Sense & Centsibility Blog

Understanding Your Health Insurance and Medical Bills

I recently had a conversation with my young adult daughter who was totally confused about why she had a medical bill since she has medical insurance. I’ve had similar conversations with more experienced (aka older) adults so the confusion is not just an issue of the youth.

A tiny fraction of us have insurance policies that cover everything. Understanding your policy can be an exercise in crazy-making. I know I’ve asked the same questions over and over of our benefits manager trying to grasp the plan details.

You likely had to choose among different options for your health insurance plan, and the options will vary among providers. Why make it simple, after all?


Co-Pay: A fixed amount you pay for service or office visit. The co-pay amount may be different for different services. 

Deductible: This is the amount of medical bills you must pay 100% before your insurance kicks in. The amount can range from a few hundred dollars to several thousand. Knowing how much your deductible is can help you plan for medical expenses.

Co-insurance: After you have satisfied your deductible, co-insurance may kick in. Typically, plans will cover 80% and you are responsible for 20%. These percentages can be different for different medical procedures or providers.

In-network: In-network providers are those providers that have an agreement with your insurance company to provide services to their policy holders. You usually pay more to see an out-of-network provider.

Out-of-Pocket limit: This is the amount you must pay each year before your insurance will cover you 100%. The amount is usually in the thousands of dollars. (The out-of-pocket limit does not include what you pay to have insurance—your premium.)

For more health insurance term explanations, view the SBC Uniform Glossary


Understanding medical bills is another exercise in crazy-making. Medical billing isn’t uniform, so if you go to different clinics or practitioners, your bills may look totally different. And, you may receive multiple bill-like notices to add to the crazy-making. But, knowing some of the above common terms about your insurance policy and the medical billing process/terms can go a long way to reducing the confusion.

Statement: You could get multiple statements for the same service, just to increase the anxiety about medical bills. Your provider sends a bill (aka claim) to your insurance company after the service was provided and may send you a statement, too, but with a notation on it to the effect of “This is not a bill” or “Your insurance has been billed”. They are informing you of the charges sent to the insurance company. You’ll receive another statement after the insurance company has paid what they will.

Explanation of Benefits (EOB): This comes from your insurance company. It tells you what they will pay for the service. They may only cover a certain amount for a certain procedure, the allowed amount. If the provider was in-network, the provider usually eats the rest, but you could be responsible for the difference. The EOB will note if you have a co-pay, deductible, or co-insurance portion to pay. It then notes what the insurance company will actually send to the medical provider and the portion you, the patient, will have to pay. (If your insurance denies the claim, be sure to contact them for an explanation.)

Statement (again)

Statement formats are all over the map, but you should be able to tease out the essentials:

  • Date of service – when you saw the medical provider
  • Service provided – this could include indecipherable codes, or with any humanity is noted in plain English
  • Cost of service – what they normally charge for it
  • Provider amount – what the agreement between the insurance company and provider says they will charge the insured (you) for that service, and is subtracted from the cost
  • Insurance payment – what the insurance sent them, refer to the policy terms to help understand why they paid or not paid the amount they did
  • Amount you owe – just that, the bottom line

Statements can really get confusing if you received another service before any payments were made on the first one. Staying on top of bills and paying them when you receive them is optimum, of course, but not always possible. Most providers will put any payments towards the oldest debt first, which can create even more confusion.

Don’t hesitate to contact the service provider for help understanding your bills. You’ll likely receive statements monthly as long as there is a balance due. It is easy to let frustration of the convoluted process get the better of you and to throw the bills into a paper bag until they grow to a frightening height. I have gone through a bag of bills with clients and whittled it down to the actual amount owed, which is far less than the tall pile would suggest.

Hopefully, these explanations will help you understand your bills so they don’t become an overwhelming mess. If you are struggling to keep up on / pay medical bills, read our post on medical debt republished in early July. Or, give us a call at 888.577.2227 to schedule your free financial counseling session.

We can help you come up with an actionable plan to manage your medical and/or other debt. If you'd rather, you can also get started online.

Author Mary Ellen Kaluza is a Certified Financial Counselor with LSS Financial Counseling and she specializes in budget, credit, and debt counseling.