What is assignment of benefits (AOB) in medical billing? [Explained in Simple Terms]
I’ve worked in medical practice management long enough to see how one small form—like an Assignment of Benefits (AOB)—can make or break a smooth billing process. Whether you're just starting out or cleaning up your billing operations, understanding AOB is essential.
Let me break it down in plain English, from one Practice Manager to another:
What is assignment of benefits (AOB)?
Assignment of Benefits, or AOB, is a legal agreement between a patient and a healthcare provider. When a patient signs an AOB form, they’re giving permission for their health insurance company to pay the provider directly. Without this form, the insurance company might send the reimbursement check to the patient instead, who then has to pass it on to us.
In practical terms, it means less chasing payments and more efficient cash flow for the practice. The patient still receives an Explanation of Benefits (EOB), but we, the provider, get paid straight from the insurer.
Why is assignment of benefits important in medical billing?
From a practice management standpoint, the AOB is a must-have. Here's why:
- Reduces Payment Delays: If we had to wait for the patient to cash a check and then pay us, we’d be looking at weeks or even months of delay.
- Improves Revenue Cycle Management: By having insurers pay us directly, we can track payments, follow up on denials, and reconcile accounts more efficiently.
- Reduces Administrative Burden: Without an AOB, billing becomes a two-step process. With it, we're dealing directly with insurers, which means fewer middle steps and less confusion.
- Limits Patient Responsibility: Patients are still responsible for their deductible and coinsurance, but they’re not acting as a middleman for insurance payments.
Simply put, the AOB cuts out the unnecessary back-and-forth and ensures we’re paid faster and more reliably.
Assignment of Benefits vs Power of Attorney: Key Differences
This is a common point of confusion. While both documents authorize someone else to act on a person’s behalf, they serve different purposes:
| Feature | Assignment of Benefits (AOB) | Power of Attorney (POA) |
| Purpose | To allow a provider to receive insurance payments directly | To give broad legal authority to act on behalf of someone |
| Scope | Limited to billing and insurance claims | Can cover finances, legal matters, even healthcare decisions |
| Use in Medical Billing | Used regularly | Rarely used unless the patient is incapacitated |
| Expires? | Often tied to a specific claim or date | Can remain active until revoked or the person dies |
In short, AOB is a standard billing form. POA is more about big-picture legal authority.
Examples of Assignment of Benefits
Let me give you a few real-world examples to put this in context:
Routine Visit:
A patient sees us for a wellness check. They sign the AOB, and once we bill the insurance, we get paid directly by the insurer. The patient only receives a bill if there’s a balance.
Specialist Referral:
After a referral to a cardiologist, the patient signs a new AOB for that specialist. The cardiology practice bills the insurance and receives payment directly, avoiding delays.
Accident Claims:
In cases involving auto or liability insurance, we’ve had patients sign an AOB so we can work directly with the insurance carrier involved, like GEICO or State Farm, rather than wait for legal settlements.
Out-of-Network Services:
If a provider is out-of-network but still accepts AOB, we can file the claim and receive payment directly—though often at a reduced rate depending on the patient’s benefits.
5 Things to Keep in Mind When Dealing with AOB
- Always Get It in Writing: A verbal AOB isn’t enough. We always make sure the patient signs the form before services are rendered.
- Check Insurance Policy Language: Some plans don’t allow AOB or have strict limits. I train my front desk team to verify this when checking eligibility.
- Don’t Skip Consent: Patients have the right to understand what they’re signing. We take the time to explain AOB during check-in or intake.
- Stay Updated on State Laws: Some states regulate or restrict AOB, especially with certain insurances like PIP (personal injury protection). It’s our job to know what applies locally.
- Have a Policy for Denied AOB Claims: If an insurer ignores or rejects an AOB, we have a standard follow-up protocol: contact the payer, re-send the form, and if needed, inform the patient for next steps.
Assignment of Benefits & Medical Billing FAQ
AOB can be a bit of a difficult topic, particularly when you intermingle it with the complexities of medical billing in general. Here are some questions people also ask me about assignment of benefits in medical billing:
What Next?
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