How to interpret an EOB
Updated: Feb 15, 2021
The EOB is a common source of stress and confusion for patients. Truth be told, it is even stressful and confusing for doctors who do not run their own practices and have never worked closely with their billers. The purpose of this post is to help patients, and hopefully some physicians, to understand this document.
First, I have to convince you that I understand it. In my present day practice, I have the honor and privilege of working with an amazing biller. I know she is amazing, because I had the painful and unfortunate experience of doing her job myself for about 2 months in the earlier years of my practice. My co-owner and practice partner was about a month from starting maternity leave when my full-time, in house biller gave her 2 weeks notice. We set to work quickly exploring options for outsourcing but struggled to find a solution that felt safe, transparent and cost effective. I signed up for a 2 hour billing tutorial with my EHR company, clearly designed for managers and billers. I learned the basics. Armed only with this rudimentary training, I came back to the office nearly every night when everyone was gone, or woke up and remoted in early in the morning while the rest of my household slept and I pushed out claims, posted payments and (this is a painful memory) even called insurance companies to chase and follow up claims that were not paid at all or not paid correctly. I made a lot of mistakes. I fixed all of them (I hope). Frankly, I am really proud of myself because I managed to keep our AR and payroll afloat. I learned a ton. And, by the way, did I mention I was pregnant at the time. Toward the end of my second month as Owner/Physician/Lead Biller (at this point my partner is on maternity leave), the clouds parted, the angels sang and I found my amazing billing consultant. She is at the top of my gratitude list (Thank you, Debbie!). Hopefully my readers can appreciate that I have an understanding of this process that is far more intimate than most doctors will ever have the misfortune to possess.
The format of the typical EOB is a spreadsheet with roughly 5-10 columns and a row for each service. The emboldened alert, "THIS IS NOT A BILL" rarely manages to allay the anxiety triggered by the dizzying display of numbers, but can always be found somewhere on each page.
Column 1 is generally the service provided - if it is vague, you are entitled to request CPT codes (standardized numerical codes for services or procedures) and descriptions. It is often confusing to patients that a single visit may have multiple codes, but services are billed a-la-carte. For example, if you had a preventive visit with a physician and received a vaccine, you will likely see 3 separate services to include: the physician visit, the medication administered and an administration fee.
Column 2 may be listed as "total charges" or "billed amount." This is usually an inflated, entirely fictional amount that is never expected to be paid in full by either insurance carrier or patient. This is an especially frustrating concept for patients, and I am often asked why this is the case. The truth is, I don't know. I suspect it is a marketing technique that allows the insurance carrier to fabricate some fictional "savings" that they can offer you for being a member. It is my general experience that whatever fee is charged for a service I provide, ALL insurance companies will say, "Nope, here's what we think it's worth" and they will "allow" somewhere between 30% and 50% of the total charge If I charge $10 for a service, they will pay me $3, and if I charge $1000, they will pay $300. I am not exaggerating. It would be so refreshing to simply charge what a service is worth; But with the above absurd explanation, hopefully, patients can appreciate why physicians don't just bill insurance companies $3 for a $3 service. An important thing to keep in mind about this amount is that if a practice or facility is not savvy to the self-pay revolution, they have not considered this and will bill a patient that full amount. If you are researching self-pay options, ask the practice if they have a self-pay fee schedule or what is the percentage discount they offer for self pay. As an example, my practice gives a self-pay discount of 50% of the master fee schedule amount for most services to established patients with a good financial track record (Offering self-pay rates to new patients is a bit risky, especially for small practices, because an established patient is considered to be established for 3 years from their last encounter. Taking on a new self-pay patient without established good faith can be a tremendous loss in the case of an unexpected event). If a practice or facility seems confused by these questions, I would recommend continuing to explore the cost for those services elsewhere. The executive order on Improving Price and Quality Transparency in American Healthcare to Put Patients First, which took effect on January 1, 2021, will hopefully remain intact to help patients in their quest to shop and find cost-effective, quality care by allowing them to compare cost and see estimated patient responsibility from different providers and facilities BEFORE receiving services. For more details, explore here.
Column 3 may be titled "contractual adjustment" or "network savings." This is the portion of the total billed amount that the insurance company "disallows" or denotes as unpayable by the plan or by the patient. It is not legal to bill a patient for this amount if they are using insurance benefits for a "covered" service. This can be tricky in a few rare cases. MOST insurance carriers will only give an amount in this column, IF the service is considered to be a covered benefit, but there are a few rare plans (generally catastrophic, injury and illness policies) that will still give recommended adjustments even for services they do not cover. In my experience, this even confuses seasoned billers. Look closely at your EOBs. In the case that a service is NOT a covered benefit, but recommended allowables and discounts are offered, you are not held to these recommendations and should investigate the self-pay rate as it may be more cost effective.
Columns 4 is generally the amount approved by the plan, and may be the same as the amount paid unless there is a deductible or other patient responsibility (see next section). This column is often called "allowable" or "approved charges.".
Columns 5-8ish are usually designating patient responsibility (in addition to premiums, which do not pay your doctor or facility) and include deductible, copay, coinsurance and "non-covered" expenses. A deductible is the total amount that a carrier expects a patient to cover before plan benefits kick in. For example, if your plan has a $5,000 deductible, the insurance carrier will not pay the doctor or facility for any "covered service" until charges exceed this amount. This can be confusing, because a "covered service" sounds like something that the plan pays for, but this is only the case once the deductible is met. Copay is a set dollar amount that a patient is expected to cover per encounter, generally anywhere from $25-$60 per visit or outpatient encounter. Coinsurance is generally a percentage of the total cost of a service. If a carrier covers 80% of a service after deductible is met, then expect to pay 20% of that amount even if you have met your deductible. If you have not met your deductible, this portion may be moot, as you may be responsible for the entire allowable for that service. "Non-covered expenses" are charges that are not considered to be disallowed or unpayable, but that the plan does not explicitly pay for. These charges are patient responsibility and will be billed. Keep in mind that you may be eligible to pursue self-pay options, but if you choose to use insurance for any service on a given date, you and your provider are bound to the amounts as set forth in the insurance coverage contract.
Column 9 is the best (hopefully). This is the portion that your plan paid!
Column 10 is often significant, but here's hoping it is the lowest amount. Designated as "patient responsibility," remember columns 5-8ish above, this is the amount that your plan allowed but did not cover and for which your doctor or facility will bill you.
I have a minor headache from writing this, so I understand if reading it has been disorienting. While my main goal was to improve understanding and hopefully alleviate patients' frustration and panic with respect to the EOB, my secondary goal is to highlight how absurd and complicated this document it, and in my humble opinion, for no good reason. In contrast, a self-pay bill will show you 1) billed amount 2) self pay discount 3) amount you owe. Calgon, take me away.