What Is An EOB?

If you are like most people, you use some type of medical service at least a couple times a year. You might visit your family doctor, have blood work done, or get a cavity filled. If you have insurance and you or your doctor file a claim for these services, you’ll receive an EOB, or Explanation of Benefits. An EOB is what your insurer uses to explain how it calculated your health insurance benefits when it processed your claim.

Your EOB may arrive in the mail a few weeks after your visit or procedure, or if you’ve signed up for electronic notifications, it may only be available on your insurer’s website. I like to get mine in the mail, because it is a physical reminder to check the statement for accuracy. It is also easier to compare the EOB to the bill when it comes and make sure they match.

Why Does It Matter?

There are many steps involved in medical billing, and mistakes can happen in any of them. Experts estimate that as many as 30-90% of all bills contain mistakes. Did your nurse enter the information on your chart accurately? Was the hospital’s medical coder overworked that day and as a result, end up entering a wrong code? If your insurance company processes paper records, did the information get transferred completely and correctly? Many times, your EOB is often the only way of knowing whether your claim was processed correctly. By comparing your EOB to the bill from your provider, you can verify your charges. You can also catch double billing or charges for procedures that your provider didn’t perform.

Reading Your EOB

Reading and understanding an Explanation of Benefits can be confusing. Even an EOB for a routine checkup can have several procedure codes listed. Each of those procedure codes will have charges associated with it. Your insurer then applies your health insurance benefits to those charges, and this results in a lot of numbers for a simple visit.

I used one of my own recent EOBs to show you the different parts and how you can decipher the numbers. Check it out below:

1. Deductible Limit – The amount you must pay before your insurance benefits kick in. Mine was $750 for in-network care for myself ($2,250 for the whole family). I’ve already paid that in healthcare costs for the year, so under the heading “Amount Satisfied,” it says “Met”. I won’t have to pay anything toward my deductible for the rest of the year.
2. Out of Pocket Limit – The total amount of money you would have to pay towards medical costs in a plan year. Your insurance company should pick up anything over that amount.
3. Billed Amount – How much your provider (doctor or hospital) charged for their services.
4. Allowed Amount – How much your insurance company is willing to pay for that service. This amount is negotiated by the insurance company and your provider when they join the network.
5. Member Savings – The difference between the Billed Amount and Allowed Amount, so this appears when you use an in-network provider.
6. Your Plan Paid – What your insurance company paid towards your bill. In my plan, they pay 80% for this type of service, and I pay 20%, so this number is 80% of the allowed amount.
7. Copayment – You may have copayments (a fixed amount, generally due at the time of service) for things like doctor or specialist visits. Copayments don’t usually count toward your deductible or out of pocket maximum. There was no copayment for this service.
8. Deductible – I had already met my deductible before this surgery, so I didn’t have to pay any more toward it.
9. Coinsurance – This is my part of the bill (the 20% that I am responsible for). This number is 20% of the allowed amount.
10. Other Liability – This section is for expenses that may not be covered by insurance or were incurred out of network, or for procedures that were not approved. You are generally responsible for paying these expenses, unless you file an appeal and they change their mind.
11. Total – This is the amount due that you should see on the bill from your provider.
12. Service – The type of service that your provider performed (followed by a number in parentheses). Make sure that you actually had these services performed on the date specified and that the codes listed here match your itemized bill.
13. Reason Code (Sorry, no green number circle!) –  Your insurer uses a number code to explain the reasons why they made certain decisions. They will provide an explanation of any codes used with your EOB.

Take Ownership

Catching mistakes and disputing charges are two ways that understanding an EOB can save you money. If you see a mistake, call your provider or insurance company. If you disagree with a decision made by your insurance company, you can always file an appeal with them. There should be instructions on how to file an appeal enclosed with the EOB. Additionally, EOBs are useful in tracking your spending on healthcare. This may be especially useful at tax time if you are unsure of whether you can deduct your medical expenses. Reviewing your EOBs can also help you with healthcare budgeting and planning ahead for health insurance elections.

Ultimately, knowing how to read an EOB will enable you take more ownership of your healthcare, while helping you to save money.