Health insurance often provides a confusing quagmire of terms, concepts and dollar amounts. The Explanation of Benefits, or EOB, that is mailed to a patient after a doctor’s visit attempts to alleviate some of this billing confusion but can potentially confuse the reader even further. The term “disallowed amount” seems scary, but understanding what the EOB really means helps you to put this, and other health insurance terminology, into context.
What Is EOB?
The Explanation of Benefits is a useful summary of the interaction between your health care provider and your insurance company. Through this paperwork, patients are able to see exactly what was billed to insurance, what was paid by insurance and what was left out. This statement also provides billing codes and explanations, so that if a treatment or procedure was not covered by insurance, you have an idea as to why.
The insurance benefit is a large part of the EOB as this is what the EOB is primarily designed to explain. This column details the services that have been provided to you by your health care provider and that the insurance company has covered under your insurance plan.
The allowed amount is one of the areas where the negotiation between your health care provider and the insurance company becomes apparent. This amount is the contracted rate of pay agreed upon between the health care provider and the insurance company — in a nutshell, this is what your doctor gets paid on your behalf.
The term “disallowed” might set your heart racing and bring visions of steep medical bills, but while these are the amounts that the insurance company has refused to pay, there’s no need to panic. A disallowed amount is simply the difference between what has been billed by the health care provider and what the insurance company has paid. These amounts are not billed to the patient; instead, they are written off by the health care provider.
What It All Means
The EOB’s detail of the back and forth negotiations between your health care provider and your insurance company allows you to keep an eye on what is being billed and what it is meant to cover. Read each EOB carefully and make sure that you understand any codes printed next to the items listed — your insurance company provides an index of their meanings. By taking the time to read this information, you’ll gain a much better understanding of what your insurance company is doing (or not) on your behalf.