Medical Billing Glossary

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Navigating the complexities of medical billing and health insurance can be daunting, but having a good understanding of the key terms and concepts can empower you to make informed decisions about your healthcare. This glossary provides definitions for a wide range of terms related to medical billing, insurance, and healthcare costs, helping you demystify the often confusing world of healthcare finance. Whether you’re dealing with hospital bills, insurance claims, or out-of-pocket expenses, this glossary can serve as a valuable resource to help you better understand and manage your healthcare finances.

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  • Ambulance & Medical Helicopter Bills: Charges for transportation services in emergencies, using ambulances or medical helicopters, when urgent medical care is required.
  • Annual out-of-pocket maximum: The maximum amount you pay during a policy year for covered health services. After reaching this limit, your health insurance pays 100% of covered services.
  • Appeal: A formal request to your health insurance company to review and reconsider a decision about your coverage.
  • Authorization Number: A unique number provided by your insurance company to approve specific medical services before they occur.
  • Balance Billing: The practice of charging patients the difference between what the health care provider charges and what the insurance pays.
  • Balance Due: The amount owed by the patient after insurance payments and adjustments have been applied.
  • Bankruptcy: A legal status for individuals or entities that cannot repay their debts. Medical bills are often a significant factor in personal bankruptcies.
  • CPT (Current Procedural Terminology): A set of codes used by healthcare providers to describe services and procedures for billing purposes.
  • Claim: A request for payment that you or your healthcare provider submits to your insurer for covered medical services received.
  • Claim adjustment: Changes made to a claim by the insurance company, which may affect how much is paid to the healthcare provider or refunded to the patient.
  • Clean claim: A medical insurance claim that has no errors or omissions, allowing for smooth processing without any delays.
  • Clearinghouse: An intermediary that processes or facilitates the processing of health information between health care providers and insurance payers.
  • Co-insurance: The percentage of medical costs you pay after meeting your deductible. For instance, 20% co-insurance means you pay 20% of each medical bill, and your insurance covers the rest.
  • Co-payment: A fixed amount you pay for a covered healthcare service, typically when you receive the service, like a doctor’s visit or prescription.
  • Coding Errors: Mistakes in the medical coding of procedures and diagnoses that can lead to incorrect billing and insurance issues.
  • Collection agency: A business that pursues payments of debts owed by individuals or businesses, often involved in recovering unpaid medical bills.
  • Coordination of Benefits (COB): A process to determine the order of payment when a person is covered by more than one health insurance plan.
  • Cost-sharing: The share of costs covered by your insurance that you pay out of your own pocket. This term generally includes deductibles, coinsurance, and copayments, but not premiums.
  • Cost-to-Charge Ratio: A ratio used by hospitals to determine how much to charge for services based on the cost to provide them.
  • Covered service: Any healthcare service or supply included in your health insurance plan’s benefits and covered at least in part by the insurance.
  • Customary, Prevailing, and Reasonable (CPR): This refers to a pricing method used by insurance companies to determine how much to pay for services, based on what is typically charged for the same or similar services in a specific geographic area.
  • Deductible: The amount you pay for health care services before your health insurance begins to pay. For example, if your deductible is $1,000, your insurance won’t pay for some services until you’ve paid $1,000 out of pocket.
  • Denied claim: A claim that the insurance company refuses to pay. This can happen for various reasons, such as if the service is not covered by your plan or if the information provided was incomplete or incorrect.
  • Discounted rate: A lower rate for medical services negotiated between healthcare providers and health insurance companies or offered to patients for various reasons, such as prompt payment or lack of insurance coverage.
  • Emergency Room Bills: Charges for services provided in a hospital’s emergency room. These can be higher than other types of medical care due to the resources required for emergency treatment.
  • Explanation of Benefits (EOB): A statement from the health insurance company detailing what costs were covered for medical care or services you received. It’s not a bill but an explanation of the payments made by your insurer.
  • Explanation of Denial (EOD): A document from the health insurance company explaining why a claim was denied, which is important for understanding whether you can appeal the decision.
  • Explanation of Medical Benefits (EOMB): Similar to an EOB, it’s a detailed statement explaining the benefits provided under your health insurance plan for a specific claim or service.
  • Explanation of Review (EOR): A detailed review provided by the insurance company or healthcare provider explaining the outcome of a claim review process.
  • Facility Fee: A charge by a hospital or medical facility for the use of their facility and equipment, separate from the cost of medical services rendered by doctors or other healthcare professionals.
  • Financial Assistance: Programs offered by healthcare providers or government entities to help patients cover medical costs, typically based on income and financial need.
  • Flexible Spending Account (FSA): A special account where you can save money pre-tax for out-of-pocket healthcare costs.
  • Fully-Insured: A term describing a health insurance plan where the employer contracts with another organization to assume financial responsibility for the enrollees’ medical claims and for all incurred administrative costs.
  • Guarantor: The person responsible for paying the bill, often the patient or the patient’s legal guardian.
  • HIPAA Privacy Rule: A federal law that protects personal health information and controls how it can be used and disclosed.
  • Health Maintenance Organization (HMO): A type of health insurance plan that usually limits coverage to care from doctors who work for or contract with the HMO. It generally won’t cover out-of-network care except in an emergency.
  • Health Savings Account (HSA): A tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP).
