5.2 Billing, Coding, and Insurance
Key Takeaways
- ICD-10-CM codes classify diagnoses (WHY the patient was seen) and are required on every insurance claim to establish medical necessity
- CPT codes describe procedures and services performed (WHAT was done) and determine reimbursement amounts
- The CMS-1500 form is the standard claim form used by physician offices and outpatient facilities for submitting insurance claims
- Medicare Part A covers hospital/inpatient services, Part B covers outpatient/physician services, Part C is Medicare Advantage, and Part D covers prescription drugs
- Managed care models include HMO (requires PCP/referral, lowest cost), PPO (no referral needed, moderate cost), and EPO (no out-of-network coverage)
- The explanation of benefits (EOB) details what was billed, what insurance paid, adjustments, and the patient's financial responsibility
Last updated: March 2026
Billing, Coding, and Insurance
Understanding medical billing and insurance is essential for the administrative side of medical assisting. The CCMA exam tests your knowledge of coding systems, insurance types, claim processing, and common billing terms.
Medical Coding Systems
| System | Purpose | Structure | Updated |
|---|---|---|---|
| ICD-10-CM | Classifies diagnoses — WHY the patient was seen | Alphanumeric, 3-7 characters (e.g., J06.9) | Annually (October 1) |
| CPT | Describes procedures — WHAT was done | 5-digit numeric (e.g., 99213) | Annually (January 1) by AMA |
| HCPCS Level II | Supplies, equipment, services not in CPT | Alphanumeric (e.g., A4253) | Updated by CMS |
Key Coding Concepts:
- Medical necessity — The diagnosis (ICD-10) must justify the procedure (CPT) for insurance reimbursement
- Upcoding — Using a higher-level code than warranted = fraud
- Unbundling — Billing separately for services that should be billed as a package = fraud
- Downcoding — Insurance company reduces the code level based on documentation
Insurance Types
Government Programs:
| Program | Coverage | Eligibility |
|---|---|---|
| Medicare Part A | Hospital, inpatient, skilled nursing, hospice | Age 65+, certain disabilities, ESRD |
| Medicare Part B | Physician visits, outpatient, preventive care, DME | Age 65+, voluntary enrollment with premium |
| Medicare Part C | Medicare Advantage (private plan combining A + B) | Medicare-eligible individuals |
| Medicare Part D | Prescription drugs | Medicare-eligible individuals |
| Medicaid | Low-income individuals and families | Income-based; jointly funded federal/state |
| TRICARE | Military members and dependents | Active duty, retired military, families |
| CHAMPVA | Veterans with service-connected disabilities and families | Specific veteran populations |
| Workers' Compensation | Work-related injuries and illnesses | Employees injured on the job |
Managed Care Plans:
| Type | Key Features | Referral Required | Out-of-Network Coverage | Cost |
|---|---|---|---|---|
| HMO | Must choose PCP; in-network only | Yes | No (except emergencies) | Lowest premiums |
| PPO | Can see any provider; in-network preferred | No | Yes (at higher cost) | Moderate premiums |
| EPO | Must use network providers | Sometimes | No | Lower than PPO |
| POS | Hybrid of HMO and PPO | For out-of-network | Yes (at higher cost) | Variable |
Common Billing Terms
| Term | Definition |
|---|---|
| Premium | Monthly payment to maintain insurance coverage |
| Deductible | Amount the patient must pay before insurance begins paying |
| Copay (copayment) | Fixed amount paid at time of service (e.g., $25 per visit) |
| Coinsurance | Percentage of costs shared after deductible (e.g., 80/20 — insurance pays 80%) |
| Out-of-pocket maximum | Maximum amount patient pays in a year; insurance pays 100% after this is met |
| Pre-authorization | Insurance approval required before a service is performed |
| EOB | Explanation of Benefits — document sent to patient detailing charges and payments |
| ERA | Electronic Remittance Advice — electronic version of EOB sent to provider |
| Allowed amount | Maximum amount insurance will pay for a service |
| Write-off/adjustment | Difference between billed amount and allowed amount that the provider absorbs |
| Balance billing | Billing the patient for the difference between billed and allowed amounts (prohibited in many situations) |
| Coordination of benefits | Determining which insurance pays first when a patient has multiple plans |
The Insurance Claim Process
| Step | Action |
|---|---|
| 1. Patient registration | Collect insurance information, verify coverage and benefits |
| 2. Service delivery | Patient receives care; services documented in the record |
| 3. Coding | Assign ICD-10 (diagnosis) and CPT (procedure) codes |
| 4. Claim preparation | Complete the CMS-1500 form with all required information |
| 5. Claim submission | Submit electronically to insurance company (or clearinghouse) |
| 6. Adjudication | Insurance processes and determines payment |
| 7. Payment/denial | Insurance sends payment (ERA) or denial with reason |
| 8. Patient billing | Bill patient for remaining balance (copay, coinsurance, deductible) |
| 9. Appeals | If denied, submit appeal with supporting documentation |
| 10. Collections | Follow up on unpaid patient balances per office policy |
Test Your Knowledge
ICD-10-CM codes are used to identify:
A
B
C
D
Test Your Knowledge
A patient with an HMO insurance plan wants to see a dermatologist. What is typically required?
A
B
C
D
Test Your Knowledge
The amount a patient pays for each office visit regardless of services provided is called the:
A
B
C
D
Test Your KnowledgeMatching
Match each Medicare Part to the services it covers.
Match each item on the left with the correct item on the right
1
Medicare Part A
2
Medicare Part B
3
Medicare Part C
4
Medicare Part D