What Is a Health Insurance Claim?

A health insurance claim is a request made by a policyholder or healthcare provider to an insurance company for payment of health services. The insurance company’s claims-processing system reviews the request to determine if the provided service or treatment falls within the coverage of the insurance policy. Once verified, the healthcare provider receives the appropriate payment.

Providers file claims for all types of services, including inpatient, outpatient, emergency, and surgical procedures. As the policyholder, you may need to file a claim in some cases, such as for pre-authorization for a treatment or procedure or for reimbursement from your insurer. Claims use unique diagnostic and medical billing codes to verify coverage and process payments.  

What Is the Claims Process?

The claims process begins when a patient checks in at the front desk of a medical facility and ends when the bill from that visit lands in the patient’s mailbox. The claims process comprises 7 steps:

1. The provider checks the patient in.
2. The provider verifies the patient’s insurance benefits.
3. The provider assigns medical codes for services rendered.
4. The provider lists the payment they expect to receive.
5. The provider transmits the claim to a clearinghouse first or directly to the insurer.
6. The insurance provider goes through the adjudication process, or evaluation of the claim.
7. The medical provider receives payment, and the patient is billed for their share of any remaining costs not approved by the insurer.

How Does the Medical Claims Process Work?

Submitting a medical claim ensures that healthcare providers are paid for their services. The process also enables policyholders to pay only their share of covered services.

Who Files a Health Insurance Claim?

Providers are required to submit a claim to your insurer within a certain deadline. Your healthcare provider should submit your claim as quickly as possible to ensure the timely payment of your claim. Deadlines vary from 90 days to up to one year after services are provided. 

Providers typically file claims fast since they seek prompt payment for their services; however, if they refuse to file a claim, are out of network, or do not accept your insurance, you may file a health insurance claim yourself. This process typically requires patients to complete a request for medical payment form and include an itemized medical bill, along with a letter explaining your claim. 

What Information is Contained in a Claim?

Claims typically contain a header and a “claims detail” section. The header includes the patient’s name, date of birth, and address, as well as the following information:

• National Provider Identifier (NPI) for the primary provider and the facility: This universal identifier applies to the attending physician and their practice or service facility.
• Primary billing code: Insurers use special diagnosis codes for medical billing purposes.
• Inpatient procedure, if applicable: This may not apply for outpatient services.
• Diagnosis-related group (DRG), if applicable: The DRG code assigns a set reimbursement amount for inpatient hospital stays.
• Name of insurer: Your insurance company is listed here.
• Overall expected payment for services: This represents the total billed amount.

Following the header, the claims detail explains any secondary diagnoses or services rendered, such as during an inpatient hospital stay.

Types of Health Insurance Claims

Health insurance claims differ depending on how the claim is paid. Insurers either pay providers directly through “cashless” transactions or reimburse patients after treatment.

Cashless

Insurers may issue payment directly to the provider through a cashless claim, which does not require the policyholder to pay upfront. Cashless claims offer a seamless and timely payment arrangement directly between insurers and providers when a policyholder is admitted to the hospital.

Policyholders must notify their insurer at least 48 hours before a pre-planned hospital stay or within 24 hours of an emergency hospitalization. They must be admitted to an in-network hospital for the insurer to cover a cashless claim. This type of health insurance claim is convenient for policyholders who prefer minimal involvement with insurers and no up-front costs. 

Reimbursements

Reimbursement claims require the policyholder to pay their hospital bills upfront and submit a claim for repayment from their insurer. While this process is not as seamless as a cashless claim, reimbursements offer fewer restrictions and limitations.

Policyholders are not necessarily limited to network care for reimbursement claims; however, this type of claim may take longer to process than a cashless claim, since the insurer must confirm coverage for the services provided. Policyholders are also involved in the reimbursement claims process, whereas a cashless claim is settled directly between providers and the insurance company.  

Understanding the Claims Process By Type of Insurance

Insurers may process claims differently depending on the type of coverage you have, including the following most common varieties: 

HMO

Health maintenance organizations (HMOs) operate their own networks of doctors and hospitals. HMOs require policyholders to name a primary care doctor and request a referral to see a specialist. Insurers commonly pay HMO providers directly through cashless claims and do not require policyholders to submit claims for services rendered.

PPO

Preferred provider organizations (PPOs) enable policyholders to access any doctors or hospitals they choose, not only those within a specific network. PPOs also do not require referrals for specialized care. If the provider is in-network with the PPO plan, the provider will submit the claim to the insurance company. If the provider is out-of-network, then the patient would need to pay upfront and submit the claim on their own. 

