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Insurance 101 - Life Cycle of a Claim

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How Does a Health Insurance Claim Work?

If you have health insurance, and you’ve used it, you have probably asked yourself ‘Why does this need to be so complicated?’

When you run to the store, you simply pick up the items you want and pay the cashier the advertised cost. Even when you buy a car, although the process is more complex, you usually know what it’s going to cost you before you drive off the lot. It doesn’t always work that way with health care.

Health care services are different than just about anything else you purchase. The price for services will depend on many different factors, but perhaps the biggest factor is whether or not you have health insurance.

Access to high-quality health care is so important for you and your family’s well-being. But, it can also be quite expensive. And unlike buying a car, you probably shouldn’t bargain hunt when it comes to life-saving care.

Health insurance claim process – from start to finish

The good news is most people have health insurance which will help protect against financial risk. The steps below explain how a medical bill gets resolved when it is sent to your insurance company.

Step 1: The health insurance claim begins its journey.

Your doctor’s office will send an itemized statement of the services you received to your insurer on your behalf. This is called a claim. The claim is prepared by certified coders. The coders must transform diagnosis, medical services and equipment into a special language of codes. The most commonly used system called The International Classification of Diseases, Tenth Revision (ICD-10) has over 68,000 possible codes to select. By comparison, the average American knows only a third to half that number of words.

Step 2: The health insurance claim is reviewed and processed.

The statement and codes are carefully reviewed by your insurer. They will verify all the information is correct and whether the services listed are covered benefits and medically necessary. This is called claims processing. Since the billing is so precise, it takes special computer systems and trained analysts to process them.

Step 3: The health insurance claim is paid to the provider.

If the claim is approved, payment and remittance advice (RA) are sent to the provider. The special rates used as well as some of the rules for these were discussed in last month’s blog.

Step 4: The health insurance benefits and coverage are explained.

Your insurance company will send you a letter in the mail called an Explanation of Benefits (EOB). This letter will show you what has been paid, what has been written off by the provider, and what still needs to be paid by you, the patient.  It will also explain how your insurance company processed the claim. You will probably recognize this as the letter that has big, bold letters stating: THIS IS NOT A BILL.

Step 5: The health insurance claim is followed up on.

Your doctor’s office’s billing department will follow up with you if you still owe a balance. They usually include a due date for the payment.

The Hometown Advantage is Our Claim to Fame at Network Health

Of course, it’s not always that simple or straightforward of a process. A claim can be denied for a variety of reasons, such as an issue with the coding or if the provider group waited too long to file the claim, or the service wasn’t deemed medically necessary. Often this can mean starting back at step one above writing a new claim to fix it.

With all the special handling and documents being sent back and forth, this can frequently make that bill from a quick doctor’s visit take a month or more to reach your door.

If you ever have questions about claims processing, we are here to help. Network Health’s customer service team can explain any questions you may have about a specific claim or EOB you receive.


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