An Introduction to Explanation of Benefits Statements for In-Network Providers

Today’s video introduces those who aren’t familiar with explanation of benefits statements (EOBs) to several simple examples of them. An explanation of benefits statement is what the insurer issues to the provider and to the insured when a claim is processed in the fee-for-service world. There are other models for paying for care but fee for service is the dominant model.

The provider, let’s say a physician office, submits a claim for your visit to the insurer and the insurer processes the claim. You are ultimately responsible for the amount shown on the EOB (which we recommend you review on your insurance company portal) in the deductible, copayment or coinsurance columns. Sometimes this amount is summarized as “What You Owe” or as the “Patient Responsibility” on other pages that accompany the EOB.

Because our system is complex and adversarial, mistakes are fairly common. If you don’t know how to spot them and what to do about it when you suspect an error, that could very well cost you. Of course, because these are simple examples and fairly low-cost services, they aren’t the best examples of how ignorance can cost you big dollars. We will get to that another day.

Our three examples, associated with services I received last year, are shown in the video and the example links below. They include a nursing visit for an allergy injection, an annual dermatology skin check and a chiropractic visit. The three visits are in-network and each illustrates the ways in which the patient shares in the cost of services through the deductible, a copayment or coinsurance.

Way too much information typically accompanies an EOB. There is often a whole page devoted to how much your insurer saved you, the “Discount,” and the Affordable Care Act-required language on translation services. Get to the page with all the columns as shown in the examples below and read across from left to right.

Nursing Visit (see example)

You can see that I had a regular allergy injection on January 11, 2021. The provider billed $50.00 but because this is an in-network provider who has negotiated rates with CIGNA, the provider has agreed to a discount of $36.13. Thus, the allowed amount (also called the negotiated amount) is $13.87. Because my benefit year begins in January and this is a January 11 service, I am in the deductible period and owe the provider $13.87. This is not a very good example of how much can be at stake when a claim is incorrectly processed. It is, however, a good example of how absurd our system can be in dealing with services provided at a modest cost. This is also an excellent example of why so many providers are frustrated. A great deal goes in to providing an allergy shot. The appointment is booked, the injection prepared and administered, a claim submitted, a processed claim reviewed, and finally a bill sent to me for $13.87, the payment of which must be processed and recorded. That’s a lot of work for about $14. It isn’t a very good system but that is the reality.

Medical Claim for Dermatology (see example)

You can see that on February 15, 2021, I saw the dermatologist for an annual skin check. The amount submitted to insurance was $175.00. The allowed amount is a mere $69.67. I owe a copayment of $35.00. When I taped the video, I thought this claim should have been applied to the deductible but I later learned that my Plan generously instituted a benefit to waive the deductible for this type of visit. This example illustrates the strong incentive you have to stay in-network. It also illustrates why so many dermatologists decide to not be in-network with insurers. An out-of-network dermatologist might have charged more than the $175.00 billed here, the Plan might still have only paid the $34.57 and the entire balance would be your responsibility. We will discuss EOBs for out-of-network providers in a future video.

Chiropractic Visit (see example)

This EOB is interesting because the Amount Billed and the Amount Allowed, $70.72, are identical. As a result, the amount paid by the Plan, $63.64 and the Allowed Amount, again, $70.72, are much closer together than what is usually seen on an EOB. My responsibility was coinsurance of $7.08. However, I was mistakenly charged a copayment of $35.00 for each visit. My Plan handles chiropractic visits in a different manner than medical visits as described above so I owe the coinsurance amount, not the copayment. This is a good example of understanding your benefits so that you can know whether a claim is processed correctly or not. In this example, I overpaid for a number of visits and the office refunded the overpayment to me. But this only happened because I understood my benefit, reviewed the EOBs and brought this error to the attention of the provider’s office staff.

Health insurance is a very important protection but many things can go wrong that result in an error of some sort with the claim and/or the subsequent bill. Please move up the learning curve so that you are only paying what you actually owe.