I was on a talk show recently and made reference to an “EOB.”  The interviewer stopped me at that point and said, “What’s an EOB?”  A good question - and one, I’m sure, most of the program’s viewers were asking, too.  Those of us who spend all day steeped in health care vocabulary often forget that we have our own language for discussing our work, and that’s a problem - for us, and for the people we try to serve.

An EOB is an “Explanation of Benefits,” and we mail them to members enrolled in most of our products.  If they’re enrolled in our Best Buy products, which include deductibles or other forms of significant cost-sharing, we send them out after they receive health care services.  The EOB is supposed to explain how the benefit package someone has relates to the services they received.  In many cases, they have the words, “This is not a Bill” stamped across the front of them, and I’m guessing that most people see that, take a look at the columns and rows of industry jargon within, and send them directly into the circular file.  This is unfortunate.  There’s a lot of useful information in an EOB, but EOBs are not very user friendly.  I lay the blame for that at the feet of the provider and health plan communities.  We view them as a way to talk to one another about covered services and paid claims, but the member ends up in the middle - and they usually don’t speak “health care jargon.”

But since I do, let me try to walk you all through some of my EOBs.  I get EOBs because the Baker family is enrolled in one of Harvard Pilgrim’s Best Buy plans, which means we have a deductible plan.  A deductible plan means that while many services (drugs, office visits, etc.) are covered in full, along with a co-pay, many other services (hospital-based services, diagnostic technology, etc.) are subject to the deductible first (paid by the member), and then covered in full.  Auto insurance works like this.  Most car repairs associated with accidents are “subject to a deductible,” which, in Massachusetts, is usually between $300 and $500.  You pay the deductible, and your auto insurance company pays the rest.

The Bakers have a $2,000 deductible, which is offset, in part, by a Health Reimbursement Account, made available by Harvard Pilgrim, my employer.  In other words, Harvard Pilgrim puts a certain amount of money on the table to cover some piece of our family’s deductible, up to a certain amount ($1,000 annually).  And by the way, this applies to all Harvard Pilgrim employees who choose a Best Buy plan, not just me.

So, if the Bakers don’t use the system much, the $1,000 made available by Harvard Pilgrim should cover most of our deductible spending.  If we use it a lot, then we’ll be digging into our own pockets to fund some piece of the difference between $1,000 and $2,000.  Why select a deductible plan?  Simple.  Since the cost of many services is shared by the enrollee (me and my family) and the insurer/employer (Harvard Pilgrim), the monthly premium for these products is significantly lower than the cost of a first dollar coverage plan.

In 2006, the Bakers didn’t use the system much.  2007 is a different story.  In 2007, we’ve received many services that are “subject to the deductible.”  The process usually works like this:

– Kid/Adult uses health care system;

– Bakers receive a check from Harvard Pilgrim as a reimbursement out of our Health Reimbursement Account (which means the provider has billed Harvard Pilgrim for the services, and Harvard Pilgrim is sending us a check to cover the deductible out of our HRA);

– Bakers receive an EOB, which outlines the services billed to Harvard Pilgrim by the provider, and notes what we owe as a deductible, along with a lot of other stuff;

– Bakers receive a bill from the provider for the deductible, which we then pay, using the check we received from our HRA.

If we exhaust our HRA, then we don’t get a check from Harvard Pilgrim.  We still get an EOB, and we still get a bill from the provider, which we then pay, if they match.

In a perfect world, the HRA check, the deductible stated on the EOB, and the billed amount from the provider all add up to the same number.  Most of the time, if you know where to look - and how to read these three different statements - they do.  But you have to understand the fine print.  For example, one of the EOBs we received recently covered both the hospital costs and the physician costs of a particular service.  The hospital bill showed up, but the physician’s office will be billing us separately.  The HRA check was for less than the hospital amount, but that’s because we didn’t have enough left in the HRA to cover the full cost of the deductible.  In this case, we’re being reimbursed through our HRA for part of the hospital costs and none of the physician expenses - which once we receive that bill, we’ll pay separately.

Sounds like a big headache, doesn’t it?  Well, it is, sort of - but only if you think there shouldn’t be any billing/paying, etc. associated with health care.  I go through the same drill every month with my bank, with the companies I have credit cards from, and with everyone I write checks to.  It’s all about service, billing and paying - and then making sure it all adds up, and the money I save by selecting a health plan with a deductible makes it worth it to me to do the extra accounting.

Someday, though, health plans and providers need to come up with a simpler way of describing what they do, and creating processes to support the end user - and not just each other.  Right now, it’s too much jargon, and it’s not as simple as it ought to be for patients/members.

Your thoughts and comments on what EOBs mean to you - and whether or not they serve a useful purpose - and how they might be simplified - are welcome.

Posted by: Charlie Baker in Health Care Costs, Transparency