What is “assignment of benefits”?

If you find yourself at a hospital, you’ll usually have to sign a bunch of paperwork before you receive care. Buried in that paperwork, you are likely agreeing to something called “assignment of benefits.” But, what is ”assignment of benefits?” Which benefits? To whom are you assigning them? Let’s break it down.

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An Assignment of Benefits (AOB) is an agreement that, once signed, transfers the insurance claims rights and benefits of the policy from the member (that’s you) to a third party (e.g., a hospital). An AOB gives that third party the authority to file a claim, collect insurance payments, and even file lawsuits without the involvement or awareness of the policyholder and patient.

You may think that signing off on an AOB means you’re handing over the headache of your insurance to the experts, but surprise! Your headaches could just be starting.

Let’s say your provider is not in your insurer’s network (out of network or OON). That means your insurer has not negotiated a discounted rate for the care you receive and the provider can charge whatever they want.

WHATEVER. THEY. WANT.

If you assign your benefits, this OON provider can claim payment from your insurer, but in most cases the insurer will only pay what they think is the proper amount. Blue Cross Blue Shield of Michigan gives a good example:

  • In-network: You go to a doctor and the total charge is $250. You get a discount of $75 because you went to an in-network doctor and our negotiated rate with them is lower. We pay $140. You pay what’s left, which is $35.
  • Out-of-network: You go to a doctor and the total charge is $250. You won’t get a discount because the doctor is out-of-network. We still pay $140, but you’ll be responsible for what’s left, which is $110 in balance billing.

Even if you assign your benefits, you’re still going to be hit with a bill known as a balance bill or surprise bill - potentially a very big one.

If you hadn’t assigned your benefits, instead of the provider receiving payment from your insurer, that check would have come directly to you. Having that check in your hand gives you potential leverage and negotiating power when it comes to surprise bills and out-of-network scenarios. By choosing to assign your benefits, you take yourself out of the equation and become an audience member rather than a backstage crew member who has a better view of things going on behind the scenes.

Basically, when you agree to an AOB, you sign away your rights and put your financial fate in the hands of someone whose interests may not align with yours.

OK. Deep breath. If you’re in NC today this isn’t a problem. Your contract with your insurer almost definitely has language making it impossible for providers to receive your benefits, so even if you signed an AOB, it would be moot. But, North Carolina is likely to see legislation introduced that would require insurers allow AOB in the future.

The impact of AOB legislation

  • Takes away patients’ negotiating power: When hospitals and providers are out-of-network (OON), they can charge patients any amount of money they want without being limited by a contract negotiated with the insurer. When an insurer pays the patient directly, the patient holding the money has the negotiation power to request that the provider reduce or remove excessive charges as a condition of the payment. When the OON provider is paid directly under an AOB, the patient has no leverage and will likely get hit with a balance or surprise bill.
  • Erodes provider networks: Assigning patients’ insurance rights to hospitals and providers makes it easier for hospitals to go OON.
  • Increases the cost of care and undermines consumer protections: The aforementioned scenario takes away consumers’ benefits of contracted network discounts. The result? You pay more out-of-pocket. You may also be hit with unnecessary fees, tests, and procedures as certain requirements that providers get prior authorization on behalf of patients go away.
  • Endanger quality of care: In addition to negotiating costs, insurers enforce quality of care standards for in-network providers. OON providers are not beholden to these standards.
  • Encourages more lawsuits: With an AOB, a patient transfers certain rights to hospitals and providers. This includes the right to sue. But now the provider can sue the patient’s employer and/or insurer without the patient’s knowledge. Individual patients can unwillingly become entangled in lawsuits brought by large and well-lawyered hospitals. Patients lose their rights to contest a bill, mediate a claim or challenge inaccurate charges. 
  • Can result in financially burdensome surprise bills: An AOB allows OON hospitals/providers to collect some money directly from the insurer, but also invoice the patient for the remainder of the “list price” for services provided. This is called a “balance bill” or “surprise bill,” which is often thousands of dollars.
  • Businesses suffer: When healthcare costs go up and lawsuits increase, businesses pay more. This limits the amount of money employers can invest in their businesses and can result in shifting healthcare costs to employees.

AOBs, frankly, are bad news for you — the consumer. Around here, we’re dedicated to fighting high healthcare costs and that means opposing AOB legislation, which would help providers win big, while everyone else loses. Have thoughts? Let us know in the comments or share them with us on Facebook. 

