What Is an Explanation of Benefits?

It looks like a bill from your health-insurance company, and you're confused. Here's how to sort it all out.

May 18, 2014 at 9:30AM

After visiting the doctor, most people receive an explanation of benefits, or EOB, from their insurance company. But what is it? Usually it's labeled "not a bill," but it looks like one. If you've received an EOB and your initial reaction was confusion, you're not alone. Here's a breakdown of a typical EOB.

Information at the top of your EOB
The top of the EOB includes the address and customer-service phone number of your insurance company, so you can call with questions. Also near the top is your name, the name of the primary policyholder, and your patient identification number. If you are the primary policyholder, your name might be here twice.

The other part at the top is your health-care provider's information. In many cases, this will be your doctor, but if you had imaging or lab work done, it could be the name of the facility. This section will also have a process date and a claim number. The claim number isn't your ID number or your policy number, since each service billed to your insurance has a different claim number. The process date is the day your insurance completes its decision on the claim.

Information in the body of your EOB
Below the identifying information, your insurance company usually includes a short statement, or a table, summarizing the claim. The table is confusing, so let's go over it in detail. Keep in mind that insurance companies don't organize their EOB tables the same way, so the columns you see might be in a different order from what they are here.

Date of service: Each line usually starts with the date of service -- the day you saw the doctor or when the procedure was performed. If your EOB is for an outpatient procedure, each line will have the same date. But if you were admitted to the hospital and stayed overnight, or if you had a complex series of services, there could be more than one date listed.

Medical billing codes: Each service you receive is identified by a code, which determines how you are billed. There are four kinds of codes that could show up on your EOB.

  • HCPCS Codes: Five numbers that identify supplies and drugs used during an outpatient visit. HCPCS is the Healthcare Common Procedure Coding System.
  • CPT Codes: Five numbers used to identify procedures or tests performed by a provider. CPT stands for Current Procedural Terminology. CPT codes are part of the HCPCS.
  • ICD-9 Codes: A system of codes assigned to every diagnosis and procedure. ICD-9 codes are from the International Classification of Diseases, Ninth Revision.
  • Revenue Codes: A system to identify the location of an inpatient procedure or service and the dollar amount associated with the procedure. Revenue codes are attached to the other three codes and help group similar charges.

It's important to note that not every EOB will have all four codes. If your EOB is for an inpatient claim, it will have ICD-9 Procedure Codes, ICD-9 Diagnosis Codes, and Revenue Codes. If the EOB is for outpatient services, it will have HCPCS, CPT, and ICD-9 Diagnosis codes only.

Place of service: This code identifies the facility you visited. Your insurance company may not cover certain procedures unless they're performed in a specific setting, such as a hospital or urgent care facility.

Charge amount: This is the amount your provider billed your insurance company. This is what you would have been charged if you didn't have health insurance.

Allowed amount: If the provider is in your insurance network, this is the amount for each service that your insurance company and health-care provider have agreed to. If a line is blank for this column, your insurance probably doesn't cover this service.

Not covered amount: This is the amount your insurance won't pay for a service. If it's equal to the charge, your insurance probably doesn't cover this service.

Reason code: This code explains why a service wasn't covered or how a claim was processed. Reason codes are usually on a separate page or after the EOB table.

Copayment: The fixed amount you pay upfront for each service. For many services, this is the only amount you're responsible for, and you probably paid it when you received the service. The copayment doesn't count toward your deductible.

Deductible: The amount you pay before your plan covers the service. The deductible may not apply to each service. Some services may be covered and you'll be responsible only for a copayment. You'll be responsible for services that aren't covered by your health plan, and those payments don't go toward your deductible.

Benefit amount or percent covered: This is the percentage your insurance covers for a network provider. Not all EOBs have this column, since it's usually fixed for in-network providers and explained in your summary of benefits.

Payment amount: The dollar amount your insurance company agrees to pay your provider. In most cases, the company has made the payment before you receive your EOB.

Due from patient: The amount you are responsible for paying to the provider. If the amount is equal to the copayment and you already paid it, you and your insurance company have covered the costs for this service. If it's more than the copayment, or you haven't already paid a copay to the provider, you should expect a bill from the provider.

If you're still confused about your EOB, head to NerdWallet's Ask An Advisor forum, where we have medical billing experts who can help answer your questions. We've done the homework for you.

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