assignment of benefits terminology

Assignment of benefits

Assignment of benefits is a legal agreement where a patient authorizes their healthcare provider to receive direct payment from the insurance company for services rendered.

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What is Assignment of Benefits?

Assignment of benefits (AOB) is a crucial concept in the healthcare revenue cycle management (RCM) process. It refers to the legal transfer of the patient's rights to receive insurance benefits directly to the healthcare provider. In simpler terms, it allows healthcare providers to receive payment directly from the insurance company, rather than the patient being responsible for paying the provider and then seeking reimbursement from their insurance company.

Understanding Assignment of Benefits

When a patient seeks medical services, they typically have health insurance coverage that helps them pay for the cost of their healthcare. In most cases, the patient is responsible for paying a portion of the bill, known as the copayment or deductible, while the insurance company covers the remaining amount. However, in situations where the patient has assigned their benefits to the healthcare provider, the provider can directly bill the insurance company for the services rendered.

The assignment of benefits is a legal agreement between the patient and the healthcare provider. By signing this agreement, the patient authorizes the healthcare provider to receive payment directly from the insurance company on their behalf. This ensures that the provider receives timely payment for the services provided, reducing the financial burden on the patient.

Difference between Assignment of Benefits and Power of Attorney

While the assignment of benefits may seem similar to a power of attorney (POA) in some respects, they are distinct legal concepts. A power of attorney grants someone the authority to make decisions and act on behalf of another person, including financial matters. On the other hand, an assignment of benefits only transfers the right to receive insurance benefits directly to the healthcare provider.

In healthcare, a power of attorney is typically used in situations where a patient is unable to make decisions about their medical care. It allows a designated individual, known as the healthcare proxy, to make decisions on behalf of the patient. In contrast, an assignment of benefits is used to streamline the payment process between the healthcare provider and the insurance company.

Examples of Assignment of Benefits

To better understand how assignment of benefits works, let's consider a few examples:

Sarah visits her primary care physician for a routine check-up. She has health insurance coverage through her employer. Before the appointment, Sarah signs an assignment of benefits form, authorizing her physician to receive payment directly from her insurance company. After the visit, the physician submits the claim to the insurance company, and they reimburse the physician directly for the covered services.

John undergoes a surgical procedure at a hospital. He has health insurance coverage through a private insurer. Prior to the surgery, John signs an assignment of benefits form, allowing the hospital to receive payment directly from his insurance company. The hospital submits the claim to the insurance company, and they reimburse the hospital for the covered services. John is responsible for paying any copayments or deductibles directly to the hospital.

Mary visits a specialist for a specific medical condition. She has health insurance coverage through a government program. Mary signs an assignment of benefits form, granting the specialist the right to receive payment directly from the government program. The specialist submits the claim to the program, and they reimburse the specialist for the covered services. Mary is responsible for any applicable copayments or deductibles.

In each of these examples, the assignment of benefits allows the healthcare provider to receive payment directly from the insurance company, simplifying the billing and reimbursement process for both the provider and the patient.

Assignment of benefits is a fundamental concept in healthcare revenue cycle management. It enables healthcare providers to receive payment directly from the insurance company, reducing the financial burden on patients and streamlining the billing process. By understanding the assignment of benefits, patients can make informed decisions about their healthcare and ensure that their providers receive timely payment for the services rendered.

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Related terms.

Insurance is a contractual agreement in which an individual or entity pays premiums to a company in exchange for financial protection against specified risks.

Prudent layperson standard

Prudent layperson standard is a legal requirement that healthcare insurers must use when determining coverage, based on whether a reasonable person without medical training would consider the symptoms to be an emergency.

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Insurance claims , medical revenue recovery, what should an assignment of benefits form include.

An assignment of benefits form (AOB) is a crucial document in the healthcare world. It is an agreement by which a patient transfers the rights or benefits under their insurance policy to a third-party – in this case, the medical professional who provides services. This way, the medical provider can file a claim and collect insurance payments. In the context of personal injury protection coverage, an AOB is a critical step in the reimbursement process.

Personal injury protection coverage , or PIP, is designed to cover medical expenses and lost wages incurred after an auto accident, regardless of who is at fault. In New Jersey, drivers are required to carry PIP. Now, let’s say there’s an accident: the driver sees a medical provider for treatment, and the provider bills the patient’s carrier. There is nothing that requires that the insurance carrier to pay the provider. 

This is why an assignment of benefits form is so important. It essentially removes the patient from the equation and puts the medical provider in their place as far as the insurance policy is concerned. This enables the provider to be paid directly. If you see PIP patients and want to be paid directly by the insurer (and avoid claim denials or complex legal situations later) you must get an AOB.

The AOB authorization creates a legal relationship between the provider and the insurance carrier. What should it include?

• Correct Business Entity

Fill out your business name correctly: it seems simple, but this can be a stumbling block to reimbursement. If your business name is Dr. Smith’s Chiropractic Care Center, you cannot substitute Dr. Smith’s, Smith’s Chiropractic, etc.  It must be Dr. Smith’s Chiropractic Care Center. If you have a FEIN number, use the name that is listed on your Health Care Financing Administration (HCFA) form.

• “Irrevocable” 

It is important that you include this term to indicate that the patient cannot later revoke the assignment of benefits. This tells the court that the AOB is the only document determining standing , or the ability to bring a lawsuit on related matters.

Another key term: the court sees benefits as payments. It does not necessarily give you the right to bring a lawsuit. Include language such as, “assigns the rights and benefits, including the right to bring suit…” 

• Benefit of Not Being Billed At This Time for Services

Essentially, this means that a provider gives up the right to collect payments at the time of service in exchange for the right to bring suit against the insurance company if they are not paid in full. Likewise, the patient gives up the right to bring suit, but they do not have to pay now. The wording will look like this: “In exchange for patient assigning the rights and benefits under their PIP insurance, Dr. Smith’s Chiropractic Care Center will allow patients to receive services without collecting payments at this time.”

• Patient Signature 

Yes, it’s basic, but make sure the assignment of benefits form is signed and dated by the patient! This renders the AOB , for all intents and purposes, null and void. It is not an executed contract. You would have to start the entire process again, which means waiting longer to be reimbursed for the claim. 

• Power of Attorney Clause

Including a power of attorney clause, which supports not only “the right of collecting payment” but also the provider’s ability to take legal action on behalf of the patients, is vital. At Callagy Law, we always argue this is inherent within the no-fault statute; however, there are carriers to argue against the right to arbitration when the language is not in the AOB.

As medical providers, it is critical that you receive proper – and timely – reimbursement for services rendered. The assignment of benefits form is one of the most important pieces in this puzzle. It is essential for an attorney to prepare, or at least review, your AOB and other admission paperwork to ensure that you are able to collect pursuant to your patients’ insurance benefits in whatever ways needed. 

Callagy Law can not only review these documents, but also ensure you are pursuing all recoverable bills to which you are eligible. If you have any questions, would like us to review your AOB form, or have issues collecting payment from insurance companies, please contact the Callagy Law team today .

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Assignment of Benefits: What You Need to Know

• August 17, 2022
• Steven Schwartzapfel

Insurance can be useful, but dealing with the back-and-forth between insurance companies and contractors, medical specialists, and others can be a time-consuming and ultimately unpleasant experience. You want your medical bills to be paid without having to act as a middleman between your healthcare provider and your insurer.

However, there’s a way you can streamline this process. With an assignment of benefits, you can designate your healthcare provider or any other insurance payout recipient as the go-to party for insurance claims. While this can be convenient, there are certain risks to keep in mind as well.

Below, we’ll explore what an assignment of insurance benefits is (as well as other forms of remediation), how it works, and when you should employ it. For more information, or to learn whether you may have a claim against an insurer, contact Schwartzapfel Lawyers now at 1-516-342-2200 .

What Is an Assignment of Benefits?

An assignment of benefits (AOB) is a legal process through which an insured individual or party signs paperwork that designates another party like a contractor, company, or healthcare provider as their insurance claimant .

Suppose you’re injured in a car accident and need to file a claim with your health insurance company for medical bills and related costs. However, you also need plenty of time to recover. The thought of constantly negotiating between your insurance company, your healthcare provider, and anyone else seems draining and unwelcome.

With an assignment of benefits, you can designate your healthcare provider as your insurance claimant. Then, your healthcare provider can request insurance payouts from your healthcare insurance provider directly.

Through this system, the health insurance provider directly pays your physician or hospital rather than paying you. This means you don’t have to pay your healthcare provider. It’s a streamlined, straightforward way to make sure insurance money gets where it needs to go. It also saves you time and prevents you from having to think about insurance payments unless absolutely necessary.

What Does an Assignment of Benefits Mean?

An AOB means that you designate another party as your insurance claimant. In the above example, that’s your healthcare provider, which could be a physician, hospital, or other organization.

With the assignment of insurance coverage, that healthcare provider can then make a claim for insurance payments directly to your insurance company. The insurance company then pays your healthcare provider directly, and you’re removed as the middleman.

