What is an EOB or Explanation of Benefits?
Every insurance payer will give a written explanation of the charges you submitted, what they will pay or not pay, what the patient may or may not owe and any reasons for non payments.
How to read an EOB
Most patients are not able to understand how an insurance interprets their benefits. In fact, many patients do not understand or read many of their benefits and how they are applied.
Sometimes they will get a bill and because they do not know how to interpret that amount and why they owe it, they may come to you.
In my experience I have seen many times where a patient calls and interprets a denial for something they owe. If they call you in a panic, you will want to be able to explain it to them.
- Billed Amount is the amount that the practice or facility billed out based on their Fee for service. If they are under a contract with the insurance they are fully aware they will not actually be reimbursed this amount. Many offices and facilities charge a higher amount to account for the difference in various insurance fee schedules.
- Allowed Amount is the amount that the insurance will allow and consider for payment. If you are under a contract and are credentialed under the patient’s plan you agree as the provider of service to accept this rate.
- Contractural or Adjustment is the difference between what you billed and the allowed amount. Many practice management software programs will autopost the electronic version of an EOB called an ERA or electronic remittance advice.
- Deductible or Coinsurance reflects the amount the patient will be responsible for if they have not met their contractural obligations at the time the service is processed. If they have a $500.00 deductible and at the time of the service have met $300.00 then they will have to pay the difference of $200.00 or the amount submitted and allowed if less than that. Once they meet the $500.00 deductible then the insurance will start kicking in their end of the contract and pay the percentage agreed upon. Some will have an 80/20 where the insurance will pay 80% and the patient 20%.
- Patient Responsibility is the part of the EOB or ERA that states the amount the patient is responsible for. You may see amounts in the deductible and Coinsurance column that added up equal patient responsibility. For example, a bill was submitted for $3000.00 and the allowed amount is $2500.00 The physician office or facility will adjust off $500.00 for their part of the contract with the payer. The patient has a $500.00 deductible and has to meet $100.00 more before the insurance will pay. In the deductible column you will see a $100.00 listed and then in the Coinsurance column you will see $400.00. Why is that? Well after they pay the $100.00 deductible remaining, then they will be paying 20% of the remainder of the allowable of the now remaining $2400.00, assuming they have a 80/20 agreement.
Some systems are not always accurate and have processing errors. We should never automatically process an EOB or ERA without looking at the values. Some have noticed that a zero value is in the allowable section which should be a red flag that something is wrong if you know the procedure is covered per the insurance guidelines and your contract with them. They process many claims so if you do not check these items it may never be discovered. Unfortunately many do not want to take the time to investigate these errors and this can result in loss of revenue for the organization.
If you are short staffed you may consider outsourcing this process regularly or investing in software. Another suggestion is to have as many insurance fee schedules that you can and your contract rates added to your practice management software so that it will notify you that may have been paid or not paid in error.
There are times that you will experience non payments due to a denial. Below are some common denials.
- Non-participating provider
- Medicare EOB needed
- Dates of service Invalid
- Termination of coverage
- No pre-authorization obtained
- Non-covered service
- Timely filing
- Out-of-network provider
- Procedure or service not medically necessary
- Additional Information requested such as medical records
- Coding errors such as ICD10 Codes or modifier mismatch
Investigate these Denial reasons and if the insurance will allow a correction or appeal. They each have different processes for each Denial code so do your homework on each type of Denial. Do not bill the patient for a Denial unless the policy indicates that the patient will be responsible for the Denial.
Work these denials regularly and within the insurance deadlines to ensure timely processing. Reach out to the team at Oncospark for assistance with our integrated software products to streamline your Denial Management and efficiency in timely payments so you can focus on patient care. You can also reach our education services at Ozark Institute for education of your staff.