Caribou: How do Health Insurance Companies Decide What to Cover?

June 29, 2020



June 29, 2020

Have you recently visited your physician, thinking that the reason for the visit was covered by your insurance provider, but you later received a surprise medical bill that says otherwise?

How Health Insurance Works

Your insurance company’s process for deciding what to cover and what not to cover might seem like a black box. But in reality, it’s pretty straightforward if you understand the steps.

From stepping foot in your healthcare provider to receiving a medical bill, here’s what happens:

  1. You’ll be asked for your insurance information upfront before receiving medical care.

  2. Your health care provider will bill the insurance company for the costs associated with your visit.

  3. Your insurance company will check the treatment or service with your plan.

  4. You’ll receive an Explanation of Benefits that details what they’ve covered and what they haven’t.

  5. You receive a medical bill for the amount that you owe, which will include instructions on who to pay (your health care provider or your health insurance company).

Arguably the most important - and the least understood - part of the process is the explanation of benefits. Learning how to read an EOB (explanation of benefits) is the way to understanding why your health insurance company decided to cover certain items and not others.

What is an explanation of benefits?

An EOB is a letter from your health insurance company, addressed to you, detailing what costs it will cover. It is generated when your healthcare provider submits a claim asking for payment for the medical care you received.

EOBs show you the value of your health insurance plan, showing any savings on those items by visiting in-network providers. They can help you see how much money you may have left in categories of spending (like physical therapy, for example) and you might also see how close you are to meeting your annual deductible, at which point your plan begins to help you pay for services.

Learning how to read an explanation of benefits is simple because they’re often standard among insurance companies. All EOBs should have the following details:

  • Your personal patient information

  • The medical services received, including from who

  • Costs (Amount Billed)

  • Any money you saved by accessing care or medical products from within your plan’s network of providers

  • The costs your health insurance plan covered

  • What costs your health plan didn’t cover 

  • Amount that could be paid from spending accounts, such as a health reimbursement account (HRA), if applicable

  • Any outstanding amount you are responsible for paying

Definitions of terms included in your EOB, as well as instructions for how you can appeal a claim, should be included on the following page. Following that, there should be more specific details about the cost of the treatments and/or services.

Dealing with a denied health insurance claim

When reviewing your explanation of benefits, you might be surprised to see a treatment or service that was denied when you thought it was in fact something your health insurance policy covered. 

Don’t panic! There are easy to follow steps to appeal a denied claim if that’s the case. Before doing so, it’s important to know what might have happened to cause the claim to be denied. Common reasons include:

  • Receiving treatment without prior authorization

  • Improper claim filing (eg. missing information, wrong procedure codes)

  • Missed time limit to file the claim

  • Treatment considered medically unnecessary

There should be a clear explanation that outlines the reasoning on the explanation of benefits. If not, contact your health insurance company right away so that you can understand the reason and include it in your appeal letter.