Assignment of Benefits (AOB)

An Assignment of Benefits (AOB) is a contractual arrangement where a patient grants permission for their healthcare provider to be paid directly by their health insurance company for covered medical services.

What Is an Assignment of Benefits?

An Assignment of Benefits (AOB) is a legal agreement in which a patient or policyholder authorizes their healthcare provider to receive insurance payments directly.

This means that instead of the insurer reimbursing the patient, the provider bills the insurer and the insurer pays the provider directly. It’s a common practice used to streamline billing and reduce administrative burdens for patients and providers.

Why Does AOB Matter?

For Patients:

  • Removes the need to pay full costs up front and then file claims for reimbursement.
  • Simplifies paperwork since the provider handles the insurance process.
  • Minimizes errors or delays in getting paid back.

For Providers:

  • Improves cash flow by receiving direct payments from insurers.
  • Reduces claim denials and delays.
  • Clarifies who has the right to negotiate or discuss claims.

For Insurers:

  • Clearly specified payee supports consistent payments.
  • Lowers risk of duplicate payments or payment fraud.

How AOB Works: The Process

  • Patient Sign‑In / Registration  
    The patient (or legal guardian) signs an AOB form during registration or check-in. The form authorizes the provider to bill and collect payment directly from the insurer.
  • Claim Submission  
    The provider submits the claim to the insurer, using the signed AOB to designate themselves as the payment recipient.
  • Insurance Payment or Denial  
    The insurer processes the claim and pays the provider directly. The patient receives an Explanation of Benefits (EOB) detailing what was paid and any remaining balances.
  • Patient Responsibility  
    Patients are still responsible for copayments, deductibles, coinsurance, or non-covered services even when an AOB is in place.

What’s Included in an AOB Form?

A standard Assignment of Benefits form may include:

SectionPurpose
Patient’s ConsentAuthorizes provider to bill and receive payment from the insurer
Insurance DetailsIncludes policy number, provider info, and insurer contact
Acknowledgement of ResponsibilityConfirms that the patient is still liable for non-covered or denied charges
Authorization to Release InfoAllows provider to share medical information with insurer for claims processing

AOB vs. Power of Attorney (POA)

  • AOB limits rights transferred to the provider for one purpose: receiving insurance payment. It does not grant authority over any other patient decisions.
  • POA is a broader legal authorization that may grant someone power to make financial or medical decisions on behalf of the patient.

AOB: Legal and Regulatory Framework

  • State Laws  
    Most U.S. states (48 + DC) have specific regulations governing AOB, including disclosure requirements, revocation options, and provider billing rules. Mississippi and Missouri are exceptions.
  • Federal Law: No Surprises Act (NSA)  
    Under the NSA, insurers must pay nonparticipating providers or facilities directly (not to the patient), if an AOB is valid. This requirement applies to ERISA and other federal health plans.

Where AOB Is Used?

  • In-Network Providers:  
    Many in-network providers have AOB arrangements embedded in their contracts, so patients generally don't sign separate forms.
  • Out-of-Network Providers:  
    Some insurers do honor AOBs for out-of-network providers, meaning they’ll send payment directly to the provider if the patient has signed an AOB form.
  • Specialists Unseen Onsite (e.g., anesthesiologists, labs):  
    A patient may sign an AOB to allow payment directly to a practitioner they didn’t choose directly.

What Are the Benefits and Challenges of AOB?

Benefits:

  • Simplifies claim handling and reduces patient paperwork.
  • Ensures timely and reliable payment to providers.
  • Reduces financial misunderstandings and insurance follow-ups.

Challenges:

  • Patients must understand their ongoing financial responsibility, even with AOB.
  • Forms must comply with state laws or else may be invalid.
  • Irrevocable forms may restrict a patient’s ability to withdraw consent.
  • Risk of balance billing if the provider is out-of-network and charges exceed insurer reimbursement. The No Surprises Act may protect in emergency or certain facility-based care.

What Are Some Examples of AOB in Practice?

  • A patient signs AOB before surgery, so insurance pays the hospital and surgical team directly. The patient only pays their deductible and co-pay.
  • A specialist, like a lab or radiologist, receives payment directly even though the patient didn’t select them.
  • An out-of-network doctor submits an AOB-backed claim and is paid directly. The patient is then billed for the remainder.

In Summary

An Assignment of Benefits is a legal agreement where a patient authorizes their healthcare provider to receive insurance payments directly. It helps streamline billing, improve provider revenue flow, and reduce patient paperwork. However, patients remain financially responsible for deductibles, copays, and non-covered services. AOBs must meet both federal law (such as the No Surprises Act) and state-specific regulations to be valid and enforceable.