Why is it important to know how to read an explanation of benefits?

An explanation of benefits ("EOB") is issued by an insurance company (or a third-party administrator that it uses to handle claims, or other type of health plan). It is a summary of what was paid, and what was not paid, with respect to a claim that was submitted by a provider for payment. It may reflect, for example, that the service was not covered by the terms of the insurance plan, that a portion of the service was paid, or that the amount billed by the provider was reduced per an agreement with the provider. It often also reflects what the patient's responsibility, if any, for payment is with regard to the bill, and sometimes how much of the annual deductible has been met.

It is important for an insured to be able to understand the explanation of benefits so as to confirm the the correct amount has been paid by the insurer or other form of health plan, and therefore, what his/her personal responsibility might be. Additionally, if the insurer or plan did not pay anything toward the bill, there will be code on the EOB indicating the reason for non-payment. Being able to understand the EOB will help the patient inquire further and uncover any errors in the payment decision.