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What is Assignment of Benefits in Medical Billing?
An assignment of benefits is the act of signing documentation authorizing a health insurance company to pay a physician directly. In other words, the insurance company can pay claims without the direct involvement of the patient in the process. There are other situations where AOBs can be helpful, but we’ll focus on their use in relation to medical benefits.
If there isn’t an assignment of benefits agreement in place, the patient would be responsible for paying the other party directly from their own pocket, then filing a claim with their insurance provider to receive reimbursement. This could be time-consuming and costly, especially if the patient has no idea how to file a claim.
The document is typically signed by patients when they undergo medical procedures. The purpose of this form is to assign the responsibility of payment for any future medical bills that may arise after the procedure. It’s important to note that not all procedures require an AOB.
An assignment of benefits agreement might be utilized to pay a medical practitioner the patient didn’t choose, like an anesthesiologist. The patient may have picked a surgeon, but an anesthesiologist assigned on the day of the procedure might issue a separate bill. They’re, in essence, signing that anyone involved in their treatment can receive direct payment from the insurance carrier. It doesn’t have to go through the patient.
This document can also eliminate service fees surrounding processing. As a result, the patient can focus on medical treatment and recovery without being bogged down with the complexities of paying medical bills. The overall intent of an assignment of benefits agreement is to make the process more manageable for the patient, as they don’t need to haggle directly with their insurer.
List of Providers and Services
When the patient signs an AOB agreement, they give a third party right to obtain payment for services the provider performed, and medical billing services are a prime example of where they may sign an AOB agreement.
- Ambulance services
- Medical insurance claims
- Drugs and pharmaceuticals
- Diagnostic and clinical lab services
- Emergency surgical center services
- Dialysis supplies and equipment used in the home
- Physician services for Medicare and Medicaid patients
Services of professionals other than a primary care physician, which includes:
- Physician assistants
- Clinical nurse specialists
- Clinical social workers
- Clinical psychologists
- Certified registered nurse anesthetists
Information Commonly Requested on Assignment of Benefits Form:
- Signature of patient or person legally responsible
- Signature of parent or legal guardian
How AOBs Affect the Medical Practitioner
A medical provider or their administrative staff may feel overwhelmed by the sheer number of forms patients must fill out prior to treatment. Demanding more paperwork from patients may be seen as an added burden on the managerial staff, as well as the patient. However, getting a signed AOB is vital in preserving the interests of everyone involved.
In addition to receiving direct payment from the insurance company without needing to go through the patient, a signed assignment of benefits form will help medical providers appeal denied and underpaid claims. They can ask that payments be made directly to them rather than through the patient. This makes the process more manageable for both the doctors and the patient.
Things to Bear in Mind
The patient gives their rights and benefits to third parties under their current health plan. Depending on the wording in the AOB, their insurer may not be allowed to contact them directly about their claims. In addition, the patient may be unable to negotiate settlements or approve payments on their behalf and enable third parties to endorse checks on behalf of the patient. Finally, when the patient signs an AOB, the insurer may sue the third parties involved in the dispute.
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What is an assignment of benefits?
Jim Probasco is an expert in the areas of personal income, saving and investing, banking, home buying, insurance, and more. A Dayton, Ohio-based writer, Jim has written for radio and television, and authored books for parents in arts education opportunities for their children.
The last time you sought medical care, you likely made an appointment with your provider, got the treatment you needed, paid your copay or deductible, and that was it. No paperwork, no waiting to be reimbursed; your doctor received payment from your insurance company and you both went on with your lives.
This is how most people receive health care in the U.S. This system, known as assignment of benefits or AOB, is now being used with other types of insurance, including auto and homeowners coverage .
What is an assignment of benefits?
An AOB is a legal agreement that allows your insurance company to directly pay a third party for services performed on your behalf. In the case of health care, it could be your doctor or another medical professional providing care. With a homeowners, renters, or auto insurance claim, the third party could be a contractor, auto repair shop, or other facility.
Assignment of benefits is legal, thanks to a concept known as freedom of contract, which says two parties may make a private agreement, including the forfeiture of certain rights, and the government may not interfere. There are exceptions, making freedom of contract something less than an absolute right. For example, the contract may not violate the law or contain unfair terms.
