Not many people think about what happens after a doctor sends a claim to the insurance company, but it’s a big deal for practices trying to get paid on time. This is exactly where the assignment of benefits (AOB) gets involved. This simple agreement lets providers get paid directly from insurers, so they don’t have to deal with each patient individually.
For practices that use medical billing services, this small detail makes a big difference in keeping the money coming in and the administrative team sane. Keep reading as we break down how the assignment of benefits (AOB) works and why it is absolutely necessary nowadays for medical practices.
Understanding How Assignment of Benefits Works
Let’s first understand the ‘How’ behind the AOB. Whenever a patient needs medical services, they generally have their health insurance coverage. This coverage helps them pay the cost of their healthcare.
In general, or everyday scenarios, the patient has to pay the deductible or copayment, which is basically a portion of their full bill; their insurance company pays the remaining portion.
But some situations are different. Sometimes, the patient assigns their benefits to the healthcare provider; when this happens, the provider can bill the insurer directly for the healthcare services.
In layman’s terms, the Assignment of Benefits (AOB) is nothing but a legal agreement between the healthcare provider and the patient. When a patient signs this agreement, they are giving full authority to the healthcare provider to receive payment from the insurance company directly.
This ensures two things:
- Eases out-of-pocket pressure for the patient
- Revenue protection for the healthcare provider
The End-To-End Process of Assignment of Benefits
The payment journey for healthcare providers becomes simple and straightforward as soon as the patient signs an AOB. Let’s show you what this process looks like from start to finish.
Step 1: Patient Authorization
So, at the time of the patient’s check-in or registration, they are always asked to complete the intake form. This is where the AOB form makes its first appearance. Once the patient signs it, they permit the provider to receive the bill payment from the insurance company directly. A lot of medical billing companies tend to include this step in their onboarding protocols to simply avoid delays in reimbursements later on.
Step 2: Claim Submission by the Provider
After the patient has received care from the provider and has been discharged, the practice or their medical billing company partner goes ahead and submits a claim to the insurance company of the patient. Now, since the patient’s AOB is already on file, the submitted claim has clear instructions for the payment to go straight to the provider, not to the patient. Many practices love to speed this up, so you’ll notice that their whole process is fully automated.
Step 3: Insurance Review and Payout
Once the insurer receives the submitted claim, they review it, check it against the insurance plan of the patient, and finally process it for further payment. If everything checks out and is good to go, the insurance company sends the reimbursement to the healthcare provider directly. You see, this direct payment is the main factor of having AOB in place. It basically removes the need for providers to chase payments from patients.
Step 4: Explanation of Benefits (EOB) Sent To Patient
So, the final step is the EOB in medical billing. Even though the provider has received the funds, the patient still gets an Explanation of Benefits from their insurance company. This document basically tells what was covered in terms of insurance, how much was paid, and whether the patient still owes anything. Keep in mind that while AOB permits direct payment, patients may still be liable for stuff like deductibles, copays, or non-covered services.
What Should Be Included in an AOB?
To make sure that the AOB is legally compliant and valid, the form should have the following key components:
Crucial Elements of a Valid AOB
Here’s what a properly structured AOB should contain:
- Patient information
- Insurance details
- Authorization from the provider
- Scope of assignment
- Acknowledgment of responsibility
- The patient’s signature and date
- HIPAA disclosure
Why This Matters?
If your submitted assignment of benefits has any vague or missing details, it will definitely lead to legal disputes, delays in payment, or claim denials. This is the main reason why many medical practices working with medical billing services have made this a standard.
Benefits for Patients, Providers, and Insurers
Given below are the benefits of using AOB for all three parties involved.
For Healthcare Providers:
- Healthcare providers’ A/R days can be reduced significantly because they receive payments quickly and easily.
- The collection rates are higher, which minimizes patient payment defaults.
- The number of legal disputes takes a dive, which improves the insurer-provider communication
For Patients:
- The patients receive a transparent and clear cost-sharing breakdown.
- The billing overall gets simplified because AOB eliminates the reimbursement paperwork.
- The patient doesn’t need to pay the cost upfront; as a result, patients feel stress-free and recover quickly.
For Insurance Providers:
- Insurance companies can rest easy knowing that AOB completely prevents fraud since it enables direct claim validation.
- The administration costs decrease because there are fewer individual transactions.
Wrapping It Up
Well, now you know that the assignment of benefits is much more than boring paperwork. As a matter of fact, this form is a vital step in making sure that healthcare providers receive due payments reliably and quickly. When it is done perfectly, it rewards you with simplified claims, refined cash flow, and stress-free billing.
Speaking of billing, if any practices are looking to organize and improve their billing process, they should know that partnering up with a trusted medical billing services provider will make all the difference. Luckily, CareCloud’s medical billing software is custom-built to handle AOB workflows with unmatched accuracy and efficiency. Experience the CareCloud advantage today.
