How Medical Billing and Health Insurance Work

It may help if you first know some key words related to the medical billing process. When dealing with a healthcare provider or your health insurance plan, you may hear or see the following words:

• Medical bill or statement. You may receive a billing statement from your healthcare provider’s office after you get care. It lists by date all the services you got and the cost for them. It may show a balance due. Keep in mind, this amount may not yet reflect any payments by your health insurance.
• Claim. This is the bill your healthcare provider sends directly to your insurance company. Like the statement you receive, it lists by date all the medical care you got. These services can include things like checkups, tests, treatments, health screenings, or vaccines.
• Explanation of benefits (EOB). This document comes to you from your health insurance company. It’s not a bill. It lists the date of service, a description of the care, and the amount your provider charged. It tells you what your health plan has paid for the care you received. It may also show the balance that you owe.
• Current procedural terminology (CPT) code. When looking at a billing statement or an EOB, you may notice CPT codes. These are a short-hand way to describe the types of care you received. They help make the electronic billing process between healthcare providers and your health plan more efficient.

Now that you know some key words involved in medical billing, you can take a more informed role in the billing process. Here is how it typically occurs and what you can do during it to prevent unexpected costs:

• After you see a healthcare provider for a service, that provider’s office will send a claim to your insurance company. This claim will list the services you have received along with the CPT codes.
• The provider’s office may send you a medical bill at this time. If they do, check this statement for any errors. Verify the services received and the date of care. Keep in mind this statement may not show what your health plan has yet to pay.
• When your health insurance gets the claim from the healthcare provider, they may send you an EOB. If so, compare the EOB with the billing statement you received from the provider. Make sure the services and dates of care match up. At this time, you will also be able to see what you owe after your health insurance has paid its share of the cost. The EOB may also show you the adjusted cost, or allowed amount. This is the negotiated cost your health plan has made with the healthcare provider’s office for the services you received.
• If everything looks good between the medical bill and the EOB, pay the balance due when you get the next billing statement from the healthcare provider’s office.

Lots of steps are involved in the medical billing process. So errors can sometimes occur. If you notice one, here’s what you can do:

Call the healthcare provider’s office if:

• There is something wrong with the provider’s billing statement. This can include errors in the date of service, member name, or insurance member ID.
• The billing statement doesn’t match the EOB
• You have questions about what was billed, such as a description of any CPT codes

Call your health insurance company if you have questions about:

• What you may owe for a service
• Why a service isn’t covered by your plan
• If your insurance hasn’t paid its share for a service after 60 days

Here are some tips on managing healthcare costs:

• Find out how much a health service will cost beforehand. When making an appointment for care, ask the healthcare provider’s office for the matching CPT codes. You can then call your insurance to get an estimate of cost based on those codes.
• When deciding on a certain test, treatment, or procedure, talk with your healthcare provider about the cost. Together, you can decide on the best option for you.
• Keep all the EOBs you get with your other health plan documents. They can help you keep track of your medical care and expenses.
• Check with your health plan to see when you may need preauthorization. This common step is also called prior approval or precertification. It means a healthcare provider needs approval from the health plan before you can get certain treatments or procedures. If you don’t get preauthorization when needed, your plan won’t cover the care. Note that preauthorization isn’t needed in an emergency.

Sometimes you may get care from out-of-network providers without knowing it, resulting in unexpected costs. This situation may occur if you get care at an in-network facility that has out-of-network providers on staff. It’s more likely to occur if you get emergency care. In the past, you would have been billed for these services at an out-of-network rate. But in 2022, the No Surprises Act came into effect. This law now prohibits such billing practices.

If you get any unexpected medical bill, talk with your health insurance company. They may be able to work with you and the healthcare provider’s office. These organizations may also help:

• Consumer Finance Protection Bureau, www.consumerfinance.gov
• Patient Advocate Foundation, www.patientadvocate.org