Not all doctors or contractors utilize AOBs. Therefore, it’s a good idea to make sure the doctor or service provider and you are on the same page when it comes to AOBs before treatment or work begins.
How an AOB works
The function of an AOB agreement varies depending on the type of insurance policy involved, the healthcare provider, contractor, or service provider, and increasingly, state law. Although an AOB is normal in health insurance, other applications of assignment of benefits have now included the auto and homeowners insurance industry.
Because AOBs are common in health care, you probably don’t think twice about signing a piece of paper that says “assignment of benefits” across the top. But once you sign it, you’re likely turning over your right to deal with your insurance company regarding service from that provider. Why would you do this?
According to Dr. David Berg of Redirect Health , the reason is simple: “Without an AOB in place, the patient themselves would be responsible for paying the cost of their service and would then file a claim with their insurance company for reimbursement.”
With homeowners or auto insurance, the same rules apply. Once you sign the AOB, you are effectively out of the picture. The contractor who reroofs your house or the mechanic who rebuilds your engine works with your insurance company by filing a claim on your behalf and receiving their money without your help or involvement.
“Each state has its own rules, regulations, and permissions regarding AOBs,” says Gregg Barrett, founder and CEO of WaterStreet , a cloud-based P&C insurance administration platform. “Some states require a strict written breakdown of work to be done, while others allow assignment of only parts of claims.”
Within the guidelines of the specific insurance rules for AOBs in your state, the general steps include:
- You and your contractor draw up an AOB clause as part of the contract.
- The contract stipulates the exact work that will be completed and all necessary details.
- The contractor sends the completed AOB to the insurance company where an adjuster reviews, asks questions, and resolves any discrepancies.
- The contractor’s name (or that of an agreed-upon party) is listed to go on the settlement check.
After work is complete and signed off, the insurer will issue the check and the claim will be considered settled.
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Example of an assignment of benefits
If you’re dealing with insurance, how would an AOB factor in? Let’s take an example. “Say you have a water leak in the house,” says Angel Conlin, chief insurance officer at Kin Insurance . “You call a home restoration company to stop the water flow, clean up the mess, and restore your home to its former glory. The restoration company may ask for an assignment of benefits so it can deal directly with the insurance company without your input.”
In this case, by eliminating the homeowner, whose interests are already represented by an experienced insurance adjustor, the AOB reduces redundancy, saves time and money, and allows the restoration process to proceed with much greater efficiency.
When would you need to use an assignment of benefits?
An AOB can simplify complicated and costly insurance transactions and allow you to turn these transactions over to trusted experts, thereby avoiding time-consuming negotiations.
An AOB also frees you from paying the entire bill upfront and seeking reimbursement from your insurance company after work has been completed or services rendered. Since you are not required to sign an assignment of benefits, failure to sign will result in you paying the entire medical bill and filing for reimbursement. The three most common uses of AOBs are with health insurance, car insurance, and homeowners insurance.
Assignment of benefits for health insurance
As discussed, AOBs in health insurance are commonplace. If you have health insurance, you’ve probably signed AOBs for years. Each provider (doctor) or practice requires a separate AOB. From your point of view, the big advantages of an AOB are that you receive medical care, your doctor and insurance company work out the details and, in the event of a disagreement, those two entities deal with each other.
Assignment of benefits for car owners
If your car is damaged in an accident and needs extensive repair, the benefits of an AOB can quickly add up. Not only will you have your automobile repaired with minimal upfront costs to you, inconvenience will be almost nonexistent. You drop your car off (or have it towed), wait to be called, told the repair is finished, and pick it up. Similar to a health care AOB, disagreements are worked out between the provider and insurer. You are usually not involved.
Assignment of benefits for homeowners
When your home or belongings are damaged or destroyed, your primary concern is to “return to normal.” You want to do this with the least amount of hassle. An AOB allows you to transfer your rights to a third party, usually a contractor, freeing you to deal with the crisis at hand.