  • Hospital Settlement Letter: A document that confirms the agreement between a patient and a hospital regarding the amount to be paid for services rendered, often used in cases where the patient negotiates the bill down.
  • In-network: Refers to healthcare providers or facilities that are part of a health insurance plan’s network of providers with which it has negotiated a discount.
  • Insurance Appeals: The process of asking your insurance company to reconsider a decision to deny coverage for a service or treatment.
  • Insured: A person covered by a health insurance policy.
  • Itemized Hospital Bills: Detailed bills from a hospital listing each service provided and the charge for each.
  • Itemized bill: Similar to itemized hospital bills, it’s a detailed statement showing every service provided and its cost.
  • Medicaid: A government insurance program for individuals and families with low income and resources.
  • Medical Necessity Letter: A letter from a healthcare provider explaining why a particular treatment or service is medically necessary for the patient.
  • Medical billing advocate: A professional who helps patients understand and negotiate their medical bills and insurance claims.
  • Medical coding: The process of converting healthcare diagnoses, procedures, medical services, and equipment into universal medical alphanumeric codes.
  • Medical debt: Debt incurred by individuals due to medical expenses and bills.
  • Medical lien: A claim on the proceeds of a personal injury case to ensure payment for medical services rendered related to the injury.
  • Medical necessity: A term used by insurance companies to describe healthcare services that are necessary for the diagnosis or treatment of an illness, injury, condition, disease, or its symptoms.
  • Medically necessary: This refers to health care services or supplies needed to diagnose or treat an illness, injury, condition, disease, or its symptoms and that meet accepted standards of medicine.
  • Medicare: A federal health insurance program in the United States for people who are 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease.
  • Network: A group of doctors, hospitals, and other health care providers that a health plan has contracted with to provide medical care to its members at negotiated rates.
  • No Surprises Act: A U.S. law that protects patients from surprise medical bills, particularly for emergency services and from out-of-network providers at in-network facilities.
  • Out of Network Bills: Charges for services provided by health care professionals or facilities not contracted with your insurance company’s network, typically resulting in higher out-of-pocket costs.
  • Out-of-network: Refers to providers or healthcare facilities not covered by your health insurance plan’s network, often leading to higher costs for services.
  • Out-of-pocket maximum: The most you have to pay for covered services in a plan year. After spending this amount on deductibles, copayments, and coinsurance, your health plan pays 100% of the costs of covered benefits.
  • Patient responsibility: The amount you owe for health care services your health insurance or plan covers before paying its share.
  • Point of Service (POS): A type of managed care health insurance plan that combines characteristics of both HMO (Health Maintenance Organization) and PPO (Preferred Provider Organization) plans.
  • Pre-authorization: A decision by your health insurer or plan that a health care service, treatment plan, prescription drug, or durable medical equipment is medically necessary.
  • Pre-certification: A requirement by some insurance companies to obtain approval before a procedure or service to ensure coverage.
  • Pre-existing condition: A health condition that existed before your health insurance coverage began.
  • Premium: The amount you pay for your health insurance every month.
  • Price Gouging: Charging excessively high prices for medical services, often in situations where patients have limited choices.
  • Primary care: Basic or general health care usually provided by primary care physicians, focusing on prevention, wellness, and treatment of common illnesses.
  • Primary insurance: The health insurance policy that pays first when you have more than one insurance plan.
  • Prior Authorization: A requirement by your health insurance to approve a specific service, procedure, or medication before you receive it to qualify for coverage.
  • Procedure Code: A code used in medical billing to identify specific medical procedures performed.
  • Provider: Any healthcare professional, hospital, or healthcare facility that provides medical care and services.
  • Reimbursement: The process by which health insurance companies or plans pay for healthcare services you have received.
  • Secondary insurance: A health insurance policy that provides additional coverage after the primary insurance has paid its portion. It can help cover remaining costs or services not covered by the primary policy.
  • Self-Insured: A situation where an employer provides health benefits to employees directly, assuming the financial risk for providing healthcare benefits.
  • Self-pay: A term used when patients pay for medical services out of their own pockets rather than through insurance.
  • Specialist: A doctor who focuses on a specific area of medicine or a group of patients to diagnose, manage, prevent, or treat certain types of symptoms and conditions.
  • Standard Hospital Bills: The regular charges from a hospital for services provided, which may not include specialized treatments or extraordinary care costs.
  • Subrogation: The process by which an insurance company seeks reimbursement from the responsible party for medical expenses they have paid on behalf of the insured.
  • Surprise Bill: A bill for medical services that a patient did not expect to receive, often from providers who are not in the patient’s insurance network.
  • The Health Insurance Portability and Accountability Act of 1996 (HIPAA): A federal law that provides data privacy and security provisions for safeguarding medical information.
  • UB-04: A form used by hospitals and other healthcare facilities to bill Medicare and Medicaid as well as private insurance companies.
  • Underinsured: Referring to individuals who have some health insurance but not enough to cover all medical expenses, particularly in the event of a serious illness or accident.
  • Usual, Customary, and Reasonable (UCR) charges: These are the standard charges for specific medical services within a geographical area, as determined by insurance companies. The UCR rate helps insurers decide how much they will pay for a particular service.
  • Write-off: This refers to the amount that healthcare providers deduct from their charges, usually because it’s not covered or not fully paid by the insurance company. It’s the difference between the provider’s charge and the allowed amount by the insurance.