As a bonus, this system sometimes cuts down on your overall costs by eliminating certain service fees. Since there’s only one transaction — the transaction between your healthcare provider and your health insurer — there’s only one set of service fees to contend with. You don’t have to deal with two sets of service fees from first receiving money from your insurance provider, then sending that money to your healthcare provider.

Ultimately, the point of an assignment of benefits is to make things easier for you, your insurer, and anyone else involved in the process.

What Types of Insurance Qualify for an Assignment of Benefits?

Most types of commonly held insurance can work with an assignment of benefits. These insurance types include car insurance, healthcare insurance, homeowners insurance, property insurance, and more.

Note that not all insurance companies allow you to use an assignment of benefits. For an assignment of benefits to work, the potential insurance claimant and the insurance company in question must each sign the paperwork and agree to the arrangement. This prevents fraud (to some extent) and ensures that every party goes into the arrangement with clear expectations.

If your insurance company does not accept assignments of benefits, you’ll have to take care of insurance payments the traditional way. There are many reasons why an insurance company may not accept an assignment of benefits.

To speak with a Schwartzapfel Lawyers expert about this directly, call 1-516-342-2200 for a free consultation today. It will be our privilege to assist you with all your legal questions, needs, and recovery efforts.

Who Uses Assignments of Benefits?

Many providers, services, and contractors use assignments of benefits. It’s often in their interests to accept an assignment of benefits since they can get paid for their work more quickly and make critical decisions without having to consult the insurance policyholder first.

Imagine a circumstance in which a homeowner wants a contractor to add a new room to their property. The contractor knows that the scale of the project could increase or shrink depending on the specifics of the job, the weather, and other factors.

If the homeowner uses an assignment of benefits to give the contractor rights to make insurance claims for the project, that contractor can then:

• Bill the insurer directly for their work. This is beneficial since it ensures that the contractor’s employees get paid promptly and they can purchase the supplies they need.
• Make important decisions to ensure that the project completes on time. For example, a contract can authorize another insurance claim for extra supplies without consulting with the homeowner beforehand, saving time and potentially money in the process.

Practically any company or organization that receives payments from insurance companies may choose to take advantage of an assignment of benefits with you. Example companies and providers include:

• Ambulance services
• Drug and biological companies
• Lab diagnostic services
• Hospitals and medical centers like clinics
• Certified medical professionals such as nurse anesthetists, nurse midwives, clinical psychologists, and others
• Ambulatory surgical center services
• Permanent repair and improvement contractors like carpenters, plumbers, roofers, restoration companies, and others
• Auto repair shops and mechanic organizations

Advantages of Using an Assignment of Benefits

An assignment of benefits can be an advantageous contract to employ, especially if you believe that you’ll need to pay a contractor, healthcare provider, and/or other organization via insurance payouts regularly for the near future.

These benefits include but are not limited to:

• Save time for yourself. Again, imagine a circumstance in which you are hospitalized and have to pay your healthcare provider through your health insurance payouts. If you use an assignment of benefits, you don’t have to make the payments personally or oversee the insurance payouts. Instead, you can focus on resting and recovering.
• Possibly save yourself money in the long run. As noted above, an assignment of benefits can help you circumvent some service fees by limiting the number of transactions or money transfers required to ensure everyone is paid on time.
• Increased peace of mind. Many people don’t like having to constantly think about insurance payouts, contacting their insurance company, or negotiating between insurers and contractors/providers. With an assignment of benefits, you can let your insurance company and a contractor or provider work things out between them, though this can lead to applications later down the road.

Because of these benefits, many recovering individuals, car accident victims, homeowners, and others utilize AOB agreements from time to time.

Risks of Using an Assignment of Benefits

Worth mentioning, too, is that an assignment of benefits does carry certain risks you should be aware of before presenting this contract to your insurance company or a contractor or provider. Remember, an assignment of benefits is a legally binding contract unless it is otherwise dissolved (which is technically possible).

The risks of using an assignment of benefits include:

• You give billing control to your healthcare provider, contractor, or another party. This allows them to bill your insurance company for charges that you might not find necessary. For example, a home improvement contractor might bill a homeowner’s insurance company for an unnecessary material or improvement. The homeowner only finds out after the fact and after all the money has been paid, resulting in a higher premium for their insurance policy or more fees than they expected.
• You allow a contractor or service provider to sue your insurance company if the insurer does not want to pay for a certain service or bill. This can happen if the insurance company and contractor or service provider disagree on one or another billable item. Then, you may be dragged into litigation or arbitration you did not agree to in the first place.
• You may lose track of what your insurance company pays for various services . As such, you could be surprised if your health insurance or other insurance premiums and deductibles increase suddenly.

Given these disadvantages, it’s still wise to keep track of insurance payments even if you choose to use an assignment of benefits. For example, you might request that your insurance company keep you up to date on all billable items a contractor or service provider charges for the duration of your treatment or project.

For more on this and related topic, call Schwartzapfel Lawyers now at 1-516-342-2200 .

How To Make Sure an Assignment of Benefits Is Safe

Even though AOBs do carry potential disadvantages, there are ways to make sure that your chosen contract is safe and legally airtight. First, it’s generally a wise idea to contact knowledgeable legal representatives so they can look over your paperwork and ensure that any given assignment of benefits doesn’t contain any loopholes that could be exploited by a service provider or contractor.

The right lawyer can also make sure that an assignment of benefits is legally binding for your insurance provider. To make sure an assignment of benefits is safe, you should perform the following steps:

• Always check for reviews and references before hiring a contractor or service provider, especially if you plan to use an AOB ahead of time. For example, you should stay away if a contractor has a reputation for abusing insurance claims.
• Always get several estimates for work, repairs, or bills. Then, you can compare the estimated bills and see whether one contractor or service provider is likely to be honest about their charges.
• Get all estimates, payment schedules, and project schedules in writing so you can refer back to them later on.
• Don’t let a service provider or contractor pressure you into hiring them for any reason . If they seem overly excited about getting started, they could be trying to rush things along or get you to sign an AOB so that they can start issuing charges to your insurance company.
• Read your assignment of benefits contract fully. Make sure that there aren’t any legal loopholes that a contractor or service provider can take advantage of. An experienced lawyer can help you draft and sign a beneficial AOB contract.

Can You Sue a Party for Abusing an Assignment of Benefits?

Sometimes. If you believe your assignment of benefits is being abused by a contractor or service provider, you may be able to sue them for breaching your contract or even AOB fraud. However, successfully suing for insurance fraud of any kind is often difficult.

Also, you should remember that a contractor or service provider can sue your insurance company if the insurance carrier decides not to pay them. For example, if your insurer decides that a service provider is engaging in billing scams and no longer wishes to make payouts, this could put you in legal hot water.

If you’re not sure whether you have grounds for a lawsuit, contact Schwartzapfel Lawyers today at 1-516-342-2200 . At no charge, we’ll examine the details of your case and provide you with a consultation. Don’t wait. Call now!

Assignment of Benefits FAQs

Which states allow assignments of benefits.

Every state allows you to offer an assignment of benefits to a contractor and/or insurance company. That means, whether you live in New York, Florida, Arizona, California, or some other state, you can rest assured that AOBs are viable tools to streamline the insurance payout process.

Can You Revoke an Assignment of Benefits?

Yes. There may come a time when you need to revoke an assignment of benefits. This may be because you no longer want the provider or contractor to have control over your insurance claims, or because you want to switch providers/contractors.

To revoke an assignment of benefits agreement, you must notify the assignee (i.e., the new insurance claimant). A legally solid assignment of benefits contract should also include terms and rules for this decision. Once more, it’s usually a wise idea to have an experienced lawyer look over an assignment of benefits contract to make sure you don’t miss these by accident.

Contact Schwartzapfel Lawyers Today

An assignment of benefits is an invaluable tool when you need to streamline the insurance claims process. For example, you can designate your healthcare provider as your primary claimant with an assignment of benefits, allowing them to charge your insurance company directly for healthcare costs.

However, there are also risks associated with an assignment of benefits. If you believe a contractor or healthcare provider is charging your insurance company unfairly, you may need legal representatives. Schwartzapfel Lawyers can help.

As knowledgeable New York attorneys who are well-versed in New York insurance law, we’re ready to assist with any and all litigation needs. For a free case evaluation and consultation, contact Schwartzapfel Lawyers today at 1-516-342-2200 !

Schwartzapfel Lawyers, P.C. | Fighting For You™™

What Is an Insurance Claim? | Experian

What is assignment of benefits, and how does it impact insurers? | Insurance Business Mag

Florida Insurance Ruling Sets Precedent for Assignment of Benefits | Law.com

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Assignment of Benefits vs Direction to Pay vs Assignment of Policy

Assignment of Benefits vs. Assignment of Policy

Assignment of Benefits forms, also known as AOBs, play a crucial role in the restoration industry’s contractor-client dynamics. These legal documents empower policyholders to transfer their insurance policy benefits to a third party, effectively connecting their restoration contractor directly to their insurance company. By doing so, policyholders can bypass many of the complications and anxieties typically associated with a restoration project, streamlining the process.

