What Is a Medical Claim and How Does It Work?
Understand medical claims, from submission to your Explanation of Benefits. Navigate healthcare billing with confidence.
A medical claim is a formal request for payment submitted by healthcare providers to insurance companies for services rendered to a patient. This document details the care administered and its costs. It enables the health insurer to process and reimburse the provider for medical care received by the policyholder. Accurate claims are vital for financial transactions between providers, patients, and insurance plans.
Key Information on a Medical Claim
A medical claim contains specific categories of information necessary for accurate processing by an insurance company. Patient demographics, such as the individual’s name, address, and date of birth, identify the person who received care. Insurance policy information, including the policy ID and group number, links the claim to the patient’s specific health coverage plan.
Details about the healthcare provider, like their name, address, and National Provider Identifier (NPI), identify the provider. The claim specifies the dates of service, when care was provided. Diagnosis codes, primarily from the International Classification of Diseases, Tenth Revision (ICD-10), explain the patient’s condition or reason for the visit. They justify medical necessity.
Procedure codes, CPT codes, describe the specific medical services or procedures performed. These codes standardize service reporting, helping insurers understand care delivered. The claim lists billed charges, representing the amount the provider requests for each service. This data allows the insurer to evaluate the claim against policy terms.
Steps to Submitting a Medical Claim
After a healthcare service is provided and information is gathered, the medical claim is submitted. Healthcare providers typically handle this process on behalf of the patient. The most common method of submission is electronic, using Electronic Data Interchange (EDI) systems.
These systems transmit claims securely through clearinghouses, which review and reformat claims to meet payer requirements before forwarding them.
While less common, paper claims can still be submitted using forms like the CMS-1500. Regardless of method, send complete and accurate claims to the correct insurer. Errors or missing information can lead to delays or denials, impacting reimbursement. Providers aim for “clean claims” to ensure efficient processing.
Understanding the Claim’s Journey
Once a medical claim is submitted, it begins a process within the insurance company known as adjudication. During this process, the insurer evaluates the claim to determine validity and eligibility for reimbursement. The initial step involves receipt and validation, where it is checked for errors, completeness, and duplication.
The claim then undergoes a thorough review, often by automated systems checking policy rules, eligibility, and coding accuracy. Some claims require manual review by a medical professional to assess medical necessity or prior authorizations. The insurer verifies coverage and applies policy benefits, considering deductibles, copayments, and coinsurance.
The “billed amount” is the total charge submitted by the provider; the “allowed amount” is the maximum the insurer will pay for a covered service. After assessment, the insurer determines payment or denies the claim, providing a reason for any denial.
This adjudication process typically takes 15 to 30 days for clean claims. It can extend to 30-45 days or longer depending on complexity or if additional information is required.
Decoding Your Explanation of Benefits (EOB)
After an insurance company processes a medical claim, you will receive an Explanation of Benefits (EOB) document. An EOB is not a bill; it is a detailed statement explaining how your health insurance processed a claim. It helps you understand the financial breakdown of your healthcare encounter.
Key EOB components include the “billed amount,” what the provider originally charged. The “allowed amount” is the maximum your plan will pay, often lower than billed due to negotiated rates. Differences between billed and allowed amounts may be listed as a “provider write-off” or “discount.”
The EOB details your financial responsibility, including any “deductible applied,” the amount you pay out-of-pocket before coverage begins. “Copayment” and “coinsurance” amounts, fixed fees or a percentage of cost, are also stated. The “amount you owe” section summarizes your patient responsibility.
If a claim or part of it was denied, “reason codes” or explanations will be provided on the EOB. Review your EOB carefully to ensure accuracy and compare it with any bill from your provider, contacting the insurer or provider if discrepancies are found.