When you sign an AOB, your contractor can begin immediately working on damage repair, shoring up against additional deterioration, and coordinating with various subcontractors without waiting for clearance or communication with you.
The fraud factor
No legal agreement, including an AOB, is free from the possibility of abuse or fraud. Built-in safeguards are essential to ensure the benefits you assign to a third party are as protected as possible.
In terms of what can and does go wrong, the answer is: plenty. According to the National Association of Mutual Insurance Companies (NAMICs), examples of AOB fraud include inflated invoices or charges for work that hasn’t been done. Another common tactic is to sue the insurance company, without the policyholder’s knowledge or consent, something that can ultimately result in the policyholder being stuck with the bill and higher insurance premiums due to losses experienced by the insurer.
State legislatures have tried to protect consumers from AOB fraud and some progress has been made. Florida, for example, passed legislation in 2019 that gives consumers the right to rescind a fraudulent contract and requires that AOB contracts include an itemized description of the work to be done. Other states, including North Dakota, Kansas, and Iowa have all signed NAMIC-backed legislation into law to protect consumers from AOB fraud.
The National Association of Insurance Commissioners (NAIC), offers advice for consumers to help avoid AOB fraud and abuse:
- File a claim with your insurer before you hire a contractor. This ensures you know what repairs need to be made.
- Don’t pay in full upfront. Legitimate contractors do not require it.
- Get three estimates before selecting a contractor.
- Get a full written contract and read it carefully before signing.
- Don’t be pressured into signing an AOB. You are not required to sign an AOB.
Pros and cons of an assignment of benefits
The advantages and disadvantages of an AOB agreement depend largely on the amount and type of protection your state’s insurance laws provide.
- An AOB frees you from paying for services and waiting for reimbursement from your insurer
- Some people appreciate not needing to negotiate with their insurer
- You are not required to sign an AOB.
- Signing an AOB could make you the victim of a scam without knowing it until your insurer refuses to pay
- An AOB doesn’t free you from the ultimate responsibility to pay for services rendered, which could drag you into expensive litigation if things go south
- Any AOB you do sign is legally binding
The takeaway
An AOB, as the health insurance example shows, can simplify complicated and costly insurance transactions and help consumers avoid time-consuming negotiations. And it can save upfront costs while letting experts work out the details.
It can also introduce a nightmare scenario laced with fraud requiring years of costly litigation. Universal state-level legislation with safeguards is required to avoid the latter. Until that is in place, your best bet is to work closely with your insurer when signing an AOB. Look for suspicious or inflated charges when negotiating with contractors, providers, and other servicers.
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What Is Assignment Of Benefits In Medical Billing – AOB Complete Guide
The healthcare industry operates with a diverse network of payers and various reimbursement means. From government to private insurance companies, a healthcare practice is simultaneously engaged with multiple payer parties, each linked to a different patient with unique regulations and requirements. This reimbursement workflow and many other factors alone make this already hectic environment business a bit more chaotic if not dealt with properly. With the development and execution of several policies, every healthcare service strives to bring more efficiency and seamlessness to its operations, and the reimbursement system is not an exception in this regard. This is where the assignment of benefits in medical billing comes into play.
What is Assignment of Benefits in Medical Billing?
An assignment of benefits in medical billing is a type of agreement between the healthcare provider, insurance company, and the patient through which a patient authorizes the medical service to collect healthcare policy coverage benefits on their behalf from their insurer for the service they have received from the facility. Once the patient signs this agreement, a direct payment link is made between the facility and the insurance company without communicating every time with the patient, which brings seamlessness and efficiency to the reimbursement process.
Read More: Medical Billing vs Revenue Cycle Management – Key Differences Explained
Medical Services That Use the Assignment of Benefits
Various healthcare providers across different specialties and settings may use Assignment of Benefits (AOB) as part of their billing practices. Some examples of healthcare providers that commonly use AOB include:
- Physicians and Medical Practices
- Hospitals and Medical Centers
- Dentists and Dental Clinics
- Physical Therapy and Rehabilitation Centers
- Ambulatory Surgery Centers
- Imaging Centers
So how does this assignment of benefits in medical billing work? Let’s explore:
What is the Procedure for the Assignment of Benefits in Medical Billing ? – the Methodology
Patient visit.