According to Josh Ehmke, Co-owner and General Consult at One Claim Solution , there’s a  common misunderstanding between assignment of benefits and assignment of policy. An assignment of policy refers to the transfer of the benefits and rights of an insurance policy from one party (the policyholder) to another party (the assignee).

“An assignment of policy is never going to be valid. In fact, I haven’t come across a state that allows an assignment of an insurance policy without the insurance company’s prior written consent,” Josh said. “The reason it’s not allowed is because it’s against public policy. It increases the insurance risk substantially.”

For example, a policyholder might have a history of filing numerous claims against their insurance provider, suggesting a pattern that they might be well-versed in exploiting certain loopholes and taking advantage of insurance companies. Additionally, there are concerns that they may not adequately maintain or safeguard their property, leading to an increased risk for the insurance company. 

“That is absolutely different from an assignment of benefits, which grants the rights the policyholder had to the payment under the policy to be transferred to the assignee,” Josh said. ”The only prerequisite for an assignment of benefits other than having a covered claim, is that the loss has already occurred. If you get an assignment of benefits before the loss occurs, that’s essentially a transfer of a policy.”

OCS recently encountered a case where the question arose regarding the scope of an assignment of benefits. Specifically, the issue was whether only the rights of the policyholder are transferred, or if the policyholder’s obligations are also transferred alongside the benefits under the assignment.

“By taking the assignment, the contractor doesn’t assume the policyholder’s obligations under that policy,” Josh said. “It’s very important to word your assignment of benefits appropriately to clearly state that you’re not agreeing to assume any of those policy obligations, and to specify which rights you want.”

Direction to Pay vs. Assignment of Benefits

Direction to pay (DTP) is a financial arrangement where the policyholder, who is entitled to receive an insurance claim payment, instructs the insurance company to pay the claim proceeds directly to a third party. This third party could be a vendor, contractor, service provider, or any other entity to whom the policyholder owes a debt or has entered into an agreement.

“The issue with direction to pay is that the carrier doesn’t have to honor it because it’s not enforceable,” Josh said. “It’s very limited in what it can do, whereas an assignment of benefits is much more powerful because it obligates the insurance company legally to pay you.”

According to Josh, DTP’s are rarely used, except in states like Texas and Florida where AOBs are detrimental to contractors or illegal.

“A DTP is better than nothing and allows you to at least show the carrier that the homeowner granted approval to request payment,” Josh said. “But outside of those situations, the direction to pay in my mind is worthless. When you can have an assignment of benefits, there’s no reason to have a direction to pay at all.”

A Final Word

Understanding the differences between an AOB, Assignment of Policy, and DTP is crucial because each term represents distinct legal and financial arrangements that can significantly impact insurance claims and policyholder rights. To learn more about the value of assignment of benefits in helping you navigate the restoration process, be sure to subscribe to our newsletter .

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Hi there! I’m Connor, the Account Executive for One Claim. My goal is to guide our contractors through the sales process, ensuring you’re equipped with all the information you need to make your decision and hit the ground running once aboard. We view ourselves as an extension of your business and I strive to make the process an enlightening and consultative one. My career has primarily been focused in software sales over a few different industries but the last few years were spent helping general contractors solve similar problems to what we’re doing here at OCS! Outside of work, I love spending time with my family, cooking and boating during the summer months.

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Director, human resources.

Hello! I’m Nicole, and I’m here to champion for our employees, recruit for new talent, and impact culture at One Claim Solution. I find satisfaction in supporting a memorable employee experience and bring innovation, problem solving, and strategic view to the process. Nothing is more important than our people, and a healthy culture is my top priority! I have had the pleasure of building my career in various sectors, specializing in small to medium size firms focused on high-growth. My experience is centered around driving and implementing change, leading high-performing teams, and driving process improvements. I am excited to make an impact at One Claim. Outside of work, my family and I enjoy getting outdoors as much as possible to explore beautiful Colorado!

Elizabeth McGlone

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Great to meet you! I’m Elizabeth, and I’m the one behind all the emails and advertisements you’ve been seeing. As the Demand Generation Manager at One Claim Solution, my mission is to connect with contractors like you who need our services. I’m passionate about having an impact on others and I bring a wealth of experience in demand generation and marketing strategy to create moments of delight, curiosity, and education for you.

Prior to One Claim Solution, I had the privilege of building marketing departments from the ground up at companies in a variety of industries, including IT consulting, first protection, and healthcare. Personally, I love being outdoors, playing Dungeons and Dragons and board games, singing, and traveling.

Alisha Yartzoff

Director of contractor success.

Welcome! I’m Alisha, and I’m here to champion your success as the Director of Contractor Success at One Claim. With a passion for helping contractors thrive, I bring a wealth of experience in onboarding, customer service, and account management to ensure your journey with us is nothing short of exceptional.

Prior to joining One Claim, I had the privilege of scaling SMB and Enterprise Customer Success teams at fast-growing SaaS startups. With over six years of experience at companies like Mavenlink, Teamwork, and ServiceTitan, I honed my expertise in building high-performing teams and fostering proactive, consultative relationships. This background has equipped me with a deep understanding of the challenges faced by businesses like yours, and I’m dedicated to helping you overcome them.

Hi there, my name is Eric! I am the Chief Technology Officer here at OCS, spearheading our technical strategy. I have a background in computer science, graduating cum laude from BYU-Idaho with a Bachelor’s degree in Computer Information Technology.

Before coming to One Claim, I served as the Director of Engineering at Slingshot Technology, Inc., a company later acquired by WorkWave in 2021. My professional journey has spanned both emerging startups and established corporations, with a steadfast focus on cultivating high-trust, low bureaucracy teams and innovating technology using agile methodologies.

In my free time, you can find me flying drones, enjoying the outdoors, and spending time with my family.

Hello, my name is Cam, I’m the COO of One Claim Solution! I come from a management consulting background (Bain & Company) and hold an MBA from the University of Michigan. I have worked at a wide variety of organizations, from Fortune 500 to small-cap, in an equally wide variety of industries. I have over 15 years of experience in operations and strategic growth, and I have spent much of my career focused on developing high-performing tech-enabled service organizations through early stage and high growth phases.

Outside of work, my wife Brittny and I have four kids, ages 13 to 6. As residents of Mesa, Arizona, we love to ski and explore the national parks of the southwest!

Hello, my name is Dan, and I am the CEO of One Claim Solution. I am super excited by everything we are doing at OCS to be the market leading insurance billing specialist that advocates on behalf of our restoration contractors. 

My professional experiences are predominantly corporate in nature. My career started at General Electric in finance and accounting. Immediately prior to joining OCS, I spent time as an investor at Bondcliff Partners and management consultant with Bain & Company. I also hold an MBA from the Kellogg School of Management at Northwestern University and got my BS in finance and accounting from Northeastern University.

Outside of the office, I enjoy spending time with my wife, two young children, and our family dog, Whiskey. We live in Charleston, SC and take advantage of the beautiful weather by spending as much time as possible outside at the beach or adventuring around town

Co-Founder and General Counsel

Hi, I’m Josh! In 2016, I co-founded One Claim Solution with my partner Jeremy Traasdahl, and I serve as General Counsel of One Claim Solution. Working in the restoration industry, Jeremy and I saw contractors struggling to get paid quickly and fairly and we knew there was a need for change. We founded One Claim Solution to be this change and it’s been my privilege to see our company grow and to advocate for our clients as general counsel.

Outside of my passion for helping the restoration industry, I enjoy spending time outdoors, fly-fishing, hunting, skiing, and coaching my kids’ baseball teams. I’ve been married to my amazing wife for 20 years and we have a beautiful family of 5 children.

Jeremy Traasdahl

Hey, I’m Jeremy! In 2016, I co-founded One Claim Solution with my partner Josh Ehmke. Working in the restoration industry, Josh and I saw contractors struggling to get paid quickly and fairly and we knew there was a need for change. We founded One Claim Solution to be this change and it’s been my privilege to lead our amazing team.

Prior to One Claim Solution, I started my career as an inside sales rep for Avnet, then moved to Pepsico as a district sales manager. Outside of work, I love spending time with my wife and four children, two boys and two girls!

Assignment of Benefits

An agreement by a doctor, provider, or supplier to be paid directly by Medicare, to accept the payment amount Medicare approves for the service, and not to bill the beneficiary for any more than the Medicare deductible and coinsurance.

• Assignment is a term used to describe the agreement between a healthcare provider and Medicare to accept the Assignment is a term used to describe the agreement between a healthcare provider and Medicare to accept the.
• If a beneficiary is enrolled in Medicare , and they visit a provider who accepts assignment, they may be responsible for paying a copayment or coinsurance for certain services. These out-of-pocket costs are typically a small percentage of the overall cost of the service and are required to be paid at the time the service is provided.
• It is important to note that not all providers accept assignments. Some providers may choose to bill Medicare directly for the services they provide but may also bill the beneficiary for any amount not covered by Medicare. This is known as nonassigned billing, and it is important to be aware the beneficiary may be responsible for paying a larger out-of-pocket cost if they visit a provider who does not accept assignment.
• If a beneficiary is considering receiving medical care from a provider who does not accept assignment,it is recommended they discuss the costs of the services with the provider and confirm whether they will be responsible for paying any additional out-of-pocket costs.

