an EOB works can help ensure that you don’t get charged incorrectly or fall victim to medical fraud. It enables you to be an active participant in your healthcare and confident in your knowledge of the payment process.

Understanding your EOB is a great first step toward more seamless healthcare. Check out our Beginner’s Guide to Health Insurance for a refresher on the terms your insurer uses to describe your coverage.