In the first step, the patient receives medical service from a healthcare facility like a hospital, clinic, etc.
AOB Agreement
Once the services are rendered, the healthcare facility presents an AOB agreement to the patient to transfer their healthcare insurance coverage benefits to the facility directly. The patient is advised to thoroughly review the form before signing for consent as they are establishing a direct form of communication and payment action by authorizing the medical service to collect monetary benefits on their behalf.
Claim Submission
In this stage, the healthcare service document and code all the service encounters with the patient into medical bills and claim, comprising all the details and treatment procedures that are associated with curing the patient. These claims are then sent to the insurance company.
Claim Reviewing
After claim submission, the insurance company meticulously evaluates it on the criteria of its unique requirements, standard policies, and regulations. They also analyze the accuracy of the claim and assess the coverage limit against the payment listed in the claim. If the claim is found to be inaccurate or ineligible for coverage by the insurance company, it reverts back to the facility for denial management.
In the case the claim is approved, the insurance company makes payment directly to the medical service given the AOB policy. This reimbursed amount may cover the full or half of the patient’s medical bills, based on the coverage plan.
Patient Responsibility
Once the insurer pays the billed amount to the medical service, any remaining payment responsibilities come on the shoulder of the patient, like deductibles, co-pays, or services not covered by insurance. The patient may receive an explanation of benefits (EOB) from the insurance company, outlining the details of the claim and any patient responsibility.
Read More: Why Outsourcing Ophthalmology Medical Billing is the Smart
What are the Complications in the Assignment of Benefits in Medical Billing? – the Hindrances
Assignment of benefits does not work well necessarily for all patient encounters. There are some instances where it fails to be applicable or may get denied. So what are those cases? Let’s explore:
Out-of-Network Providers
An insurance policy can deny the assignment of benefits claim if the service acquired by the patient is out of its network of carriers. In this case, the healthcare facility can’t establish any type of reimbursement connection with the insurance policy and must obtain the payments directly from the patient. The patient can then cover their expenditure from their insurance policy.
Non-Covered Services
It is not necessary that a health insurance policy cover all types of patient medical encounters. Every policy has its own limitations and offers reimbursements for medical services according to its regulations. So if a patient seeks a medical facility that is not covered by their healthcare policy, no AOB agreement will be applicable here. In this scenario, a patient is required to pay all the charges from their own pocket.
Preauthorization Requirements
Insurance policies require preauthorization for certain medical treatments, procedures, or medications, and if a patient fails to obtain this preauthorization, the insurance company rejects the assignment of benefits claim, leaving the patient to pay the bills out of their pocket.
Claims Rejection
Even with an AOB in place, insurance companies may reject or deny claims for various reasons, such as incomplete documentation, coding errors, or policy exclusions. In such cases, the provider and the patient may need to work together to resolve the issue and resubmit the claim.
If an AOB gets accepted, it will only cover the services eligible for insurance coverage. Patients are still responsible for any deductibles, co-pays, or non-covered services as per their insurance policy. If the patient fails to pay their portion, it can lead to complications in the billing process.
Billing Disputes
Moreover, billing disputes between healthcare providers and insurance companies are another reason for AOB complications. Occasionally, disputes may arise between the healthcare provider and the insurance company regarding reimbursement rates or claim processing. These disputes can delay or hinder the AOB process, requiring additional efforts to resolve the billing issues. Read More: What Is Down Coding In Medical Billing? – The Complete Guide
Assignment of benefits is an excellent way to increase the efficiency of the reimbursement process in the medical industry. However, for a patient, it is important to thoroughly and meticulously review all the terms and complications associated with the agreement of AOB as it transfers their monetary rights directly to the healthcare service.
Concerning healthcare services, they must ensure a well-communicated, clear, and detailed preparation of this agreement to help patients better understand all the things related to their financial obligations and insurance benefits transfer. Further, the medical facilities should also bring more accuracy and compliance with standards to their billing and overall financial landscape to make the whole process conducive to the acceptance of AOB, effectively navigating the complex web of reimbursements.
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