What Is the Difference Between Insurance Eligibility and Benefits Verification?

Verifying insurance details prior to rendering care is necessary within the healthcare revenue cycle. Many healthcare providers confuse the insurance eligibility process and insurance benefits verification; however, they are two separate processes. Understanding of insurance eligibility vs. benefits verification explained concept provides the basis for many medical practices to limit billing errors, decrease claim denials, and provide clear communication regarding a patient’s financial responsibility for services.

Each of the two above-mentioned steps in eligibility and benefits in RCM (Revenue Cycle Management) assists the medical billing team in identifying if a patient’s health insurance plan is current and if the patient’s medical services are covered under their insurance plan. However, each step assesses different elements of the patient’s insurance plan.

The following article provides an explanation of the difference between coverage and eligibility, how each step is performed, and why they are so important in medical billing.

Insurance Eligibility Verification

Eligibility verification is the verification of whether the patient’s health insurance plan is active/valid as of the date of service. Eligibility verification provides assurance that the patient currently has an active health insurance plan that will allow payment for medical services.

During the eligibility verification process, the billing staff verifies the patient’s insurance information with the payer to confirm the patient’s coverage status at the time of service. The process of eligibility verification will prevent denied claims due to an inactivated insurance plan or incorrectly entered insurance information.

Therefore, the first step in the insurance coverage vs. benefits check is insurance eligibility verification. Prior to determining whether a patient’s insurance will pay for a claim, the provider must first verify the patient’s eligibility.

Eligibility checks are used to verify several key elements regarding the patient’s insurance status. These include:

• Patient policy status as either “Active” or “Inactive”
• Date effective for coverage: 
• Payer information for the patient’s insurance
• Information about the person purchasing the policy (policyholder) 
• Demographic/identification information about the patient

The focus of this stage is to confirm that coverage and benefits exist, i.e., whether the patient has an active insurance policy.

What is Benefits Verification in Medical Billing?

Once the eligibility process has confirmed that the patient’s policy is active, the next step in the medical billing process is to verify the patient’s benefits. The eligibility confirmation will determine if the patient has an active insurance policy, and the benefits verification will determine what the insurance plan will cover.

Benefits verification is the process of reviewing the patient’s insurance policy in detail to identify how much of the patient’s out-of-pocket cost the insurance will pay, the limits placed on services by the insurance company, and other reimbursement policies prior to providing any treatment.

Key Details During Benefits Verification

• Deductible amounts
• Cost share (co-pays/coinsurance)
• Services that are covered and not covered
• Pre-authorisation requirements for services
• Limits on coverage (e.g., number of visits and treatments)
• Benefits when services are out-of-network

Insurance benefit breakdown typically is completed at this time, as it clearly outlines to whom costs will be allocated. The breakdown is based upon information obtained during the eligibility/benefits verification process.

Eligibility vs. Benefits Verification

The two terms are very similar but serve two distinct purposes in the billing cycle. An understanding of the differences between eligibility vs. benefits verification can help healthcare providers better manage their billing activities.

Factor	Insurance Eligibility	Benefits Verification
Purpose	Confirms the patient has active insurance	Determines what services the plan covers
Timing	First step before services	Second step after eligibility confirmation
Focus	Policy status and coverage validity	Coverage details and patient financial responsibility
Outcome	Confirms insurance can be billed	Identifies costs and service limitations

In simple words, “eligibility” means “are you currently insured?” and “Benefits verification” means “What does your insurance cover?”

Difference Between Coverage and Eligibility

Another common source of confusion is defining coverage and eligibility. While the two terms are often used together, they define two different areas of insurance verification.

Eligibility defines if the patient has active enrolment in an insurance plan.

‘Coverage’ defines what services/treatments are covered by the patient’s insurance plan.

For example, a patient may be eligible for health insurance but not have coverage for a certain surgical procedure. That’s why both need to be checked prior to providing care.

By understanding how the insurance coverage vs. benefits check process works, healthcare providers will be able to avoid surprise billing problems.

Patient Insurance Benefits Investigation Process

In essence, the patient benefits investigation process is essentially the entire process for verifying if a patient has insurance (eligibility) as well as what is covered by that patient’s insurance (benefits) prior to treatment; this process will help ensure the provider understands both the patient’s insurance coverage and the specifics of the patient’s insurance plan.

Typically, the process involves the following:

• Obtain patient insurance information at the time of scheduling.
• Verify insurance eligibility with the payer (insurance).
• Verify benefits for specific services.
• Determine co-pay, deductible, and coinsurance amounts.
• Provide the patient with estimated out-of-pocket expenses.

A complete insurance benefits breakdown will provide patients with an understanding of what they owe up front for the services being rendered, thus creating increased transparency as well as reducing billing disputes.

Coverage Verification vs. Prior Authorisation

Additionally, it is also very helpful to understand coverage verification vs. prior authorisation, as these are two distinct steps in medical billing.

Coverage verification is the step to determine whether a particular service is included in a patient’s insurance plan.

Prior authorization is the insurer’s approval of payment for a particular procedure(s) or treatment(s), which must be received prior to performing the procedure(s)/treatment(s).

Example: Benefits verification may indicate that a procedure is covered, but the insurance carrier may still require prior authorization prior to paying for it.

Both are necessary to avoid denial of claims and delay in receipt of reimbursement.

Medical Billing Verification Types

Each of the various medical billing verification types focuses on a distinct aspect of the patients’ insurance plans.

Eligibility Verification 

Eligibility verification confirms that the patient has an active health insurance plan.

Benefits Verification 

Benefits verification verifies coverage, out-of-pocket deductible amounts and the patient’s or family member’s financial responsibility.

Prior Authorization Verification 

Prior authorization verification ensures that all necessary approvals have been received by the patient’s insurer prior to performing any procedure(s) that require prior authorisation.

Referral Verification 

Referral verification verifies if there is a requirement for a referral from the patient’s primary care physician prior to the specialist providing services.

Coverage Verification 

Coverage verification verifies which services the patient’s health insurance will cover (i.e., will be reimbursed).

Verification of coverage and benefits processes assists healthcare providers with submitting accurate claims to avoid delayed payments.

Why are eligibility and benefit verification important in revenue cycle management?

Eligibility and benefits in RCM are vital to the financial sustainability of healthcare organisations. Providers can be denied claims or experience delayed payments when the two steps are omitted or performed incorrectly.

Benefits of properly verifying include the following:

• Fewer denied claims
• Faster payback from insurance
• More accurate billing for healthcare providers
• Transparency of patient expenses for patients
• Fewer hours spent by staff on administrative tasks

Both eligibility and benefit verification will create a streamlined billing process for all healthcare providers; therefore, it is important to perform both so as to improve your overall revenue cycle performance.

Conclusion

It is critical for medical billing and revenue cycle management to know the difference between insurance eligibility and benefit verification. Insurance eligibility verifies whether the patient has an active insurance policy, whereas benefit verification identifies which services will be covered by the patient’s plan and at what percentage the costs will be split.

The two processes provide the basis for verification of coverage and benefits in medical billing. When completed successfully, they decrease denied claims, increase the speed of reimbursement, and allow patients to understand their financial responsibility.

Therefore, by having knowledge of the medical billing verification types, healthcare providers will have more efficient operations and better predictable revenues.