What Does “Explanation of Benefits” Mean?

Think back to the last time you received one of those forms from Medicare or your health insurer that’s marked “THIS IS NOT A BILL.” Chances are you stuck it in a pile or even tossed it in the garbage, never really looking at it. But if you take the time to understand and review these forms, you may save a lot in out-of-pocket expenses. I once saved $9,500 because of an error on the form—more on that later.

What’s the form all about?

This form is called your “Explanation of Benefits,” or “EOB” for short. By law, Medicare or your insurance company must send it to you every time a medical practitioner or hospital submits a claim for services provided to you. Sometimes, a single form will include a long list of services rendered—especially if you were hospitalized. While the form does not go into detail about the services listed, the EOB is for you, the patient, to review and know what portion, if any, of the charges you will have to pay out-of-pocket—and to spot errors.

What should you look at first?

Every EOB must have the policyholder’s name (which may be your spouse if he/she has the insurance through his/her employer)…the patient’s name…and the patient’s insurance ID number (the number on the patient’s insurance or Medicare card). It will also name the doctor, the practice or the hospital that submitted the claim. Don’t worry about every column on the form. Pay particular attention to “Total Charges,” which is what the hospital or doctor submits to the insurer, and “Allowable Amount” (or “Medicare or Insurance Approved”), which is the amount the doctor or hospital has agreed to accept as full payment. Also check the columns under “Patient Responsibility” that explain what you may have to pay as part of your insurance deductible or copayment. For example, if a hospital submits a bill for a total charge of $10,000, and your insurer or Medicare lists an allowable charge of $4,000, that means the hospital has agreed to accept $4,000 as total payment. If your policy requires that you pay 20% of the bill, the EOB will show that the hospital is allowed to bill you for up to $800 (20% of $4,000)—and no more. If you get a bill for more than that, call your insurer—and do not pay it until the situation is resolved.

What can go wrong?

In my case, my insurer had disallowed a $9,500 charge on the EOB because it claimed that my one-night hospital stay had not been preapproved. But I knew that it had. I called the insurer and pointed out the mistake. The representative told me the error would be corrected and not to pay any bills from the hospital until it was. Other common mistakes include mixing up patients who have similar names, so make sure that your name and identification number are both correct. Also check the EOB for charges from doctors or hospitals that you don’t recognize and look for duplicate charges—such as the use of two operating rooms on the same day. These simple steps can save you a bundle!

Source: Charles B. Inlander, a consumer advocate and health-care consultant based in Fogelsville, Pennsylvania. He was the founding president of the nonprofit People’s Medical Society, a consumer advocacy organization credited with key improvements in the quality of US health care in the 1980s and 1990s, and is the author of 20 books, including Take This Book to the Hospital With You: A Consumer Guide to Surviving Your Hospital Stay.

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