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  • commented 2017-10-18 13:31:50 -0400
    As a patient, I understand this article and it sounds scary. However, working for a provider in billing, and having been in the medical field in both direct patient care and administrative I can stand to tell you that providers cannot just charge whatever they want. There is more with regards to charging than that. A radiologist, for example, can’t just decide to charge $1000 for the reading of a standard chest x-ray because he/she just felt like it and I don’t believe it’s fair to convey that message. There are guidelines to everything even medical/healthcare pricing.
    Conversely, insurances can decide to change the terms of their policies at any time with the policyholder if the terms of their contract with the policyholder doesn’t guarantee against such. That means that if an insurance company decides reduce the amount of pay-out or to not cover a specific procedure anymore then they can do so. Even with an in-network provider where the insurance company may have a contract. For example, an insurance policy contract with a provider states the provider will accept a 35% adjustment/discount of billed charges. If the insurance company decides to no longer pay 65% of the billed charges (which would have been a 100% coverage for the patient) but maybe 45% or nothing at all the patient who may have been seeing the same doctor for years, having the same procedure performed annually who have never had to pay out-of-pocket may now find themselves balanced billed. The provider didn’t change their terms the insurance company did and probably without the knowledge of the insured. What some patients may not be aware of is that OON providers may offer their own discounts with patients facing 100% of billed charges even with insurance where the charges are not credited towards a deductible or co-insurance. You just have to ask. In rare cases persons with a high deductible may be able to get a discount anyway again you just have to ask or plead your case. But holding a payment hostage from a provider is not recommended or very effective.
    Unfortunately, there are patients currently paying premiums on a health insurance policy where the insurance company may NEVER have to pay out because of such things as co-pays, co-insurance, deductibles, in-network deductibles, in-network co-insurance, in-network co-pays, OON co-pays, OON deductibles, OON co-insurance and so forth. I admit healthcare costs are high, but this article seems to villainize the provider versus stating the multitude of factors that play into rising healthcare costs, because while health care costs are rising insurance and health care programs (like Medicaid) are decreasing how much they are remitting or just flat out denying claims. AOBs are not bad and it’s not the piranha-like providers trying to tear into patients’ wallets it’s a way for providers to be guaranteed remittance. Not every hospital is a huge mega medical enterprise in urban areas, there are some small rural hospitals, and there are private practices that are vital to the communities they serve. So when unfavorable legislative measures are used to evoke opposition, such as the ones proposed in this article, the results of such legislation not being enacted can cripple small medical providers which disrupts healthcare in quality and efficiency which in turn drives the cost of healthcare up.
    People and companies getting health insurance coverage need to read and understand their policies just as much as the forms they are signing upon entering into a medical facility. Even if you get insurance through your job you can be under-covered. Patient’s need to read their RAPLE clause for example, understand the in-network and OON policies because going to a participating facility may not guarantee coverage by ancillary providers who may never be seen by the patient. Ancillary providers are often small and may not participate with a person’s insurance because they are only contracted with that participating facility and are a separate entity. For example, if you’ve ever gone to the hospital to be treated. A few weeks or even months later you start receiving several different bills related to that one hospital visit. Most of those separate bills are from ancillary providers contracted with that hospital. However aggravating though, ancillary or RAPLE providers, are a tool against rising healthcare costs. Many of these types of providers file claims as a curtesy with a signed AOB. However, if the patient refuses to sign an AOB or has received some kind of payment from the insurance company for services rendered by a provider but negates to pay their providers that affects the cost of health care. Ancillary providers who choose not to participate with a lot of insurances can become a problem for many patients and places providers in a bad light. As of late, healthcare legislation has been more pro-insurance in that it allows strong-arm measures for insurance companies to enact to force providers into networks. There are a hosts of reasons why some providers refuse to contract with insurance companies. For instance, a contracted provider may be restricted by insurance policies to effectively treat an insured patient. Providers have to get an authorization by the insurance company in order to perform certain procedures on a patient. Without that authorization the patient may get stuck with a bill. This “Mother May I” approach interrupts the flow of healthcare and is costly.
    Many of these providers find it both beneficial and cost effective to not be in-network with most commercial insurances and instead work with the patients directly. They are likely to participate with Medicare, Medicaid and VA policies however, but the remittance is mere pennies on a dollar. I mean I can obviously go on and on about rising health care cost, provider over-pricing and villainize the insurance companies and people who don’t pay their bills and government legislature but, the healthcare system as a whole is flawed and convoluted with finger-pointing all around. Healthcare shouldn’t be like this.

    Your Medicare Costs
    https://www.medicare.gov/your-medicare-costs/

    The Rising Cost of Health Care by Year and Its Causes
    https://www.thebalance.com/causes-of-rising-healthcare-costs-4064878

    UnitedHealth CEO’s compensation swells in 2016 to $17.8 million
    http://www.modernhealthcare.com/article/20170421/NEWS/170429946
    Aetna CEO’s total 2016 pay reaches $18.7 million
    http://www.modernhealthcare.com/article/20170407/NEWS/170409914

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