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Understanding Insurance Company Payment Statements
I have worked in the healthcare industry for eighteen years. During that time, I have managed several billing departments ranging in size from one physician to several hundred physicians. I have extensive experience in reviewing health insurance correspondence and processing health insurance claims and payments.
What is an EOB?
Many insurance companies and governmental payers will send a copy of an Explanation of Benefits or EOB when they process a claim billed by a provider, such as a doctor or hospital. Insurance companies may have different terminology for these statements, such as Explanation of Payments or Statement of Benefits. Whatever they call the document, it is intended to let the patient know what services were billed on their behalf by the provider, what is covered and what is not, and an expectation of what the patient will be expected to pay the provider out of their own pocket.
There are several terms on an EOB that might seem like another language if you have not read these statements before. Here is a list of some of those terms:
Allowed Amount: Insurance companies and providers have contracts in place to offer discounted rates. This allowed amount reflects the amount that the insurance carrier shows in their database is the contracted amount for this service.
Payment Amount: This is the amount that is actually being paid by the insurance carrier for this service. It is not necessarily the same as the allowed amount, as copayments, coinsurance and deductibles will need to be taken into account.
Copayment Amount: This is the amount that the patient owes at the time of service. It is usually a flat amount and often printed on the front of an insurance card.
Coinsurance Amount: This is also an amount that the patient owes for services. However, it is generally a percentage of the allowed amount, and as a result, is often due after the claim has been processed by the insurance carrier. Your provider will often bill you for this amount at a later date, but can ask for the amount up front if they are able to determine what it will be.
Deductible Amount: This is an amount due from the patient and generally must be paid before the insurance carrier will pay for any services. Usually preventative services are excluded from deductibles.
NonCovered Amount: Insurance carriers use this term in different ways, but generally this is an amount or service that is not covered by your insurance policy. If it is not covered, there will probably not be an allowed amount associated with it and you may be asked to pay the entire charge to your provider. However, some insurance contracts protect the patient from this, so if you did not sign a waiver or notice at the time of service you should check with your insurance company before you pay this amount.
Discount Amount or Contractual Allowance: This is the amount that the insurance carrier is expecting the provider to discount the billed charges. If there is a contract in place, the provider cannot hold the patient responsible for this amount.
Billed Charges: This is the amount that the provider billed to the insurance carrier for the service.
CPT Code: This is a term that means procedure code. Nearly every service you receive at a provider has an associated procedure code. It is a numerical code sent on a claim to represent the services you received. There are thousands of different procedure codes.
Diagnosis Code: This is an alpha numeric code that represents the complaint or symptom associated with the procedure. For instance if you went to the emergency room for a fracture, there would be a procedure code billed to represent an Xray and also a diagnosis code to represent an arm injury.
Insurance companies and carriers will negotiate contracts with providers of health care services such as hospitals and physicians. If you access care outside of that insurance network, your insurance company may decide not to pay any portion of the bill, dependent upon the plan you signed up for with your insurance company. Some plans have out of network benefits and some do not. Nearly all plans provide out of network benefits for true life and/or limb threatening emergencies.
It is very important to review your Explanation of Benefits statements that you receive from your insurance company to make sure you (or a family member) received the services being billed and that you know what should expect to pay to your provider. If there is a discrepancy, attempt to work it out with your provider. If you cannot, you should consult your insurance company.