What Is Assignment of Benefits, And How Does It Impact Insurers?

Assignment of Benefits (AOB) is an advantage to policyholders, whereas it presents problems for insurance companies. It is a legal document signed by the policyholder, creating an agreement between the beneficiary and a third party. This agreement transfers control from the beneficiary to the third party, allowing the latter to directly file an insurance claim with the insurer, thus eliminating the need for policyholder involvement.

The Insurance Information Institute considers AOB as a method to settle claims on behalf of a policyholder. After the policyholder signs an AOB, it becomes the third party's responsibility to address the issue and request payment from the insurer for the service provided.

What is the Purpose of AOB?

Once the AOB contractual agreement is signed, it authorizes the third party to submit the claim to the insurance company for the service rendered. This is beneficial for healthcare providers, as it allows them to move insurer reimbursement directly, bypassing the patient. This circumvents potential issues such as underpayments, denials, and appeals, and expedites the process of resolving the issue.

For instance, an out-of-network or non-participating provider, not bound by any legal contract with the insurer regarding service rates, can, upon signing an AOB, submit the insurance claim along with supporting documents, hoping to receive reimbursement at the actual billed charges. In cases where the insurer pays less than the billed charges or refuses to pay the amount, the provider is at liberty to appeal the underpayment or denial.

Services Using AOB:

Services that typically use AOB include:

• Ambulance services,
• Ambulatory Surgical Centre services,
• Clinical diagnostic lab services,
• Biologicals and drugs providers,
• Home dialysis equipment & supplies providers,
• Patients with Medicaid and Medicare plans,
• Services from professionals such as certified nurse anesthetists,
  Vaccinations,
• Clinical social workers, clinical nurse specialists, nurses, psychologists, and physician assistants.

Impact of AOB on Insurers:

• AOB is garnering negative attention due to the abuse of the practice, leading to inflated claim costs and insurers being charged for services either not performed or unnecessary. Unfortunately, insurers disputing these inflated claims often lose in court. As a result, they incur expenses in paying the plaintiff's attorney, which can be significant. Conversely, if insurers win the case, they are not entitled to any compensation. This situation has led many insurers to settle claims out of court rather than risk litigation.
• The problem with inflated claims and lawsuits is not limited to insurance companies. Patients are also affected, as they face higher insurance premiums and more restricted terms and conditions. This can make it difficult for patients to access the healthcare they need.
• Overall, the issue of AOB abuse is a complex one with far-reaching consequences for both insurers and patients. It is crucial for all parties involved to work together to find a solution that is fair and equitable for everyone.

Impact of AOB on Patients:

Before hiring a third party, it is advisable for patients to get multiple estimates from different companies or contractors to understand the average cost. Moreover, checking for reviews and references before making any decision is crucial. Once a company is chosen, it is vital to read the contract carefully before signing. Having everything in writing, such as the cost, time schedules, payment schedules, and the work scope, helps avoid confusion. It is also essential to review the documents sent to the insurer to prevent the abuse of inflated claim costs.

Overall, Assignment of Benefits (AOB) is an essential tool for healthcare providers and patients, making healthcare management more efficient and less stressful.