What Is an Electronic Remittance Advice in Medical Billing?
Understand how Electronic Remittance Advice streamlines medical billing, automating payment posting and reconciliation for healthcare providers.
An Electronic Remittance Advice (ERA) is a digital document that streamlines the communication between healthcare providers and insurance companies regarding claim payments and adjustments. It serves as an electronic explanation from a health plan to a provider about how a medical claim was processed. The ERA plays a fundamental role in the financial management of healthcare practices by detailing payment decisions, denials, and modifications to billed amounts.
Understanding Electronic Remittance Advice
An ERA is an electronic explanation sent by an insurance payer to a healthcare provider, detailing how a submitted claim was adjudicated. This digital document outlines the adjustments and payments a health plan has made to the provider’s charges. Key information found within an ERA includes patient identification, service dates, billed amounts, allowed amounts, and the amount the insurance payer paid. Additionally, an ERA specifies contractual adjustments, deductibles, co-insurance, and co-pays, which outline the patient’s financial responsibility.
It also includes denial or rejection codes, explaining why a claim was not paid in full or was denied. The industry standard for an ERA in the United States is the HIPAA X12N 835 transaction, which is designed for electronic transmission and reconciliation of claims.
The ERA Workflow
The process of an ERA begins with the healthcare provider submitting a claim to the insurance payer, typically an electronic claim. Once the payer receives the claim, they process it according to the patient’s benefit coverage and any existing contract agreements with the provider. Following this review, the payer generates the ERA, which contains the adjudication details for the claim.
The ERA is then transmitted electronically, often through a clearinghouse, which acts as an intermediary between the payer and the provider. This electronic transmission allows for faster and more accurate posting of payments. Upon receipt, the provider’s practice management system or electronic health record (EHR) system can automatically import and post the ERA data, reconciling the claim with the payment received. This automation helps reduce manual data entry, minimize errors, and accelerate the revenue cycle.
ERA and Explanation of Benefits
While both an Electronic Remittance Advice (ERA) and an Explanation of Benefits (EOB) provide details about claim payments and adjustments, their primary audience and purpose differ. It helps providers reconcile accounts receivable and track the status of their claims with the payer.
In contrast, an EOB is a statement sent to the patient, explaining the costs of services received, how their insurance was applied, and their financial responsibility. Although both documents contain similar payment and adjustment information, EOBs are primarily paper-based documents mailed to patients, while ERAs are digital and integrate directly with providers’ billing systems. ERAs offer providers near real-time information, often arriving within 2 to 3 weeks of claim filing, compared to EOBs which can take up to 90 days for patients to receive.