Glossary Section 6-Understanding Insurance Claims and Your Medical Bills

Navigating the healthcare system can feel like learning a new language. Knowing the right terms matters. It can help you

• Understand what your insurance will and won't cover.
• Know what questions to ask about your health insurance, financial assistance, or income.
• Avoid unexpected costs.
• Get financial help.
• Advocate for yourself or your patients when insurance companies deny coverage or when bills don't add up.

This glossary is a tool you can use whenever you aren't sure about a word or term. It covers health insurance basics, prescription drug coverage, billing, the approvals and appeals process, financial assistance, and income support.

Remember, health policy, program eligibility, and insurance rules change all the time. It is a good idea to check with your insurance company, job, healthcare providers or other federal/state agencies about your specific needs or questions about your coverage.

Key Terms

Appeal: A request for your insurance company to review a denied claim again. An appeal can be filed by you or your provider. Your insurance company may ask for more information about your health and why your provider believes the procedure, medication, or test is medically necessary.

Billing Code/CPT Code: A number used to describe a medical service or procedure. CPT stands for Current Procedural Terminology. These codes are used in billing to tell your insurance company what they are being charged for.

Bundled Payment: One payment that pays for a group of related health services, instead of paying for each separately.

Charge Master: A list of the standard prices a hospital charges for every service, procedure, medication, and supply it provides. Think of these as the “sticker prices" before any insurance discounts or adjustments are applied. Most patients do not pay the charge master rate. Insurance companies have lower, pre-set rates. Patients who don’t have insurance may be able to ask for a “self-pay” rate that is also discounted.

Contractual Adjustment: When your provider charges you a reduced amount. It is based on an agreement (contract) between your insurance company and the provider. There is a difference between what your provider is billed and what your insurance company agrees to pay. You may see this on your Explanation of Benefits (EOB) or itemized bill. You don’t owe this amount. It should be taken off from your bill because it is the contracted rate.

Denial: When your insurance company decides that it will not pay for a service, procedure, medication, or test. Just because something is denied, doesn’t mean you can’t have it. You and your provider have the right to appeal any denial made by your insurance.

Explanation of Benefits (EOB): A statement from your insurance company after you have medical care. It explains what was billed, what your insurance paid, and what you may owe. It is not a bill. It is a breakdown of how your claim was processed. It is important to review your EOBs and match them by date of service with your bills to look for mistakes.

Expedited Appeal: A type of appeal you or your provider can request if a delay in treatment could seriously harm your health. By law, insurers must make a decision as quickly as possible but no longer than 72 hours after the appeal is received.

External Appeal/Review: A review of a denied claim by an Independent Review Organization (IRO) that is not part of your insurance company. If your insurance company has upheld an internal appeal, you can request an external appeal. An independent reviewer will look at your case and make a decision that your insurance company must follow. External reviews can be overseen by the State Department of Insurance or the Department of Health and Human Services. This depends on the type of plan you have and the state you live in.

Facility Fee: A charge from a hospital or health system for the use of their facility. This is separate from what your provider charges. If the office is owned by a hospital, there can be facility fees for outpatient visits, telehealth appointments, or routine office visits. This can cause higher out-of-pocket costs than you expected. It’s a good idea to ask whether a location is hospital-owned before your appointment.

ICD-10 Code: ICD-10 stands for the International Classification of Diseases, 10^th edition. This is a system of codes used to identify a diagnosis or health condition. They are used in billing to let your insurer know the condition that is being treated. You can have many ICD-10 codes. You may see them on your EOB and your medical bills. They are not the same as CPT codes.

Itemized Bill: A detailed list of every charge on your medical bill. This includes every service, test, procedure, medication, or supply you were billed for. It should also have the billing code and cost for each item. You have the right to ask for an itemized bill from your provider or hospital. It is an important tool to find billing mistakes.

Medical Necessity: This is the way an insurance company decides if a service, procedure, medication, or test is what is needed for your care. Insurers use it to decide what they cover and what they will pay for. Your provider can recommend a service that may be denied by your insurer because they don’t think it is medically necessary. Your provider can give the insurance company more information to support that the service, procedure, medication, or test is medically necessary if the claim has been denied.

Post-Treatment Appeal: A kind of appeal made after you have received a service or treatment that was then denied by your insurance company. This can happen if there is not enough time to get an approval before care was needed (like in an emergency) or if the claim is denied after the service or treatment. You still have a right to appeal, even if care has already been provided.

Preauthorization Appeal: A kind of appeal made when your insurance company denies a preauthorization. It means your insurance has decided they will not cover a service, procedure, medication, or test. You or your provider can appeal the decision before you have care. It is always important to ask your provider if preauthorization for a service, procedure, medication, or test was approved.

Pre-Certification/Pre- or Prior-authorization: Approval from your insurance company that a service, procedure, medication, or test will be covered. This happens before you receive it. These three terms mean the same thing. You may see any of them used by your insurance company, provider, or pharmacy. It is usually the job of the provider to request the approval. If you don’t get an approval, it could cause your claim to be denied, or you may have higher out-of-pocket costs.  It is always a good idea to ask if a service, procedure, medication, or test needs approval before you have it.  You can call the member services number on your insurance card about what services require pre-approval. You may also want to keep a record of pre-approvals, just in case there is a billing mistake after you have the service.

Surprise Billing/No Surprises Act: Surprise billing is when you receive care from a provider who is not in your insurance network, but you don't know this before you receive care. This can happen even when you go to an in-network hospital. For example, you have an X-ray at an in-network hospital. The radiologist who reads your X-ray is out-of-network. As a result, the service could be denied (if you don't have out-of-network benefits) or you could get a large bill.

In 2022, the No Surprises Act became federal law. This law protects patients from many kinds of surprise bills. Under this law, you cannot be charged more than your in-network cost-sharing amount for emergency care, even if the provider is out-of-network. The law also requires providers and healthcare facilities to give you a good-faith estimate of costs before you have a service.

Utilization Review: This is how your insurance company decides if a service, procedure, medication, or test is necessary and appropriate. This review can happen before you have care (preauthorization/certification), while you are having care, or after you have care. The goal is to make sure your care meets the insurance company’s coverage rules.