Assignment of Benefit (AOB)

By Steven M. Verno, CMBS, CEMCS, CMSCS
An excerpt of Medical Billing Terminology (c) 2009 Steven M. Verno. Published with author's permission.

Assignment of Benefit (AOB) is a simple term that can have very drastic consequences. Assignment means to take something and give it to someone else. Example: I assign my parking spot to Jim. Benefit is a health care service provided under a contract between a health insurance company and an employer or patient. SO, an assignment of benefit simply means the patient is asking permission to take the payment of their health benefit and give it to the doctor so that the doctor can apply the benefit payment to the medical debt owed by the patient. 

AOB Request...

This is a request sent to the insurance company, signed by the patient or member, requesting that the payment of their health benefit be sent to a person they designate to receive the payment of the health benefit. This request may or may not be honored and accepted by the insurance company depending on the patient’s or member’s health benefit contract, or State Law.

The patient’s or member’s health benefit contract may prohibit the assignment of the health benefit payment to anyone. State Law such as in Florida and Louisiana may require the insurance company to honor the Assignment request even if the contract prohibits it. If the Assignment is prohibited, the payment of the health benefit will be sent directly to the patient or member; and then requires the provider to bill the patient or member.   

Assignment of Benefit and State Laws

Not every patient has the contracted right to assign their benefit payment. Even if you have the patient sign an AOB form, the insurance company doesn’t have to honor it if the patient cannot contractually assign their benefit payment to anyone. The only exception is if there is a State Law mandating it.

The provider has the option to do this on a claim by claim basis.

If accepted, the insurance company pays the patient’s health benefit directly to the person designated by the patient to receive the payment of the health benefit. The provider has checked “Yes” for “Assignment” on the claim form. Block 27 (Assignment) of the CMS 1500.

State Law such as in Florida and Louisiana may require the insurance company to honor the Assignment request even if the contract prohibits it. If the Assignment is prohibited, the payment of the health benefit will be sent directly to the patient or member. Then requires the provider to bill the patient or member. 

Non-Acceptance of AOB

If the provider does NOT accept assignment, the payment of the health benefit is sent to the patient or member. Some insurance companies such as Medicare, Railroad Medicare, and Tricare allow you to bill the patient for 115% of the allowable. For example, if the allowable is $100, you can bill the patient for $115.00. Assignment only works if the patient’s contract allows the assignment of the benefit payment, or State Law mandates acceptance of Assignment.

State Assignment of Benefit Laws can be referenced on the American College of Emergency Physician (ACEP) website http://www.acep.org/advocacy.aspx?LinkIdentifier=id&id=29364&fid=1018&Mo=No