Understanding EOB and ERA

Description: This article defines and compares the Explanation of Benefits (EOB) and the Electronic Remittance Advice (ERA), outlining their specific roles in the medical billing and revenue cycle management process.

Target Audience: Medical Billing Staff, Patient Service Representatives, Revenue Cycle Managers.

Overview

In medical billing, payers generate documentation to detail how a claim was processed. While both documents contain similar data regarding dates of service, billed amounts, and allowed amounts, they are intended for different recipients and serve distinct operational purposes.

• EOB (Explanation of Benefits): Sent to the Patient.

• ERA (Electronic Remittance Advice): Sent to the Provider.

1. Explanation of Benefits (EOB)

The EOB is a statement sent by a health insurance company to covered individuals explaining what medical treatments and/or services were paid for on their behalf.

Key Characteristics

• Recipient: The Patient / Member.

• Format: Paper mail or Digital PDF (via patient portal).

• Status: This is NOT a bill. It is an informational document.

• Purpose: Transparency. It informs the patient of the negotiated rates and their financial responsibility.

Core Components

• Service Information: Date of service and provider name.

• Billed Charges: The full amount charged by the provider.

• Allowed Amount: The maximum amount the plan will pay for the service.

• Patient Responsibility: The final amount owed by the patient, broken down into:

  • Deductible

  • Co-pay

  • Co-insurance

2. Electronic Remittance Advice (ERA)

The ERA is an electronic data file that explains the payment of medical claims. It is the digital equivalent of a paper EOB but is designed for automated processing by provider software.

Key Characteristics

• Recipient: The Healthcare Provider / Billing Office.

• Format: Electronic Data Interchange (EDI) file (specifically the ANSI X12 835 transaction set).

• Purpose: Reconciliation. It enables the automatic posting of payments and adjustments to patient accounts.

Core Components

• Check/EFT Number: Traces the actual transfer of funds.

• Adjudication Details: Specific reasons for payment or denial.

• Standardized Codes: Unlike the EOB, the ERA relies on universal codes to communicate status:

  • CARC (Claim Adjustment Reason Codes): Explains why a claim was paid differently than billed (e.g., deductible, non-covered service).

  • RARC (Remittance Advice Remark Codes): Provides supplemental information for the adjustment.

3. Comparison Summary

4. Operational Workflows

Processing the ERA

When an ERA is received by the practice management system:

1. Auto-Posting: The software matches the ERA to the original claim and posts the payment.

2. Denial Management: If a claim is denied, the ERA codes (CARC/RARC) trigger a work queue for billing staff to investigate and resubmit.

3. Balance Transfer: Any remaining patient responsibility (deductible/co-pay) is transferred to the patient's statement cycle.

Addressing Patient EOB Inquiries

Patients frequently confuse the EOB with a bill. When a patient calls regarding an EOB:

• Confirm they are looking at the EOB, not a provider statement.

• Verify that the "Patient Responsibility" on their EOB matches the "Balance Due" in the practice management system.

• Advise the patient to wait for the official statement from the provider before making payment, unless paying a known co-pay.
  

Tags: #MedicalBilling #RevenueCycle #EOB #ERA #Insurance #ClaimsProcessing #835Transaction