Example scenario: Patient A goes to their in-network family doctor for a checkup. Patient A goes through the typical procedures of signing in and filling out paperwork describing their coverage and family history. The appointment takes place, and Patient A pays a $25 copay before leaving. Several weeks later, Patient A receives an Explanation of Benefits (EOB) from Insurance Provider Z that shows the following summary:
A week later, Patient A receives the bill from the family doctor. The total charges on the bill are $200. What just happened? Patient A has been balance-billed ($50 for the deductible and $150 for the charges allowed for by Insurance Provider Z).
As seen in the example above, balance billing is when a medical provider bills a patient for the amount not paid for by the insurance provider. In this scenario, Patient A had visited their in-network provider, and in-network balance billing is illegal. Whether the billing issue was intentional or a mistake on the part of the medical provider’s financial office, the patient can’t be held responsible for the $150 allowed for by the insurance provider. The solution to this issue is a phone call to the number located on the bill.
So what would’ve happened if the patient had gone to an out-of-network provider? Balance billing by out-of-network providers is acceptable. Keep in mind that even though a medical provider is out-of-network, the insurance provider may still cover some of the costs, just not as much as if the patient had gone to an in-network provider. If you’ve ever gone to your doctor and filled out the paperwork, you may or may not have read the paragraph right before signing your name where it states, “I understand that I may be held liable for any charges not covered by my insurance.” That paragraph allows the provider to bill out-of-network patients for the amount that hasn’t been received ($200 in the scenario above). This is because the out-of-network medical provider hasn’t contracted with the insurance provider to accept the insurance payment and adjustments as final.
Whether you’re auditing a healthcare client, performing an investigation on a medical provider’s office, or simply using this information for your own personal knowledge, it’s important to understand how to interpret EOBs from insurance providers. Find out whether the medical provider is in-network or out-of-network and then keep in mind how much has been paid for copays, how much has been allocated as an “allowance” or “reduction” by the insurance provider, how much has been paid by the insurance provider, and how much the patient is responsible for when it comes to deductibles and coinsurance.
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