How one medical charge splits into five numbers

Every line on an Explanation of Benefits does the same small piece of arithmetic. Once you can follow it, most of the page starts to make sense, and the numbers that don't belong stand out.

The five numbers

Insurers use different labels, but the structure is the same:

• Billed: the provider's list price. For in network care it is a starting point, not a real price.
• Allowed: the price your insurer's contract permits for the service. This is the real price, and every percentage is calculated from it.
• Network discount: the gap between billed and allowed that an in network provider agreed to write off. It is never yours to pay.
• Plan paid: the insurer's share of the allowed amount.
• Your share: what is left, made up of deductible, copay and coinsurance.

Sometimes a sixth appears: an amount marked not covered, which the plan refused to consider at all. That one always deserves a written reason.

A worked example

Take an outpatient imaging scan on a plan with a $1,500 deductible, $400 of it already met, and 20 percent coinsurance after the deductible.

The provider bills $2,400. The insurer's contracted rate is $900, so the allowed amount is $900 and the network discount is $1,500.

You still have $1,100 of deductible left, so the entire $900 goes to your deductible. The plan pays nothing on this claim, and your share is $900.

Now change one fact. Suppose you had already met your deductible before the scan. Nothing goes to the deductible, your coinsurance is 20 percent of $900, and the split becomes $180 for you and $720 for the plan.

Same scan, same negotiated price, and your share moved by $720 because of where you were in the plan year. That is why a bill can't be judged by the service alone. Your share depends on the service, the plan, the network tier and the calendar.

Where the math usually goes wrong

• The discount lands on your bill. If the provider asks for more than the EOB says you owe, and the extra matches the network discount, the bill was built from the list price.
• Coinsurance on the wrong base. Coinsurance is a percentage of the allowed amount, not the billed amount. Divide your coinsurance by the allowed amount and compare the result with the rate in your plan.
• The pieces don't add up. Deductible plus copay plus coinsurance should equal the share printed on that line.
• The lines don't match the total. Add the lines yourself and compare them with the summary row. They don't always agree, often because one line was reprocessed.

None of these checks need any knowledge of your plan. They only need the page and a calculator.

General information, not legal, medical or financial advice. Every plan is different, so check the details against your own plan documents.