How to Read Your Explanation of Benefits (EOB): A Guide to Decoding Medical Bills

After a visit to the doctor or a stay in the hospital, your mailbox begins to fill with a flurry of confusing paperwork. You'll receive a bill from the doctor's office, another from the hospital, and perhaps another from a lab. But before any of those arrive, you will receive a document from your health insurance company called an Explanation of Benefits, or EOB.

To the untrained eye, an EOB looks suspiciously like a medical bill. It has columns of numbers, lists of medical services, and a final, bolded amount labeled "What You Owe." It's tempting to either panic and pay this amount or, more commonly, to file it away and ignore it. Both are mistakes. An EOB is not a bill. It is, however, one of the most important tools you have to understand your health costs, verify that your insurance has been processed correctly, and protect yourself from the rampant problem of medical billing errors.

Learning to read and understand your EOB is a form of financial self-defense. It transforms you from a passive recipient of confusing bills into an empowered healthcare consumer. This guide will demystify the EOB, breaking it down section by section so you can understand exactly what your insurer did and what you actually owe.

What is the Purpose of an EOB?

An Explanation of Benefits is a summary statement that your health insurance company sends you after it has processed a claim for medical services you received. Its primary purpose is to show you:

• What the medical provider billed for.
• What your health plan has agreed to pay the provider.
• What portion of the bill is your personal financial responsibility.

It is a transparent accounting of the transaction between your doctor and your insurance company. You should never pay a medical bill from a provider until you have received the corresponding EOB from your insurer and have verified that the two documents match. The EOB is your key to confirming the bill is correct.

Decoding the Key Sections of a Standard EOB

While the layout can vary from one insurer to another, all EOBs contain the same fundamental information. Let's walk through the most important columns and terms you will see.

1. Patient and Provider Information: The top of the EOB will clearly identify who the statement is for (the patient), the policy number, and who provided the service (the doctor or hospital). Always verify this is correct.

2. Service Details: This is the itemized list of what you are being charged for. It will typically include:

• Date of Service: The day you received the medical care.
• Service Description: A brief description of the service, often accompanied by a CPT (Current Procedural Terminology) code. This five-digit code is a universal identifier for a specific medical procedure (e.g., 99213 is a standard office visit). While you don't need to be an expert in these codes, if something looks wildly incorrect (e.g., you see a code for a surgery you didn't have), it's a major red flag.

3. The Financial Columns: Where the Action Happens

This is the heart of the EOB and the source of most confusion. Let's break down the columns.

• Amount Billed (or "Submitted Charges"): This is the "sticker price"—the full amount your medical provider billed your insurance company for the service. This number is often an inflated starting point for negotiations.

• Network Discount (or "Plan Discount," "Allowed Amount," "Negotiated Rate"): This is one of the most important columns. Your insurance company has a contract with in-network providers that specifies a discounted price for every service. This column shows the "write-off" or the amount of the original bill that the provider has agreed to forgive as part of their contract with your insurer. This discount is a primary benefit of using in-network care.

• Amount Paid by Plan: This column shows the exact amount your insurance company has paid directly to the medical provider.

• Deductible / Copay / Coinsurance: This section breaks down your share of the cost. It will show you how much of the bill was applied to your annual deductible, copay, or coinsurance.

• What You Owe (or "Patient Responsibility"): This is the bottom line. This number is the sum of your deductible, copay, and coinsurance for that specific claim. This is the amount you should expect to see on the bill you receive from your doctor's office.

4. Deductible and Out-of-Pocket Maximum Tracker: Most modern EOBs include a helpful summary that shows your progress toward meeting your annual deductible and your out-of-pocket maximum. This is a great tool for tracking your total healthcare spending for the year.

A Real-World Example: Putting it all Together

Let's say you have a PPO plan with a $1,000 deductible and 20% coinsurance. You have a specialist visit and a minor procedure. Here's how the EOB might look:

Service	Amount Billed	Network Discount	Plan Pays	Your Share (Deductible/Coinsurance)	What You Owe
Office Visit	$400	$150	$0	$250 (Deductible)	$250
Procedure X	$2,000	$800	$360	$750 (Deductible) + $90 (Coinsurance)	$840
Totals	$2,400	$950	$360		$1,090

Let's break down the math for "Procedure X":

1. Allowed Amount: The provider billed $2,000, but the negotiated rate (Amount Billed - Network Discount) is $1,200.
2. Meeting the Deductible: You had already paid $250 of your $1,000 deductible with the office visit. So, the first $750 of the procedure's allowed amount goes toward satisfying the rest of your deductible.
3. Applying Coinsurance: The remaining balance on the procedure is now $450 ($1,200 - $750). Your plan requires you to pay 20% of this. 20% of $450 is $90. This is your coinsurance.
4. Plan Pays: The insurance plan pays the remaining 80%, which is $360.
5. Your Total for the Procedure: You owe the $750 to meet your deductible plus the $90 in coinsurance, for a total of $840.

The final bill you receive from the doctor should be for $1,090.

What to Do When You Receive Your EOB: Your 3-Step Action Plan

1. Don't Pay Yet: Remind yourself that the EOB is not a bill. Set it aside and wait for the actual bill from your provider.
2. Match the EOB to the Bill: When the provider's bill arrives, compare it, line by line, to your EOB. The "Amount You Owe" on the bill should match the "What You Owe" or "Patient Responsibility" on the EOB.
3. Investigate Discrepancies: What if they don't match?
   • Is the bill higher than the EOB? This is a common error. The provider might be improperly billing you for the "Network Discount" amount that they are contractually obligated to write off. This is called "balance billing," and it is illegal for in-network providers.
   • Is a service listed that you didn't receive? This could be a simple coding error or, in rare cases, a sign of fraud.
   • Is the date of service or patient name incorrect?

What to Do in Case of an Error

If you find a discrepancy, always call your insurance company first, not the provider's billing office. Your insurer is your advocate in this situation.

• Reference your EOB and the claim number.
• Explain the discrepancy to the customer service representative.
• They will investigate the issue and, if an error was made, they will contact the provider's office to have the bill corrected and re-issued.

Conclusion

Your Explanation of Benefits is your roadmap to understanding the complex and often opaque world of medical billing. By taking a few minutes to carefully review this document after every medical service, you can verify that your claims are being processed correctly, that you are receiving the full benefit of your plan's negotiated discounts, and that you are only paying what you truly owe. It is a simple but powerful habit that can save you from significant stress and potentially hundreds or even thousands of dollars in billing errors. Don't throw it away—use it as the powerful financial tool it is.