Health Insurance Claim Processing Procedures

Health insurance claims take a standard path from submission and adjudication to payment and notification. At each step of the path, there are variables; however, each health insurer follows the same basic procedures. Health insurance companies are governed under the federal Employee Retirement Income Security Act of 1974 (ERISA), including standards in claims processing. State laws may also impact how insurers pay claims.

Submission

• Claims submission is the first part of the claims processing path. Claims are submitted for each medical service provided, from examinations to procedures to surgeries. Depending on the type of insurance plan and if the provider of services is in-network or out-of-network, the claim may be submitted by the provider or the patient. Providers often submit claims electronically; however, insurers can accept paper claim forms submitted on HCFA 1500s -- for outpatient services such as doctor visits -- or UB-04s for inpatient services. Upon receipt, most payers scan and triage paper claims for adjudication.

Adjudication

• In the adjudication process, the insurer determines who is responsible for payment and the amount. Providers may submit charges for any amount, but if they are network providers, claims are adjudicated to pay just the network allowed amount. If your plan has a co-insurance provision, a percentage of the claims are paid to the provider and the insurer determines what you will pay. Adjudication is often electronic but may require manual intervention by a claims processer, depending on the service, amount of the submitted claim or if the claim is incomplete.

Reimbursement

• After claims adjudication, payment is sent to the provider or patient, as applicable. The claim may be denied, in which case no payment is sent. However, in most cases payment is reimbursed directly to the provider through an electronic funds transfer -- direct deposit. When the patient is reimbursed for services directly, the insurer mails her a check, unless another arrangement is made.

Explanation of Benefits

• The patient receives an explanation of benefits statement upon adjudication of a claim. The explanation of benefits displays claims details, including how the claim was paid, patient balance, the date of service and the procedure or service code of the service. If the claim was denied payment, you and the provider may also receive a denial letter outlining the reason for the denial and how to appeal the decision.