Understanding Your Health Insurance and Medical Bills

A doctor smiles.

The Good Brigade / Getty Images

Understanding the basics of your health insurance policy terms will not only help you find affordable health insurance but will help you understand your medical bills and your health insurance billing statement after you have filed your health insurance claim.

Notably, 38% of Americans had problems with medical bills or debt in 2021, according to The Commonwealth Fund. Below are some tips and resources to help you understand your health insurance bill, billing errors, and how to check or negotiate your medical bill when your health insurance bills are confusing.

Key Takeaways

  • Knowing the health insurance policy terms can help you understand your medical bills and find affordable health insurance.
  • An explanation of benefits (EOB) is a summary of the costs your medical provider billed to your insurance provider.
  • An EOB explains how the costs of your medical care (the medical bill) will be split between you and your insurer.
  • It's important to review your medical bills for errors by checking the billing codes and fees being charged.
  • If you don't understand a medical bill, call your health insurance provider and ask them to explain it or call the medical service provider.

Understanding the Explanation of Benefits (EOB)

An explanation of benefits is a summary of the costs your medical provider billed your insurance provider and what they did with the claim. The EOB is not a bill; it explains how the costs of your medical care (the medical bill) will be split between you and your insurer.

Questions To Ask

  • Ask your service provider for an itemized list of services or procedures provided to you. Use it to compare with your EOB.
  • Ask your service provider to confirm to you how much of the services were covered by your health insurance; compare this to your EOB.

Understanding Your Health Insurance Bill Can Help Save Money and Catch Errors

Understanding your health insurance bills can help you manage health care debt. Financial consequences can arise for those who have outstanding debt from medical or dental bills. However, 43% of adults with health care debt reported receiving a bill that they believed had an error.

Over 60% of these adults stated that the errors were for services that should have been covered by insurance, while some errors were for services that were already paid for or never received. As a result, it's essential to understand the codes and terms that insurance companies and health care providers use in order to determine whether a bill contains an error.

Coding Errors on Your Health Insurance Bill

When you visit a doctor or receive medical attention, a code is applied—for billing purposes—that identifies with the specific service you received, such as a diagnosis or treatment. Sometimes the wrong billing code is applied, which can lead to the denial of insurance coverage.

For example, if a service is covered by your health insurance, but it's coded mistakenly as a service that isn't covered, this can lead to denial of insurance coverage. If the patient went ahead with the treatment, they would receive a bill for the medical service even though it should have been covered by insurance. Alternatively, the patient might not go ahead with the treatment to avoid the cost and might also avoid future doctor appointments, which can lead to serious health issues.

Below are examples of errors that can occur with the coding of your medical bill:

Bundling Errors

Often there are codes for a group of services or supplies that get bundled together. If the wrong code is used, or if a code is used outside of the bundle code, then the individual code may be denied.

Upcoding Errors

This is when the wrong code is used for a service or procedure. An example would be a code used for a brand-name drug when the right code should have been the code for the generic drug. Another example is when a person is billed for a more severe version of their injury, such as coding for a broken arm when it was a sprain.

Downcoding Errors

When you are billed for the wrong treatment, your coverage may be denied. Using the same example above, it may be they entered the code for a sprain, but you had a broken ankle. This is downcoding and incorrect billing.

How To Know If You Are Being Overcharged on Medical Bills

If you are being overcharged on a medical bill, it could be difficult for you to know on your own, but you can always compare to the costs Medicare would charge by checking out its cost list or physician fees on its website. Once you know what should be charged, you might be in a better position to negotiate a better price or reduction.


Additional things to look out for:

  • Check the dates of service, as well as the billing codes used. Make sure nothing is duplicated.
  • Beware of balance billing.

Balance Billing

Medical providers that are in-network are a pre-approved set of providers accepted by your insurance. These providers accept the payment from your insurance company for covered services, but the amount paid by your insurance company is usually less than the amount billed by the provider. The in-network provider is not allowed to bill the patient for that difference—a practice called balance billing.