Understanding AOB is essential for Medicare beneficiaries to ensure they are not billed for healthcare services covered by Medicare beyond their financial responsibility. AOB helps simplify the billing process for beneficiaries and ensures they are not subject to unexpected out-of-pocket expenses for covered services.

Interested in learning more about how Assignment of Benefits works and its impact on Medicare coverage? Download our comprehensive E-book for valuable insights and guidance on navigating Medicare billing and coverage effectively.

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What is an assignment of benefits?

Jim Probasco is an expert in the areas of personal income, saving and investing, banking, home buying, insurance, and more. A Dayton, Ohio-based writer, Jim has written for radio and television, and authored books for parents in arts education opportunities for their children.

The last time you sought medical care, you likely made an appointment with your provider, got the treatment you needed, paid your copay or deductible, and that was it. No paperwork, no waiting to be reimbursed; your doctor received payment from your insurance company and you both went on with your lives.

This is how most people receive health care in the U.S. This system, known as assignment of benefits or AOB, is now being used with other types of insurance, including auto and homeowners coverage . 

What is an assignment of benefits?  

An AOB is a legal agreement that allows your insurance company to directly pay a third party for services performed on your behalf. In the case of health care, it could be your doctor or another medical professional providing care. With a homeowners, renters, or auto insurance claim, the third party could be a contractor, auto repair shop, or other facility.

Assignment of benefits is legal, thanks to a concept known as freedom of contract, which says two parties may make a private agreement, including the forfeiture of certain rights, and the government may not interfere. There are exceptions, making freedom of contract something less than an absolute right. For example, the contract may not violate the law or contain unfair terms.

Not all doctors or contractors utilize AOBs. Therefore, it’s a good idea to make sure the doctor or service provider and you are on the same page when it comes to AOBs before treatment or work begins.

How an AOB works

The function of an AOB agreement varies depending on the type of insurance policy involved, the healthcare provider, contractor, or service provider, and increasingly, state law. Although an AOB is normal in health insurance, other applications of assignment of benefits have now included the auto and homeowners insurance industry.

Because AOBs are common in health care, you probably don’t think twice about signing a piece of paper that says “assignment of benefits” across the top. But once you sign it, you’re likely turning over your right to deal with your insurance company regarding service from that provider. Why would you do this? 

According to Dr. David Berg of Redirect Health , the reason is simple: “Without an AOB in place, the patient themselves would be responsible for paying the cost of their service and would then file a claim with their insurance company for reimbursement.”

With homeowners or auto insurance, the same rules apply. Once you sign the AOB, you are effectively out of the picture. The contractor who reroofs your house or the mechanic who rebuilds your engine works with your insurance company by filing a claim on your behalf and receiving their money without your help or involvement.

“Each state has its own rules, regulations, and permissions regarding AOBs,” says Gregg Barrett, founder and CEO of WaterStreet , a cloud-based P&C insurance administration platform. “Some states require a strict written breakdown of work to be done, while others allow assignment of only parts of claims.” 

Within the guidelines of the specific insurance rules for AOBs in your state, the general steps include:

• You and your contractor draw up an AOB clause as part of the contract.
• The contract stipulates the exact work that will be completed and all necessary details.
• The contractor sends the completed AOB to the insurance company where an adjuster reviews, asks questions, and resolves any discrepancies.
• The contractor’s name (or that of an agreed-upon party) is listed to go on the settlement check.

After work is complete and signed off, the insurer will issue the check and the claim will be considered settled.

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Example of an assignment of benefits  

If you’re dealing with insurance, how would an AOB factor in? Let’s take an example. “Say you have a water leak in the house,” says Angel Conlin, chief insurance officer at Kin Insurance . “You call a home restoration company to stop the water flow, clean up the mess, and restore your home to its former glory. The restoration company may ask for an assignment of benefits so it can deal directly with the insurance company without your input.”

In this case, by eliminating the homeowner, whose interests are already represented by an experienced insurance adjustor, the AOB reduces redundancy, saves time and money, and allows the restoration process to proceed with much greater efficiency.

When would you need to use an assignment of benefits?  

An AOB can simplify complicated and costly insurance transactions and allow you to turn these transactions over to trusted experts, thereby avoiding time-consuming negotiations. 

An AOB also frees you from paying the entire bill upfront and seeking reimbursement from your insurance company after work has been completed or services rendered. Since you are not required to sign an assignment of benefits, failure to sign will result in you paying the entire medical bill and filing for reimbursement. The three most common uses of AOBs are with health insurance, car insurance, and homeowners insurance.

Assignment of benefits for health insurance

As discussed, AOBs in health insurance are commonplace. If you have health insurance, you’ve probably signed AOBs for years. Each provider (doctor) or practice requires a separate AOB. From your point of view, the big advantages of an AOB are that you receive medical care, your doctor and insurance company work out the details and, in the event of a disagreement, those two entities deal with each other. 

Assignment of benefits for car owners

If your car is damaged in an accident and needs extensive repair, the benefits of an AOB can quickly add up. Not only will you have your automobile repaired with minimal upfront costs to you, inconvenience will be almost nonexistent. You drop your car off (or have it towed), wait to be called, told the repair is finished, and pick it up. Similar to a health care AOB, disagreements are worked out between the provider and insurer. You are usually not involved.

Assignment of benefits for homeowners  

When your home or belongings are damaged or destroyed, your primary concern is to “return to normal.” You want to do this with the least amount of hassle. An AOB allows you to transfer your rights to a third party, usually a contractor, freeing you to deal with the crisis at hand.

When you sign an AOB, your contractor can begin immediately working on damage repair, shoring up against additional deterioration, and coordinating with various subcontractors without waiting for clearance or communication with you.

The fraud factor

No legal agreement, including an AOB, is free from the possibility of abuse or fraud. Built-in safeguards are essential to ensure the benefits you assign to a third party are as protected as possible.

In terms of what can and does go wrong, the answer is: plenty. According to the National Association of Mutual Insurance Companies (NAMICs), examples of AOB fraud include inflated invoices or charges for work that hasn’t been done. Another common tactic is to sue the insurance company, without the policyholder’s knowledge or consent, something that can ultimately result in the policyholder being stuck with the bill and higher insurance premiums due to losses experienced by the insurer.

State legislatures have tried to protect consumers from AOB fraud and some progress has been made. Florida, for example, passed legislation in 2019 that gives consumers the right to rescind a fraudulent contract and requires that AOB contracts include an itemized description of the work to be done. Other states, including North Dakota, Kansas, and Iowa have all signed NAMIC-backed legislation into law to protect consumers from AOB fraud.

The National Association of Insurance Commissioners (NAIC), offers advice for consumers to help avoid AOB fraud and abuse:

• File a claim with your insurer before you hire a contractor. This ensures you know what repairs need to be made.
• Don’t pay in full upfront. Legitimate contractors do not require it.
• Get three estimates before selecting a contractor.
• Get a full written contract and read it carefully before signing.
• Don’t be pressured into signing an AOB. You are not required to sign an AOB.

Pros and cons of an assignment of benefits  

The advantages and disadvantages of an AOB agreement depend largely on the amount and type of protection your state’s insurance laws provide.  

• An AOB frees you from paying for services and waiting for reimbursement from your insurer
• Some people appreciate not needing to negotiate with their insurer
• You are not required to sign an AOB.
• Signing an AOB could make you the victim of a scam without knowing it until your insurer refuses to pay
• An AOB doesn’t free you from the ultimate responsibility to pay for services rendered, which could drag you into expensive litigation if things go south
• Any AOB you do sign is legally binding

The takeaway  

An AOB, as the health insurance example shows, can simplify complicated and costly insurance transactions and help consumers avoid time-consuming negotiations. And it can save upfront costs while letting experts work out the details.

It can also introduce a nightmare scenario laced with fraud requiring years of costly litigation. Universal state-level legislation with safeguards is required to avoid the latter. Until that is in place, your best bet is to work closely with your insurer when signing an AOB. Look for suspicious or inflated charges when negotiating with contractors, providers, and other servicers.

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What Is Assignment Of Benefits In Medical Billing – AOB Complete Guide

The healthcare industry operates with a diverse network of payers and various reimbursement means. From government to private insurance companies, a healthcare practice is simultaneously engaged with multiple payer parties, each linked to a different patient with unique regulations and requirements. This reimbursement workflow and many other factors alone make this already hectic environment business a bit more chaotic if not dealt with properly. With the development and execution of several policies, every healthcare service strives to bring more efficiency and seamlessness to its operations, and the reimbursement system is not an exception in this regard. This is where the assignment of benefits in medical billing comes into play. 

What is Assignment of Benefits in Medical Billing?

An assignment of benefits in medical billing is a type of agreement between the healthcare provider, insurance company, and the patient through which a patient authorizes the medical service to collect healthcare policy coverage benefits on their behalf from their insurer for the service they have received from the facility. Once the patient signs this agreement, a direct payment link is made between the facility and the insurance company without communicating every time with the patient, which brings seamlessness and efficiency to the reimbursement process. 

