How to Read an Explanation of Benefits
Have you ever gotten an Explanation of Benefits from an insurance company after you go to the doctor or hospital? Probably. Do you know exactly what you’re looking at? Probably not!
An Explanation of Benefits is essentially “one big receipt” that explains your visit. It shows what was billed, what was paid by the insurance company, and what you, the patient, have to pay. But let’s explore it line by line.
By the Numbers
The first number you’ll notice (because it’s usually the biggest number on the page) is the ‘Billed’ amount. That’s the amount the doctor’s office wants to bill the insurance company.
The next number that you should look at is the ‘Allowed’ amount. The ‘Allowed’ amount is based on the contract agreement the doctor’s office has with the insurance company. That’s what the insurance company is actually going to let the doctor’s office charge for the particular procedure or visit.
The ‘Adjustment’ number is between ‘Billed’ and ‘Allowed’ on the sheet. It’s just the difference between those two numbers, similar to a write off. So in this example $875 was billed, $134.22 was allowed, so the adjustment is $740.78. This is similar to a write off, the amount should not be billed to the patient.
The next items you’ll notice are words you’re probably pretty familiar with – co-pay, deductible, and co-insurance. These amounts are all based on your individual insurance contracts, but let’s go through them because it’s easy to get them mixed up.
- The co-pay is what you agreed to pay every time you go to the doctor. It could be $10, $20, $30 (or more). It’s $0 in this example.
- The deductible is basically the amount you have to pay yourself before the insurance kicks in, at which point you don’t have to pay any more. That’s also $0 in this example.
- Co-insurance is the percentage you have to pay of the ‘Allowed’ amount. Again, in this case, there’s none to be paid.
So in the first example, the patient owes nothing, but that’s not always the case!
This is another example of an Explanation of Benefits where the patient does owe an amount.
‘Total Charges’ on this example is the same as ‘Billed’ on the last sheet. As a reminder, that’s what the doctor’s office wants to charge for the visit or procedure, but the ‘Allowed’ amount is what the insurance company will let them charge.
Look closely at this example and you’ll see that there’s a ‘Paid’ column that’s different to the ‘Allowed’ amount. We’ll let Medical Billing & Coding student Daniella explain this one;
“Again it’s down to the insurance. They [the insurance company] don’t always pay the full ‘Allowed’ amount like they did in the example before. So the ‘Paid’ column – $120.90 – is the amount that the insurance company is actually going to pay the doctor’s office. Obviously there’s a difference between the two…so that means the patient has to pay the rest. That’s why it says the patient’s responsibility is $30.84.”
On this example you’ll notice a bunch of codes that you may not understand (unless you’re a Medical Billing & Coding student!)
As a patient you don’t need to worry about these codes, they’re for the doctor’s office. They explain why the insurance company isn’t paying the amount requested in the ‘Billed’ amount or ‘Total Charges’. The reason given here is that the ‘Total Charges’ exceeds the fee schedule, which is the maximum (the ‘Allowed’ amount) they allow for that visit.
Good Record Keeping!
It’s important to hang on to these Explanation of Benefit documents. When you get the bill from the doctor, you can then compare them side by side. Daniella explains why keeping good records is vital;
“Doctors and hospitals are always trying to get more money, any way they possibly can. This is your proof to say ‘this is what I paid because this is what it said I owed’. It’s one big receipt to make sure that in the end, you’re not paying more than you need to.”
We hope that helps unravel the mystery of an Explanation of Benefits!
 For comprehensive consumer information, visit https://carrington.edu/degrees/medical-billing-and-coding/