However, if you go to an out-of-network provider, balance billing might be allowed, meaning a medical provider might bill you for the difference between what they charged and the amount your insurance company paid. For example, if an out-of-network provider charged $300 and your insurance only paid $200, you might receive a bill for the balance owed, or $100, from the provider.

Surprise Balance Billing

In some cases, you might seek care from an in-network provider, but you didn't have any choice in who treated you, such as an emergency room visit. While in the emergency room, you might have also been treated by an out-of-network provider. If your insurance doesn't cover the out-of-network care, the provider might send you a bill—a situation called "surprise balance billing."

Consumers have protections for many of the surprise billing practices as a result of federal legislation called the No Surprises Act. To help protect yourself, request information in advance, if possible, about how services will be covered and who will provide them, and whether the provider is in-network.

If you believe you were a victim of surprise balance billing, contact your insurer and the provider to dispute the bill. If they don't resolve it, you can file a complaint with your state or a federal complaint online. You can also contact the No Surprises Help Desk at 1-800-985-3059 from 8 a.m. to 8 p.m. EST, seven days a week.

Health Insurance Terms To Help You Understand Your Medical Bill

Your health insurance coverage will outline certain types of out-of-pocket costs that are your responsibility. Depending on the kind of health insurance, you may also have coverage restrictions (in-network vs. out-of-network). Some of the terms and conditions to understand include:

Understanding Medical Billing Codes and How To Check Them

One of the reasons for medical billing errors may be related to the number of codes used. There are more than 10,000 codes used in the medical field.


If you want to check what a medical billing code is, you can look up the code on ICD-10 code lookup.

Steps To Reduce Your Medical Bills

  1. Check your medical bills yourself using the tools we provided above.
  2. Start by trying to check the billing codes and fees being charged.
  3. Call your health insurance provider and ask it to explain the EOB.
  4. You can also call the medical service provider. More hospitals and doctors' offices are working hard to help their patients understand their medical billing, and depending on the care facility, they may have people in the accounting and finance departments willing to help you.
  5. If you do not find any billing errors, you can still try and negotiate to see if any of the costs may be waived or reduced.
  6. Once you agree on an amount that must be paid, try and come to a payment arrangement to avoid having your account go into collection.

Many organizations and hospitals have patient advocates or medical billing advocates who may be able to help you in the process of reviewing your medical bills, so don't be afraid to ask for clarification.

Frequently Asked Questions (FAQs)

How do I understand my health insurance and medical bills?

Review your medical bills for errors by checking the billing codes and fees being charged. If you don't understand a medical bill, call your health insurance provider and ask for them to explain it or contact the medical service provider.

What is an explanation of benefits?

An explanation of benefits (EOB) summarizes the costs your medical provider billed your insurance for a particular claim. The EOB explains how the costs of your medical care (the medical bill) will be split between you and your insurer.

Was this page helpful?
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. The Commonwealth Fund. "As the Pandemic Eases, What Is the State of Health Care Coverage and Affordability in the U.S.?"

  2. Cigna. "Understanding Your Explanation of Benefits (EOB)."

  3. Kaiser Family Foundation. "Could Consumer Assistance Be Helpful to People Facing Medical Debt?"

  4. NIH National Library of Medicine. "CPT® Codes: What Are They, Why Are They Necessary, and How Are They Developed?"

  5. Healthinsurance.org. "Balance Billing."

  6. Healthcare.gov. "Balance Billing."

  7. Kaiser Family Foundation. "Surprise Medical Bills: New Protections for Consumers Take Effect in 2022."

  8. Centers for Medicare & Medicaid Services. "No Surprises: Understand Your Rights Against Surprise Medical Bills."

  9. Centers for Medicare & Medicaid Services. "List of CPT/HCPCS Codes," Download list of codes.

Related Articles