Read More: Medical Billing vs Revenue Cycle Management – Key Differences Explained

Medical Services That Use the Assignment of Benefits

Various healthcare providers across different specialties and settings may use Assignment of Benefits (AOB) as part of their billing practices. Some examples of healthcare providers that commonly use AOB include:

• Physicians and Medical Practices
• Hospitals and Medical Centers
• Dentists and Dental Clinics
• Physical Therapy and Rehabilitation Centers
• Ambulatory Surgery Centers
• Imaging Centers

So how does this assignment of benefits in medical billing work? Let’s explore:

What is the Procedure for the Assignment of Benefits in Medical Billing ? – the Methodology

Patient visit.

In the first step, the patient receives medical service from a healthcare facility like a hospital, clinic, etc.

AOB Agreement 

Once the services are rendered, the healthcare facility presents an AOB agreement to the patient to transfer their healthcare insurance coverage benefits to the facility directly. The patient is advised to thoroughly review the form before signing for consent as they are establishing a direct form of communication and payment action by authorizing the medical service to collect monetary benefits on their behalf.

Claim Submission

In this stage, the healthcare service document and code all the service encounters with the patient into medical bills and claim, comprising all the details and treatment procedures that are associated with curing the patient. These claims are then sent to the insurance company. 

Claim Reviewing

After claim submission, the insurance company meticulously evaluates it on the criteria of its unique requirements, standard policies, and regulations. They also analyze the accuracy of the claim and assess the coverage limit against the payment listed in the claim. If the claim is found to be inaccurate or ineligible for coverage by the insurance company, it reverts back to the facility for denial management. 

In the case the claim is approved, the insurance company makes payment directly to the medical service given the AOB policy. This reimbursed amount may cover the full or half of the patient’s medical bills, based on the coverage plan.

Patient Responsibility

Once the insurer pays the billed amount to the medical service, any remaining payment responsibilities come on the shoulder of the patient, like deductibles, co-pays, or services not covered by insurance. The patient may receive an explanation of benefits (EOB) from the insurance company, outlining the details of the claim and any patient responsibility.

Read More: Why Outsourcing Ophthalmology Medical Billing is the Smart

What are the Complications in the Assignment of Benefits in Medical Billing? – the Hindrances

Assignment of benefits does not work well necessarily for all patient encounters. There are some instances where it fails to be applicable or may get denied. So what are those cases? Let’s explore:

Out-of-Network Providers

An insurance policy can deny the assignment of benefits claim if the service acquired by the patient is out of its network of carriers. In this case, the healthcare facility can’t establish any type of reimbursement connection with the insurance policy and must obtain the payments directly from the patient. The patient can then cover their expenditure from their insurance policy. 

Non-Covered Services

It is not necessary that a health insurance policy cover all types of patient medical encounters. Every policy has its own limitations and offers reimbursements for medical services according to its regulations. So if a patient seeks a medical facility that is not covered by their healthcare policy, no AOB agreement will be applicable here. In this scenario, a patient is required to pay all the charges from their own pocket. 

Preauthorization Requirements

Insurance policies require preauthorization for certain medical treatments, procedures, or medications, and if a patient fails to obtain this preauthorization, the insurance company rejects the assignment of benefits claim, leaving the patient to pay the bills out of their pocket.

Claims Rejection

Even with an AOB in place, insurance companies may reject or deny claims for various reasons, such as incomplete documentation, coding errors, or policy exclusions. In such cases, the provider and the patient may need to work together to resolve the issue and resubmit the claim.

If an AOB gets accepted, it will only cover the services eligible for insurance coverage. Patients are still responsible for any deductibles, co-pays, or non-covered services as per their insurance policy. If the patient fails to pay their portion, it can lead to complications in the billing process.

Billing Disputes

Moreover, billing disputes between healthcare providers and insurance companies are another reason for AOB complications. Occasionally, disputes may arise between the healthcare provider and the insurance company regarding reimbursement rates or claim processing. These disputes can delay or hinder the AOB process, requiring additional efforts to resolve the billing issues. Read More: What Is Down Coding In Medical Billing? – The Complete Guide

Assignment of benefits is an excellent way to increase the efficiency of the reimbursement process in the medical industry. However, for a patient, it is important to thoroughly and meticulously review all the terms and complications associated with the agreement of AOB as it transfers their monetary rights directly to the healthcare service. 

Concerning healthcare services, they must ensure a well-communicated, clear, and detailed preparation of this agreement to help patients better understand all the things related to their financial obligations and insurance benefits transfer. Further, the medical facilities should also bring more accuracy and compliance with standards to their billing and overall financial landscape to make the whole process conducive to the acceptance of AOB, effectively navigating the complex web of reimbursements.

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Assignment Of Benefits

What does assignment of benefits mean.

Assignment of benefits (AOB) is the official way an insured person asks their insurance company to pay a professional or facility for services rendered.

Insuranceopedia Explains Assignment Of Benefits

Assignment of benefits is a document that directs payment to a third party at the insured’s request. It becomes legitimate once both the insured party and their insurer have signed the AOB form. AOB is used in a number of insurance contexts, such as paying physicians or clinics through health insurance or paying contractors for repairs through a homeowner’s insurance policy.

Usually, AOBs are issued when the third party pursues it in the hopes that payment from the insurance company will be more certain and delivered more quickly than it would be from the insured.

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Home » Coverage Exclusions » Assignment of Benefits

Assignment of Benefits for Homeowners

• How It Works
• Using Your AOB
• Pros & Cons
• Safe & Secure
• Watch Out for Abuse
• Frequently Asked Questions

An assignment of benefits (AOB) is a contractual agreement that enables a third party to access insurance benefits on behalf of the policyholder.[1] When the policyholder signs an AOB agreement, it grants the third party the authority to initiate an insurance claim and receive reimbursement directly from the insurance company. 

Assignment of benefits for homeowners means that any  contractors , plumbers, or other professionals who perform work to repair your home or property after a claim can work with your insurance provider directly to get compensated. You step aside as the middleman, and they work together.  

While AOB can work with most types of insurance, not every insurance company will allow it. The party performing the work (the insurance claimant) and your insurance company must both agree to the process.

• As the policyholder, you must willingly sign an AOB agreement, giving explicit consent for a third party to access their insurance benefits.
• AOBs may make things easier for both you as the policyholder and for the service provider.
• The service provider takes care of filing the claim, helps the homeowner decide on repairs, and gets paid by the insurance company, relieving you (the policyholder) of having to manage these details.

How Do Assignment of Benefits Work?

AOB is a straightforward process that simplifies insurance billing for both service providers and policyholders. Here is how an AOB works.

Coverage Verified

Before hiring a service provider, the policyholder must make sure that the service is covered by their policy by checking in with the insurance provider. Homeowners insurance pays for the cost of damages or loss due to a covered event, as outlined in the policy. 

Mutual Agreement

The policyholder and the service provider agree to utilize an AOB form.[2] This agreement authorizes the service provider to handle direct billing to the insurance company for the services provided.

Billing Submission

With the AOB form in place, the service provider submits all relevant documentation, including invoices and service records, to the insurance company for payment. In many cases, this includes the initial claim with documentation of the damage and an explanation/proof of how it happened.

Claim Evaluation

The insurance company thoroughly reviews the submitted documents to verify that the damage itself and the provided services are indeed covered under the policy terms and that the contractor provided those same services.

Direct Payment

If the services are eligible and covered by the insurance policy, the insurance company promptly issues payment directly to the service provider. This payment aligns with the agreed-upon costs as outlined in the insurance policy.

Policyholder’s Responsibility

Generally, the policyholder is only responsible for any deductibles, copays, or out-of-pocket expenses specified in their insurance policy.[3] They are relieved of the responsibility of managing the billing process or handling reimbursement paperwork.

Service Rendered

The policyholder receives necessary services covered by their insurance policy, such as medical treatment or repairs.

Example of an Assignment of Benefits

A hurricane hit Rachel’s town, severely damaging the shed where she keeps her tools and lawn equipment. The shed is covered under her home insurance policy, and she files a claim with the insurance provider quickly with photographs and documents that show the damage and provide proof of the value and potential cost to rebuild. The insurance provider approves the replacement of the shed.

To streamline the process of paying the contractor, Rachel signs an AOB allowing the contractor to bill the insurance provider rather than billing her. This means that if there are any disputes about the costs of materials, timeliness of payment, or any other issues, those will happen between the insurance company and the contractor, and Rachel will not be required to step in. 

Additionally, rather than having to pay the contractor out of pocket and wait for a reimbursement check from the provider, the contractor will be paid directly by the insurance company, so Rachel doesn’t have to pay the cost of the shed replacement.

When Would You Use Your Assignment of Benefits?

AOBs can be useful in various situations:

• Assign benefits to contractors for property damage repairs, simplifying the insurance claim process. It can often expedite the process and help claimants to get paid faster.
• AOBs can help in emergencies, ensuring timely payment without paperwork hassles. This can be particularly helpful during already high-stress times. 
• Consider AOBs for complex claims with multiple providers or extensive paperwork. You’ll have less to manage if the parties work together directly.
• You can use an AOB for a range of professionals relating to a homeowners insurance claim, such as plumbers, roofers, window repair specialists, landscapers, carpenters, and restoration specialists.

