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Insurance Billing Terms

When you visit a health-care provider, your insurance company receives a claim for your visit. Your insurance company processes the claim and sends out documentation to both the provider and yourself stating how much of the cost will be covered by insurance and how much is your financial responsibility. Some key insurance billing terms will help you understand the insurance billing process.

  1. Eight critical claim components

    • For a claim to be processed and paid by an insurance company, there are eight critical components needed: your name, date of birth, your insurance identification number, the provider tax identification (TIN) number, the dates of service that you saw your provider, your diagnosis, the procedures performed and the amount billed for the procedures. If any of these items are missing, your insurance company will not be able to process your claim until they obtain the additional information.

    Claim status

    • Your claim can be designated as clean, rejected or pending. A clean claim is one that is submitted on time and contains all the necessary information so it can be processed and paid promptly. A rejected claim is one that cannot be processed because information is missing, such as the diagnosis code or date of service, or the company is unable to locate your name in their insurance claim system. A pending claim is one that has been suspended for review by your insurance company.

    In-Network (INN) or out-of-network (OON)

    • In-network means providers or health-care facilities that are part of your insurance company's discount-negotiated network. You usually pay less when using an in-network provider, because these networks provide services at lower cost to the insurance companies. An out-of-network provider refers to physicians, hospitals or other health care providers who are considered nonparticipants with your insurance plan. Depending on your plan, expenses incurred by services provided by out-of-network health professionals may not be covered, or covered only in part by your insurance company.

    Billed amount vs. allowable amount

    • A provider can submit a claim to your insurance company and charge any amount it deems necessary for your visit. This is called the billed amount. This, however, does not mean the provider will be reimbursed the full amount asked for. The allowable amount is the highest amount an insurance company finds acceptable for a given procedure.

    Provider write-off vs. balance bill

    • When your provider is in-network, the difference between the billed amount less the allowable amount equals the provider write-off amount. The in-network provider must subtract the write-off amount from your bill. If it's an out-of-network provider, however, the provider may "balance bill" you this difference.

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