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Common medical billing And insurance terminologies.

Common Medical Billing And Insurance Terminologies

Medical billing and health insurance are essential components of the modern healthcare industry. These domains have a set of common but crucial terms that every health care provider must understand. The terminology may confuse you when you receive a medical bill or other data from your insurance provider. Following definitions describe some of the most regularly used medical billing phrases, allowing you to comprehend better what you’ve been charged and whether you’ve received an exorbitant medical bill.

Accounts Receivable (AR)

The sum of money owed to a company for goods or services delivered or utilized but not yet paid for by customers is known as accounts receivable (AR). On the balance sheet, accounts receivable is categorized as a current asset. Any amount of money due by clients for credit purchases is AR.

Explanation Of Benefits (EOB)

An EOB is not a bill from your provider; rather, it is a mandatory document supplied to you by the insurance company that describes how a claim made to them by a medical provider was handled regarding the benefits of your specific policy. It comprises a list of all services submitted for payment by the provider and the codes that identify those operations. It highlights the charges that your insurance plan covers as well as those that are your responsibility to pay.


It is a sort of insurance agreement between the payer and the patient in which the payment for medical treatment is divided by a percentage. While the term is sometimes used interchangeably with a co-pay, the arrangements are not the same: A co-pay is a fixed sum the patient owes, whereas co-insurance is a fixed percentage of the bill. 


The term co-payment (co-pay) refers to the amount specified in the insurance plan that the patient must pay each time they receive healthcare services. 

Coordination of Benefits (COB)

A way of combining benefits payable under multiple group health insurance plans so that the insured person’s total benefits do not exceed 100 % of their permitted medical expenses.


You must pay your insurance company a predetermined amount of money to maintain an active insurance plan for your healthcare business. In exchange for insurance coverage, payments can be made at regular periods such as monthly, quarterly, or annually.


It is a process through which a patient obtains permission (prior authorization) from an insurance payer before undergoing specific treatments or services.

Health Maintenance Organization (HMO)

A health maintenance organization (HMO) is a network of medical insurance providers that offer health insurance policies for a set charge. Only healthcare services offered by physicians, doctors, and other providers who have an agreement with the HMO are covered by the insurance companies affiliated with the HMO.

Health Savings Account (HSA)

A health savings account (HSA) is a type of savings account that allows healthcare providers to pay for expenses with pre-tax cash. HSAs are frequently thought of as a way to supplement a certain insurance plan – an HSA-qualified High-Deductible Health Plan (HDHP). HDHPs are quite common among healthcare professionals because they have substantially cheaper monthly premiums than traditional health insurance plans. End users can also utilize the money saved on premiums to participate in the HSA and pay for other medical costs.

Health Insurance Portability And Accountability Act (HIPAA)

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) was created by the Secretary of the United States Department of Health and Human Services (HHS) to secure the privacy and security of individual’s patient data. The HHS issued HIPAA Privacy Rule to define new standards for safeguarding patient’s personal health information, and the HIPAA Security Rule created a federal standard for the safety of patient’s personal health information recorded or transmitted in electronic form. HIPAA compliance is required for healthcare professionals to safeguard their systems from cyber-attacks and maintain cybersecurity across their activities.

Eligibility And Verification

Ensures that the insurance information is correct and assists in determining how much a patient may spend (e.g., co-pays, co-insurance, and deductibles). Giving your patients more precise cost estimation can increase patient satisfaction and prevent you from later claim denials.


An appeal is a procedure that allows a healthcare professional to get an insurance company to pay more for a claim. Any healthcare provider can initiate an appeal on a claim in the case of refused claims or claim rejections.

Clean Claim

A claim submitted by an insurance payer is error-free and handled on schedule. Clean claims significantly help physicians since they minimize reimbursement delivery time and the requirement for time-consuming appeals procedures. Many providers send their claims to third party specializing in establishing clean claims, such as clearinghouses.

Managed Care Plan 

A form of insurance plan in which policyholders can only obtain health care from providers within the insurance company’s network. Managed care system includes Health Maintenance Organization HMOs and Independent Practice Association (IPA).


A government insurance program was established in 1965 that offers healthcare coverage to adults over 65 and those with disabilities. Medicare currently covers more than 50 million people in the United States and is one of the most common destinations for medical claims.


Modifiers are added to Healthcare Common Procedure Coding System (HCPCS) or Current Procedural Terminology (CPT®) codes to provide the additional data needed for claim processing, such as recognizing why a doctor or other competent healthcare professional offered a particular service and process.

Revenue Cycle Management (RCM)

A comprehensive RCM is a financial process that includes physician credentialing and enrollment, eligibility and benefits verification, claims processing, payment posting, and revenue generation. RCM services collaborate with your medical clearinghouse to expedite and streamline medical and administrative activities to capture, manage, and collect patient service revenue.

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