Pros & Cons of Using Assignment of Benefits

Making Sure Your AOB Is Safe & Secure

To ensure the safety of an AOB:

• Check the reputation of the service provider and seek multiple quotes for services.[4]
• Carefully examine the AOB terms, ensuring clarity and alignment with your insurance policy.
• Beware of high-pressure tactics and take your time to decide.
• Confirm the provider’s licensing and insurance.
• Get multiple estimates in writing for the needed work.
• Consult an attorney or insurance advisor if you have concerns.
• Keep records of communication and contracts.
• Inform your insurer about the AOB and their requirements.
• After services, check the results against AOB terms and your satisfaction.
• Make sure the AOB has appropriate cancellation provisions in place so that you can rescind the agreement in writing in certain circumstances.

Assignment of Benefits Being Abused: What Are My Options?

While an AOB can offer convenience, the process may be susceptible to misuse by those who would take advantage of the insurance company and overcharge for services or claim to have provided services that they did not actually perform. Lisa Koosis, a former claims specialist, warns, “Be watchful for AOB scams, particularly after natural disasters such as earthquakes or hurricanes. Red flags include contractors who offer something for nothing, make exaggerated claims of damage or present broadly worded contracts.”

If you suspect AOB abuse or fraud, consider these options.

Contact Your Insurer 

If you suspect AOB abuse, promptly reach out to your insurance company. Express your concerns and provide any evidence you have to support them. Insurers have units dedicated to investigating potential fraud or AOB misuse.

Report Fraud

If you suspect fraudulent activities, report the issue to your state’s insurance fraud bureau or department, which investigates such cases and takes legal action when appropriate. However, fraud is generally difficult to prove. 

Seek Legal Counsel

Get advice from an  attorney who is experienced in insurance claims to navigate your specific situation. Be aware that pursuing legal action can be costly and lengthy, so it generally won’t be your first course of action. But if the process gets complicated, it’s helpful to have a legal professional on your side. Lisa Koosis, a former claims specialist, says, “If you need legal assistance but can’t afford it, try calling your local law school. Many of them offer free clinics where you can get a consultation and, sometimes, pro bono representation.”

Know About Potential Litigation

If the contractor or service provider isn’t paid by your insurance company, they might pursue legal action against your provider, leading to a dispute that may require your action or response.

Frequently Asked Questions About Assignment of Benefits (AOB) for Homeowners

We have compiled some of the most frequently asked questions about AOBs and how to use them most effectively, so you can make the most informed decisions about your situation.

An assignment of benefits, also referred to as an AOB, in homeowners insurance is when you allow a contractor or service provider to take over your insurance claim process. They deal directly with the insurance company for tasks like repairs or damage assessments and get paid directly. This can simplify and expedite the process because the service provider is dealing directly with your insurance company without you serving as the intermediary. 

All parties must agree to the process. As the policyholder, you’ll sign off on the process, and both the services provider and your insurance company must also agree to the process. 

Using an AOB can be beneficial if it is used wisely and for the purposes of working with reputable service providers. It streamlines claims, but it also comes with potential risks like fraud. Proceed with caution and agree to an AOB only if you feel confident that you are working with trusted parties. Also, be aware that not all insurance companies allow AOBs. Some states prohibit AOBs for certain types of work. Consult your insurance provider to ensure they do before proceeding. 

In recent years, AOBs have been the target of fraud. Some service providers have inflated their invoices, billing for work that wasn’t performed. In some cases, claimants sue the insurance company, resulting in higher premiums for the policyholder down the road.

An AOB simplifies the insurance claims process for policyholders, letting service providers handle the work of getting paid for their services. This reduces responsibility and stress for policyholders and can often serve the best interests of all parties.

An AOB on a claim form is a line item where you authorize a service provider to receive insurance benefits for a specific claim. It lets that provider directly bill and get paid by the insurance company, simplifying the process for you. Make sure to understand the terms before signing it.[2] In some cases, it could mean you are responsible for any fees billed by your service provider if your insurance company doesn’t pay the full amount.

Related Pages

• The Do’s & Don’ts of Submitting a Homeowners Insurance Claim
• How Long Will My Homeowners Insurance Claim Take?
• How to File a Homeowners Insurance Claim
• How to Document Property Damage for Your Claim
• How to Speed Up Your Homeowners Insurance Claim
• Insurance Claims & Appeals

Post Disaster Claims Guide . National Association of Insurance Commissioners.

Assignment of Benefits . Department of Health and Human Services – North Dakota.

Understanding Dental Assignment of Benefits . West Virginia Offices of the Insurance Commissioner.

Assignment of Benefits: Consumer Beware . (April 2020). National Association of Insurance Commissioners.

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A Few More Thoughts About Assignments of Benefits

I last wrote about assignments of benefits (AOB) back in January. You didn’t read that one? I’m shocked, but I’ll be ok. Here’s the link to my thoughts about assignments of benefits . You don’t even have to leave this page to read that one. Just press the control key when you click the link and it’ll bring up another window so that you can keep reading this post. You can thank me later.

So, if I wrote on this topic just a few months ago, why am I writing about it again? That’s an easy one. The problem hasn’t gone away and Insurance Journal is hosting a panel discussion webinar on the topic next week. That’s why I’m writing again.

The premise of the AOB

Let’s reset again and make sure that we’re all on the same page. An assignment of benefits is a document, or clause in a contract, that allows another party (a contractor, water mediation company, your doctor’s office) to file for, and receive insurance benefits. This process allows the insurance company to negotiate and pay the assignee for the claim, rather than the customer having to pay their contractor first and then file the claim.

In theory, it’s a great way to operate. Think about it. The customer takes one link out of the claim chain. Without the AOB, the process is centered on the customer who spends their time getting an estimate, sending it to the insurance company, negotiating with the adjuster about the most fair claim payment, receiving the payment, getting the contractor to start the work, paying the contractor, and then finalizing the claim (or reopening the claim if the repairs take more money that initially paid, which means starting over almost from the beginning).

The AOB makes it so that the insured can hire a contractor and then remove themselves from the process. All they have to do is drink their coffee, wait for the contractor to finish the work, and pay their deductible. OK, that might be an oversimplification, but you get the point. The insurance company works directly with the contractor to get the repairs going.

The problem with the AOB

As you know by now (because you’re daily Insurance Journal readers), it just doesn’t work that way. Not every insurance company pays the claims that they probably should as easily as they should (sorry insurance people, but it’s kind of true). Not every repair contractor files the correct amount for their claim. Sometimes they inflate the costs. What happens when the insurance company doesn’t want to pay for the costs as presented by the contractor? That’s right, the contractor calls their attorney and (you know it) the insurance company contacts their legal team. What happens with the customer?

The customer finds themselves in the middle of a feud, which might leave them waiting for the work to be done, or worse yet, they find that they are on the hook for the balance if the insurance company wins against the contractor. For the customer, the best case is that they get their repairs paid for and find out later that their insurance premiums go up (along with the rest of us, thanks) to make up for the extra expenses that the insurance company had.

The potential solution for the AOB issue

As the primary contact with the customer, we (and by we, I mean we insurance professionals) need agents to be involved way before the claim ever happens.

The solution starts with educating customer about a few things.

• Give your customer two phone numbers to be used in the event of a claim. Give them your number and give them a direct number to their insurance company’s claims line. I know. You need down time, too. You can tell them to call the company first if it happens after hours, but if they call you and you come by, ready to help, what does that do for your reputation with them, and all of their friends? I’m not saying, I’m just saying.
• Give your customers a few hints about how the less honorable contractors will deal with them. You can tell them this story that actually happened to me. I was sitting in my office at home (yes, when I was working at an insurance company) when the doorbell rang. A nice looking young gentleman told me that he worked with a roofer that was in my neighborhood, working on a neighbor’s roof. He asked me if he could schedule us for a complimentary roof inspection and that if they found anything there wouldn’t be any expense to me, they would just bill it to the insurance company. What a nice fellow, except that he worked for a crook. Tell your customers that someone might visit them, trying the same thing.
• Give your customers some help understanding what happens if they sign the AOB. Tell them a bad story about an AOB that went horribly wrong. You could tell them this story from Insurance Journal .
• Give your customers a newsletter the helps them to understand their insurance policies, gives them important and timely tips (like for hurricane season, winterizing homes, or other seasonal and regional events). Your newsletter should come out at a minimum of quarterly and provide a huge value to them. You get to remind them how to reach your, or where they can find contact information for their insurance company. You get to be on their mind when something happens. You’re a trusted resource, rather than the insurance person that sends them a bill a couple of times a year.

You guessed it, I think we need to be proactive about helping our customers. It can’t just be about selling a product. Insurance policies aren’t commodities to be purchased without proper explanation and conversations. Insurance policies are complicated, and we have the education and training to help our customers to understand what it is that they’re purchasing.

When we are reactionary, which insurance people kind of tend to be, we end up paying for it. We lose time, credibility, and money dealing with these issues. Let’s face it, all of us would rather be serving the customer before the claim, than dealing with an angry customer after the claim goes wrong.