EPO

Exclusive provider organizations (EPOs) combine elements of both HMOs and PPOs. They strictly cover only in-network providers, except in an emergency, but do not require referrals for specialists. EPOs also tend to cost more than HMOs but less than a PPO. Most EPOs process medical bills directly with providers as cashless claims, similar to an HMO. 

POS

Point-of-service (POS) plans are also a hybrid of HMO and PPO plans. POSs include a limited network of providers and, like HMOs, require referrals for specialists. At every “point” in their healthcare journey, policyholders can decide whether to stay in-network or go out-of-network for services. POSs tend to cost more than HMOs but less than PPOs, with fewer choices. Policyholders must submit their own claims to be reimbursed for out-of-network services, but in-network providers will submit the claim on the policyholders behalf. 

Indemnity

Also called fee-for-service plans, indemnity plans offer the most flexibility but also require the most paperwork. Individuals can see any provider they choose but must always pay up front and submit their own claims for reimbursement after receiving services. These plans suit policyholders with a strong understanding of the medical claims process and available cash on hand.

What To Know If You File a Claim

You may need to file your own claim in rare instances, including if your provider refuses to do it or you received covered services through an out-of-network provider. The following are some of the key elements you should consider when filing your claim:

• Documents and documentation: You must include the necessary paperwork such as the Patient Request for Medical Payment Form, an itemized bill, and a written explanation of your reason for submitting the claim
• Time limits: Time limits vary, but most insurers require you to submit your claim within 90 days of the services provided.
• Estimated turnaround time: Most insurers allow you to submit a claim online, which can sometimes expedite processing as fast as 24 hours. If you mail your claim, note when it was shipped and track the package through the carrier whenever possible.
• Exemptions: Medical expenses that exceed 7.5% of your annual gross income may qualify for a tax deduction.
• Timeline of treatment: Make sure to keep documentation of when you received services since this is among the primary personal data required on the claim form.
• Knowledge of one’s network: Insurers may not pay for covered services administered by an out-of-network doctor or facility.  
• Timeline for the validity of the policy: Make sure your policy was active when you received medical services.

What Is a Medical Claims Clearinghouse?

A medical claims clearinghouse acts as a middleman between the provider and the insurer. When a provider submits a claim, it typically goes to an electronic clearing house where it is screened for coding or formatting errors before it reaches the payor.

Most claims are submitted to an intermediary clearinghouse first and not directly to the insurer. While this is an additional step in the process, filtering claims through a clearinghouse helps insurers streamline and expedite their payments to providers. 

What Happens If Your Claim Is Denied?

An insurer can deny your healthcare claim if it contains clerical or coding errors or leaves out critical information. For example, your claim may include an invalid subscriber identification number or a medical code corresponding to the wrong service or may have been filed past the deadline. 

You have the right to appeal the denial and request a third party to review your claim. Insurers must disclose why your claim is denied and explain how you can dispute their decision. Depending on what happens next in the appeal process, you may follow different steps. 

How to Appeal a Denied Claim

You may choose to pursue an internal or external appeal for a denied medical claim. Internal appeals call on the insurer to review the claim again, often with the addition of new supplemental documentation, such as a letter from your doctor, within 6 months of the denial of your original claim. The exact process may differ by insurer, but should look like the following:

1. Review the denial letter for an explanation of denial and instructions on how to appeal.
2. Contact your insurance company and let them know you will be appealing.
3. Collect relevant documentation. This may include test results, a doctor letter, medical records, etc.
4. Submit a formal appeal letter that includes your policy number, claim number, and the specific service that was denied. Explain why you are appealing the denial.
5. Follow up with the insurer for next steps. 

If you are experiencing an urgent financial healthcare situation, you may request an external and internal appeal simultaneously. Otherwise, you can proceed with an external appeal if your internal appeal is denied. Appeals must be decided within 30 days for services not yet received and within 60 days for services already rendered. 

Remember, insurers are unlikely to approve claims for restrictions outlined in the explanation of benefits, such as for a service not covered by your policy, visiting an out-of-network provider, or for a procedure deemed not medically necessary. 

Health Insurance Claims and Your Family

Health insurance claims play a critical role in the healthcare system. Whether your provider bills the insurance company directly through a cashless claim or you submit your claim for reimbursement, the claims process ensures you can receive the care you need.

How a medical claim is processed depends on your individual type of insurance plan. Your policy may also cover only in-network care or require you to submit a special reimbursement claim for out-of-network services. Policyholders can request internal and external reviews to appeal a denied medical claim