What is an EOB?

Have you recently had a doctor's office visit? If so, you likely received an explanation of benefits (EOB) in your mailbox. While it may seem like a bill, an EOB is simply a statement that helps you track your covered services and anticipated medical expenses.

All health insurance policyholders will likely receive an EOB at some point. While it may be confusing initially, knowing how to read an EOB will make you more knowledgeable when receiving healthcare and paying out-of-pocket costs.

In this blog post, you’ll learn:

• What an EOB is and how it can help you understand your healthcare costs.
• The importance of keeping EOBs for tax purposes and ensuring accurate medical billing.
• Why your employer may require you to submit an EOB to receive reimbursements from an integrated health reimbursement arrangement (HRA).

What is an EOB?

An explanation of benefits is a one- to three-page statement from your health insurance company. It summarizes the healthcare you recently received from a provider and details how you and your policy will share the cost of the service.

The way it works is simple:

1. You receive medical care from a provider.
2. The provider submits a claim for the services rendered to your insurance company.
3. Your insurer generates an EOB to mail to you.
   1. The insurance company usually sends the EOB to the primary policyholder. But your insurer may also send it to a spouse or dependent on the plan if they were the one to receive care.
4. The provider sends you a bill for any remaining out-of-pocket cost you still owe for the service.

You’ll typically get your EOB within a few weeks after you receive medical care. Your provider’s bill should match the out-of-pocket amount you’re listed as owing on your EOB. If it doesn’t, contact the medical provider and your insurance company to ensure the bill is accurate.

Why is an EOB important?

Most insurance companies will send you an EOB even if you don’t owe anything out-of-pocket for the service. Even if this is the case, keeping your EOB for your records for at least two years is essential. Sometimes, you may need your EOB for tax purposes. For example, you can use an EOB as proof you received a service if you claim a medical deduction on your tax return.

Below are some other reasons why EOBs are important:

• It details the cost of your care and what you can expect to pay for a particular service. This can help you budget for the expense ahead of time.
• It tracks how much you’ve paid toward your deductible and out-of-pocket limit for the year.
• It lists your eligible discount for in-network covered services under your health insurance plan.
• It can help you identify billing errors, such as getting a bill for a medical service you didn’t receive.
• It contains your insurer's contact information if you have questions or need to appeal a claim.

What does an EOB contain?

EOBs are standard documents within the health insurance industry. While the statement will vary slightly from insurer to insurer, they all contain the same basic details.

Below is some common information an EOB will include:

• Your personal information, including your name, date, member ID, and claim number
• A description of the service and the date you received medical care
• The total amount for the service
• The amount your insurer has agreed to pay the provider for the service
• Your member discount
  • Depending on your plan type, members receive pre-negotiated discounted rates for when they receive in-network care. Out-of-network medical providers may bill you for any part of the total service charges your plan doesn’t cover.
• The copayment, coinsurance, or deductibles you owe
• A remark code (also called an adjustment code or reason code)
  • If your plan doesn’t cover a service, you’ll see a remark code next to the charge for the service. You’ll find details about this code and why your insurance provider denied coverage toward the end of your EOB.
• The amount you may be responsible for paying out-of-pocket
  • The medical provider will send the bill to you directly.
• Specific details about the cost of the service.
• A glossary of the terms included on the EOB
• Instructions for how you can appeal an insurance claim in your state
• A summary of year-to-date deductible and out-of-pocket limit accumulations
• The contact information for your health insurance company
• Language assistance instructions

What is the difference between a claim and an EOB?

A claim is a request for payment for a service that you or a medical provider file with your insurance company. In most cases, an in-network provider will file the claim on your behalf. If you receive out-of-network care, you may be responsible for filing the claim yourself.

If your insurer approves the claim, they’ll pay the provider their portion of the cost. If you filed the claim and your plan covers some out-of-network costs, they’ll reimburse you for the expense. Then, your provider bills you directly for any remaining charges your plan doesn’t cover.

In contrast, an EOB is a summary sent by your insurance company after it receives a medical claim.

If you believe your insurer should have covered a service but denied the claim, you can appeal their decision. Contact your insurance company via the phone number for member services on your EOB or the back of your health plan ID card to start the appeal process.

What if you get an EOB but no bill?

If you obtain medical care and receive an EOB, you might be waiting for a bill in the mail. But sometimes, you may not get a bill from the healthcare provider. This typically means your insurer covered the entire cost of the service. If you paid a copay upfront, it may have also covered the cost. In either case, not receiving a bill generally means you owe nothing. But occasionally, there are errors.

In some cases, the provider tried to send you a bill, but they couldn’t reach you or had an outdated home or email address. Contact the healthcare provider to confirm if you believe you owe money for a service and haven’t received a bill. If you do owe, you don’t want your bill sent to a collections agency for non-payment.

Do you need an EOB to submit an HRA reimbursement request?

A health reimbursement arrangement (HRA) allows employers to reimburse their employees tax-free for qualified out-of-pocket medical expenses. IRS Publication 502¹ and the CARES Act² outline the complete list of eligible services and items.

The IRS requires employees to submit proper claim documentation to receive HRA reimbursements. Usually, this is in the form of an itemized receipt or invoice. But if you have a group coverage HRA (GCHRA), your employer may require you to submit an EOB instead.

Also known as an integrated HRA, the GCHRA supplements an employer-sponsored group health plan. Only employees enrolled in their employer’s group plan can participate. This HRA reimburses you for out-of-pocket costs your group plan doesn’t fully cover, like deductibles, coinsurance, and copays.

By requiring an EOB instead of a receipt or invoice, your group plan’s insurance company decides what’s an eligible expense instead. This narrows the list from the IRS and the CARES Act. Essentially, your insurer determines what medical expenses are eligible for HRA reimbursement.

Conclusion

Despite common belief, an EOB is different from a medical bill. Instead, it helps you understand how your health insurance plan covers your medical care and how much you may expect to pay out-of-pocket. They also show your progress toward your annual deductible amount and maximum limit. So, carefully read your EOB to catch any billing errors, dispute a claim, and keep your healthcare costs as low as possible.

1. IRS Publication 502

2. CARES Act