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Written By Patrick Wraight

Patrick Wraight, CIC, CRM, AU, is director of Insurance Journal's Academy of Insurance. He can be reached at [email protected].

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Assignment of Benefits

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What is an Assignment of Benefits?

After an accident or other event that triggers your insurance coverage, an assignment of benefits simplifies the process of paying any third parties to whom you may be liable. For instance, if you were to get health insurance and didn’t sign an assignment of benefits, the insurance company would pay you, and you would be responsible for paying the medical facility out of pocket.

An assignment of benefits is beneficial for all parties involved because insurance companies frequently negotiate lower costs with healthcare providers. Insurance companies save money, and you avoid the hassle of tracking down and paying each individual medical provider, except for co-pays or coinsurance. 

Assigning Benefits

Here’s another example of assigning benefits: 

Let’s say a storm causes damage to your home due to the wind. After reporting a loss to your insurer, an adjuster will visit your home or business to provide an estimate of repair costs. When you’re ready to have some work done on your home, call a contractor and make arrangements. 

To avoid having to pay the contractor out of pocket and then wait to be reimbursed by the insurance company, contractors will sometimes have you sign a document authorizing the contractor to contact the insurance company directly for payment. Contractors can sue your insurance company on your behalf if they aren’t paid after you’ve signed an assignment of benefits.

Whether or not insurance benefits are transferable will be specified in the policy. Assuming the loss occurs before the assignment, the assignment is generally valid. However, it may be invalid to assign benefits before the damage has occurred. For instance, you could run into legal trouble if you foresee a storm damaging your home and offer your contractor friend the insurance payout in exchange for immediate repairs.

Before you distributed the benefits of your insurance policy in certain circumstances, the insurance company could have needed to grant its prior consent. In these situations, they have little control over the potential cost of the bill. It’s better to avoid making any commitments regarding your insurance proceeds until after the damage has really occurred.

Are You Being Asked to Sign an Assignment of Benefits?

If so, before you take any action, you might want to have an experienced personal injury attorney analyze it before proceeding.

Contact an Attorney for Legal Help

The context of health insurance in personal injury claims is where an assignment of benefits is most frequently raised.

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Consumer Insight

Sept. 13, 2023

Assignment of Benefits: Consumer Beware

You've just survived a severe storm, or a tornado and you've experienced some extensive damage to your home that requires repairs, including the roof. Your contractor is now asking for your permission to speak with your insurance company using an Assignment of Benefits. Before you sign, read the fine print. Otherwise, you may inadvertently sign over your benefits and any extra money you’re owed as part of your claim settlement.

The National Association of Insurance Commissioners (NAIC) offers information to help you better understand insurance, your risk and what to do in the event you need repairs after significant storm damage.

Be cautious about signing an Assignment of Benefits. An Assignment of Benefits, or an AOB, is an agreement signed by a policyholder that allows a third party—such as a water extraction company, a roofer or a plumber—to act on behalf of the insured and seek direct payment from the insurance company.  An AOB can be a useful tool for getting repairs done, as it allows the repair company to deal directly with your insurance company when negotiating repairs and issuing payment directly to the repair company. However, an AOB is a legal contract, so you need to understand what rights you are signing away and you need to be sure the repair company is trustworthy.

• With an Assignment of Benefits, the third party, like a roofing company or plumber, files your claim, makes the repair decision and collects insurance payments without your involvement.
• Once you have signed an AOB, the insurer only communicates with the third party and the other party can sue your insurer and you can lose your right to mediation.
• It's possible the third party may demand a higher claim payment than the insurer offers and then sue the insurer when it denies your claim.
• You are not required to sign an AOB to have repairs completed. You can file a claim directly with your insurance company, which allows you to maintain control of the rights and benefits provided by your policy in resolving the claim.

Be on alert for fraud. Home repair fraud is common after a natural disaster. Contractors often come into disaster-struck regions looking to make quick money by taking advantage of victims.

• It is a good idea to do business with local or trusted companies. Ask friends and family for references.
•  Your insurer may also have recommendations or a list of preferred contractors.
• Always get more than one bid on work projects. Your adjuster may want to review estimates before you make repairs.

Immediately after the disaster, have an accurate account of the damage for your insurance company when you file a claim.

• Before removing any debris or belongings, document all losses.
• Take photos or video and make a list of the damages and lost items.
• Save damaged items if possible so your insurer can inspect them, some insurance companies may have this as a requirement in their policy.

Most insurance companies have a time requirement for reporting a claim, so contact your agent or company as soon as possible. Your  state insurance department  can help you find contact information for your insurance company, if you cannot find it.

• Insurance company officials can help you determine what damages are covered, start your claim and even issue a check to start the recovery process.
• When reporting losses, you will need insurance information, current contact information and a  home inventory or list of damaged and lost property . If you do not have a list, the adjuster will give you some time to make one. Ask the adjuster how much time you have to submit this inventory list. The NAIC Post Disaster Claims Guide has details on what you can do if you do not have a home inventory list.

After you report damage to your insurance company, they will send a claims adjuster to assess the damage at no cost to you . An adjuster from your insurance company will walk through and around your home to inspect damaged items and temporary repairs you may have made.

• A public adjuster is different from an adjuster from your insurance company and has no ties to the insurance company.
• They estimate the damage to your home and property, review your insurance coverage, and negotiate a settlement of the insurance claim for you.
• Many states require public adjusters to be licensed. Some states prohibit public adjusters from negotiating insurance claims for you. In those states, only a licensed attorney can represent you.
• You have to pay a public adjuster.
• The NAIC Post Disaster Claims Guide has information on the different types of adjusters.

Once the adjuster has completed an assessment, they will provide documentation of the loss to your insurer to determine your claims settlement. When it comes to getting paid, you may receive more than one check. If the damage is severe or you are displaced from your home, the first check may be an emergency advance. Other payments may be for the contents of your home, other personal property, and structural damages. Please note that if there is a mortgage on your home, the payment for structural damage may be payable to you and your mortgage lender. Lenders may put that money into an escrow account and pay for repairs as the work is completed.

More information. States have rules governing how insurance companies handle claims. If you think that your insurer is not responding in a timely manner or completing a reasonable investigation of your claim, contact your  state insurance department .

About the National Association of Insurance Commissioners

As part of our state-based system of insurance regulation in the United States, the National Association of Insurance Commissioners (NAIC) provides expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers. The U.S. standard-setting organization is governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally.

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What is Assignment of Benefits (AOB) in Medical Billing

The healthcare sector has an extensive network of payers for health insurance who make payments on behalf of clients with insurance policies. The assignment of benefits is used in this situation. Insurance programs allow many patients to receive medical care. Patients must ensure that their insurance provider covers all medical benefits when they visit the doctor.

Keep reading as we go through everything related to the assignment of benefits in medical billing , including what it comprises and what components it should contain.

What is Assignment of Benefits (AOB)?

The assignment of benefits (AOB) is undoubtedly one of the most significant legal documents that make up the healthcare system. It is an agreement conveying the medical professional’s right to claim medical services and obtain benefits from the patient’s insurance plan. The medical professional receives payment for patient services under this agreement.

Therefore, the insurance payer must pay the doctor when the patient signs this paper allowing payment. Without the AOB, the patient’s sole obligation is to pay the cost of any medical services obtained from the physician before filing a claim with the insurance provider for prompt payment.

Various components of the assignment of benefits (AOB)

Different formats.

AOB must be written considering its complexity because it is an important document. Although it is a legal document, it can be created in various ways because each medical officer or team may use a different structure or style.

Exchange of information

Patients must sign a letter allowing the insurance company to supply the medical practitioner with information to get reimbursed. Thus, by signing this contract, the patient implicitly permits the insurance provider to provide essential information and data to medical providers.

In addition, the signatures attest that the patient has authorized a medical practitioner’s staff member to approach the insurance provider on the patient’s behalf to request the necessary payments as outlined in the contract.

Establishes a line of communication

Thanks to this paperwork, the patients are also released from the obligation to contact the insurance provider or the doctor directly for payment-related issues. He can leave it after allowing both parties to interact with one another and carry out the subsequent actions without being held responsible for making the connection himself.

Transfer of the financial obligation

The benefits assignment occurs once the insurance company/payer’s claim process has been successfully completed. This is the precise moment when the patient shifts payment responsibility to the insurance provider.

Outsourced billing services might be engaged by medical professionals who need help keeping up with the billing. AOB requests might not be approved by the insurance company involved in the specific process; it is necessary to note this.

Rejection may occur for several reasons, including the patient’s health benefits contract clauses or State Law.

Relational to state laws

The doctor, patient, and insurance company must stay abreast of state legislation changes because of this. A single clause modification can generate significant problems with insurance benefits. It is essential to keep up with the evolving state laws and regulations because doing so saves time and reduces paperwork.

The doctor or hospital must analyze each patient’s health benefit program to ensure the claim is accepted. Several things influence the operation of AOB and its success.

