How to Read an Explanation of Benefits (EOB)

What Is an Explanation of Benefits?

An Explanation of Benefits (EOB) is a document sent by an insurance company after a healthcare claim is processed. It explains what service was provided, how the claim was adjudicated, what the insurance paid, and what amount (if any) the patient is responsible for.

An EOB is not a bill. It is an informational statement that helps providers and patients understand how a claim was handled.

For Medicare beneficiaries, the equivalent document is called a Medicare Summary Notice (MSN).

Verify with your payer: EOB formats vary by insurance company. The sections described below are common across most payers, but the layout, terminology, and remark codes may differ. Contact your payer's provider services line if you have questions about a specific EOB.

Key Sections of an EOB

Patient and Provider Information

The top of the EOB typically identifies:

• Patient name and insurance ID number
• Provider name and NPI or tax ID
• Claim number — the unique identifier for this claim (reference this when calling the payer)
• Date of service — when the session occurred
• Date processed — when the insurance company adjudicated the claim

Service Details

This section lists each service included in the claim:

• CPT code — the procedure code billed (e.g., 90834 for individual psychotherapy)
• ICD-10 code — the diagnosis code associated with the service
• Modifiers — any modifiers applied (e.g., 95 for telehealth)
• Units — the number of units billed (typically 1 for therapy sessions)

Financial Breakdown

This is the most important section for understanding payment. Here is what each line means:

Term	Definition
Billed amount	What the provider charged for the service
Allowed amount	The maximum the payer will recognize for the service
Contractual adjustment	The write-off between billed and allowed (in-network)
Insurance paid	What the payer actually paid the provider
Copay	The fixed amount the patient pays per visit
Coinsurance	The percentage of the allowed amount the patient pays
Deductible applied	The portion applied to the patient's annual deductible
Patient responsibility	The total amount the patient owes

How the Math Works

Here is a simplified example of how an EOB calculates payment:

Remark and Adjustment Codes

EOBs include standardized codes that explain adjustments and denials. These codes fall into categories:

• CO (Contractual Obligation) — Adjustments based on the provider's contract. The provider cannot bill the patient for CO adjustments.
• PR (Patient Responsibility) — Amounts the patient is responsible for (copay, coinsurance, deductible).
• OA (Other Adjustment) — Adjustments that don't fall into CO or PR categories.
• PI (Payer Initiated) — Reductions initiated by the payer (e.g., fee schedule adjustment).

Common remark codes you may see:

Code	Meaning
CO-45	Charges exceed the fee schedule or allowed amount
PR-1	Deductible amount
PR-2	Coinsurance amount
PR-3	Copay amount
CO-4	Procedure code is inconsistent with the modifier or not covered
CO-97	Payment adjusted — already adjudicated in a prior claim
CO-16	Claim lacks information needed for adjudication
CO-29	Filing deadline has passed

For a complete list of adjustment reason codes, refer to the X12 CARC/RARC code lookup.

Understanding Common Insurance Terms

Deductible

The amount a patient must pay out-of-pocket before insurance begins covering services. Deductibles reset annually. Until the deductible is met, the patient pays 100% of the allowed amount.

Copay

A fixed dollar amount the patient pays per visit, regardless of the service cost. Copays are set by the insurance plan and are collected at the time of service.

Coinsurance

The percentage of the allowed amount the patient pays after the deductible is met. For example, if the plan has 20% coinsurance, the patient pays 20% and insurance pays 80% of the allowed amount.

Out-of-Pocket Maximum

The most a patient will pay in a plan year for covered services. Once this limit is reached, insurance pays 100% of covered services for the remainder of the year. Copays, coinsurance, and deductible payments count toward this maximum.

Allowed Amount vs. Billed Amount

The billed amount is what the provider charges. The allowed amount is what the insurance recognizes as the maximum payable for that service. In-network providers agree to accept the allowed amount and write off the difference. Out-of-network providers may bill the patient for the difference (balance billing), subject to state laws and the No Surprises Act.

How to Spot Errors on an EOB

Review every EOB you receive. Common errors include:

• Wrong CPT code — The service code does not match what was actually provided
• Wrong diagnosis code — The ICD-10 code is incorrect or not supported by the documentation
• Incorrect date of service — The session date is wrong
• Duplicate claim — The same service was processed twice
• Incorrect patient responsibility — The copay, coinsurance, or deductible amount is wrong
• Service denied without reason — No remark code or explanation for a denial
• Wrong provider — The claim was attributed to the wrong clinician

What to Do When You Find an Error

1. Note the claim number from the EOB
2. Call the payer's provider services line — the number is on the EOB
3. Reference the specific line item and remark code when describing the issue
4. Request a claim reprocessing if the error was on the payer's side
5. Submit a corrected claim if the error was in your original submission
6. Document every call — note the date, representative name, reference number, and outcome

If the payer does not resolve the issue, you may need to file a formal appeal. See our claim denial troubleshooting guide for appeal steps.

EOBs for Out-of-Network Claims

When a client submits a superbill to their insurance for out-of-network reimbursement, the EOB is sent to the client (not the provider). Key differences:

• The allowed amount is based on the payer's usual and customary rate, not a contracted rate
• The patient may be responsible for the difference between your fee and the allowed amount
• Reimbursement goes to the client unless you have an assignment of benefits

Help your clients understand their EOBs so they know what to expect. See our out-of-network reimbursement guide for more details.