These include state legislation, the type of medical services the healthcare provider offers, and the insurance plan the consumer has chosen. The patient gives up his right to bargain with the insurance provider over the provider’s services by signing the AOB.

What should be included in an AOB?

It is crucial to carefully craft the AOB because only one signature establishes a binding legal relationship between the three parties. The elements listed below make up a proper assignment of benefits:

Business’s full name

Even a tiny error in the company’s name that needs compensation can prevent progress and cause unneeded delays. In addition, while preparing the medical billing papers, the business organization’s name must be added with the utmost level of precision in the assignment of benefits.

Even if a provider of outsourced medical billing services is involved in the procedure, it is still required to ensure that the name listed in the contract is correct.

The concept of Irrevocability

The term “irrevocable” is crucial and significant for contracts that establish legal responsibilities. Using this phrase, the patient signifies that they cannot reverse the benefit assignment later.

Demonstration of Rights

The court is instructed by the rights demonstrated in this contract to investigate the advantages paid by the patient to the doctor. These rights are granted to the insurance carrier, which will compensate the healthcare practitioner.

Benefits of Not Paying for Treatment

A provider forfeits their right to demand payment at the time of service in return for the ability to sue the insurance provider if they are not paid in full. The patient will forfeit their right to sue, but payment is unnecessary.

Genuine signature provided by the patients

This is the crucial clause in the contract. The patient must accurately sign this document to be legally binding and establish rights and obligations. Finding the best medical billing service that guarantees prompt payment reimbursement can be challenging.

RCM Matter is the only place to go if you’re looking for a business that can provide adequate medical billing services.

What channel is opened between the patient, doctor, and insurance company thanks to the assignment of benefits?

The benefits assignment permits communication between the insurance company and the doctor for financial matters. By doing this, the patient is released from having direct contact with both parties on payment-related issues.

What happens when the insurance company has processed your claim successfully?

After completing a claim, the insurance provider takes over the patient’s financial responsibilities. This allows the insurance company to pay the doctor directly.

What should a document containing an assignment of benefits have?

The precise name of the medical professional or firm, the word “irrevocable” to indicate that the patient cannot revoke the assignment, a clear display of the rights assigned to the insurance company for payment, and an actual signature by the patient to verify the agreement all need to be required in an assignment of benefits document.

AOB establishes a direct line of communication with the patient’s health insurance payer, playing a significant role in medical billing. The goal is to speed up the process without further contacting the patient while increasing the likelihood that the claim will be reimbursed.

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An assignment of benefits, or AOB, is a legal tool that allows an insurer to directly pay a third party for services performed rather than reimbursing a claimant afterwards. In recent years, insurers have experienced an increase in fraud and abuse of assignment of benefit provisions, resulting in higher costs.

Assignment of rights to collect under an insurance policy after a loss are common. In many cases, homeowners will assign the right to collect to contractors or other service providers following a loss. Vendors soliciting AOBs from policyholders are typically associated with property insurance, auto repair, and personal insurance claims. While such assignment may allow policyholders to make emergency repairs more quickly, the practice has resulted in many homeowners becoming the victims of scam artists and other unscrupulous service providers. Contractors have sought to unilaterally establish the value of the claim and demand payment for inflated invoices. Many contractors also work with attorneys that then sue the insurance company over the claim.

State legislatures have sought to protect insurance consumers from AOB abuse by imposing common sense limitations, and 2019 finally saw some progress. For example, for the past several years, the Florida legislature has sought to put some parameters around the use of assignment of benefits to curtail the explosion of lawsuits filed by contractors and attorneys allegedly on behalf of consumers who knew nothing about the lawsuits. The only beneficiary of such fraud were the unscrupulous lawyers and contractors. In 2019, AOB reform legislation finally passed the Florida legislature, and was signed into law by the governor. Among other things, the new law gives policyholders the right to rescind the contract, and mandates that the assignment include an itemized description of the work to be done. Similarly, governors in North Dakota, Kansas, and Iowa all signed into law NAMIC-backed legislation to protect consumers from abusive assignment of benefit practices.

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News & media.

Assignment of benefits: A growing concern

By Kevin Poll

Evaluating claims properly and determining the appropriate amount of a loss are crucial for insurance companies, especially when trying to offer competitive premiums to customers and maintain profitable financial results.

Factors that affect profitability

In the business of insurance, many factors—some that can’t be controlled—affect financial profitability. Predictive analytics and more refined modeling are helping insurers reduce uncertainty, but even the best of models have their limitations.

Further, many variables can’t be predicted but could have significant financial impact on the bottom line. One of those variables—the potential for the benefits of an insurance policy being assigned post-loss to predatory adjusters—has been a hot topic, particularly in those states where laws and regulations currently prevent insurance companies from being able to mitigate the problem.

What is assignment of benefits?

Typically, an insurance policy has a loss payment provision that advises the policyholder that any payment for a first-party loss will be paid directly to the insured unless another party is legally entitled to collect payment. However, a common practice by consumers after a loss is to have the contractor that will be making the repairs to the damaged property work directly with the insurance company for payment.

Some insurance providers have simplified this process by developing a network of trusted contractors that are allowed to inspect claims on their behalf. This creates a consumer-friendly environment where the insured, for the most part, is removed from the claims settlement process. However, consumers generally are free to make other choices, so if they decide on a contractor not in that network, the insurer most likely will work with the entity selected by the insured.

When a contractor, who is not in an insurance provider’s network, is chosen, the insured has two options: either receive payment from the insurance company and then work directly with the contractor or allow the contractor to work directly with the insurance company regarding repairs and payment. Insurance companies would likely prefer the first option because they can then more closely monitor the claims process. While the second option may be less desirable to the insurance company, certain states, like Florida, have laws in place that actually prevent the carrier from disallowing it.

What are the concerns with assignment of benefits?

Transferring the benefits of a policy to a third party, such as a contractor, does create a better customer experience; however, insurers generally lose a bit of control managing the claims process when working directly with the third party.

Several states (especially Florida as discussed below) have seen an influx in predatory public adjusters and contractors that seek out consumers who may potentially have a loss covered by their homeowners policy. These adjusters (that may also serve as the contractor making the repairs to the home) will have the consumer sign a transfer of benefits to them almost immediately after suffering the loss, and then they will work directly with the insurance company to complete the claims process.

One issue that arises (and often the consumer is unaware of this) is that the adjuster/contractor could be inflating the actual cost of the claim by reporting damage that may not actually have occurred. Additionally, the claim may not be reported to the insurance company until the repairs have already been completed so the insurance company has not had an opportunity to inspect the damage. Such tactics can result in additional profits for the adjuster/contractor, which translates to inflated severity and rising premiums for the consumer.

This issue may be particularly problematic in Florida, where insurance carriers may not be aware of potential losses until they’re served with a lawsuit for expenses incurred by the contractor that completed the repairs. In fact, the Florida Office of Insurance Regulation (FLOIR) released results from a study it conducted showing that the number of lawsuits attributed to assignment of benefits (AOB) increased from 408 in 2000 to more than 28,000 in 2016. Further, the average severity for claims where there is an AOB is about 85 percent more than those claims without an AOB.

How has this issue escalated?

Several factors have contributed to the growing problem of assignment of benefits in Florida; however, a combination of case law and legislation, which has made it difficult for insurance companies to mitigate claim costs and potential fraud, may be the most impactful.

In the 1917 landmark case of West Florida Grocery Co. v. Teutonia Fire Ins. Co., 77 So. 209, 210-, the state Supreme Court rendered a decision holding that the insured was able to assign the benefits of the policy following a loss directly to a third party without the written consent of the insurance provider. The precedent established by this 100-year-old case continues to make it very difficult for an insurance company to prohibit the assignment of benefits in Florida.

In addition to this case, Florida Statute §627.428 governing payment of attorneys’ fees related to insurance practices requires that insurance companies pay legal fees to third parties successfully suing to obtain payment for their services even if the ruling from the court places the amount of the claim only $1 above the insurance company’s offer in settlement. As a result, this statute incentivizes contractors to sue insurance companies for reimbursement, because the likelihood that they’ll have to pay their own legal fees for the case is very slim.

As reported by The Sun Sentinel earlier this year, consumers in southern Florida could expect to see rate increases averaging 5-15% as a result of claims abuse. Additionally, if it can be assumed that a significant number of the lawsuits complied in the FLOIR study referenced above were initiated by public adjusters and contractors seeking to be unjustly compensated, it could be suggested that this predatory behavior is factoring into these rate increases.

Despite this potential correlation, the legislature has yet to make changes to existing laws. While some members of Florida’s legislature favor the existing legislation, others are advocating for consumers and supporting legislation that would eliminate the abuse. Although remedial legislation did fail in 2017, some members have said they’re hopeful to get legislation passed in 2018.

How is ISO responding?

ISO has been reviewing policy language to determine the best course of action for responding to the growing crisis, especially in Florida. While prohibiting assignment of benefits post-loss altogether is not allowed by state law, several policy provisions can be modified to introduce parameters on how the benefits of the policy can be assigned to a third party. ISO is finalizing these changes and hopes to file in the first quarter of 2018 so that member companies can address this concern with or without any future changes to Florida law.

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