6.3 Insurance Claims, EOBs, and Denial Management
Key Takeaways
The CMS-1500 is the standard claim form for professional (physician) services; the UB-04 is used for institutional (hospital) services
Claims are submitted electronically through clearinghouses that check for errors before forwarding to insurance companies
An Explanation of Benefits (EOB) is a statement from the insurance company showing how a claim was processed
Common denial reasons include no authorization, patient not eligible, non-covered service, incorrect coding, duplicate claim, and timely filing exceeded
Denied claims should be reviewed, corrected, and resubmitted or formally appealed within the insurance company's appeal timeframe
An aging report categorizes outstanding claims by the number of days since the date of service (30, 60, 90, 120+ days)
Understanding the claims process helps CMAAs contribute to the practice's financial health by ensuring accurate front-end data and supporting the billing team.
Claim Forms
| Form | Full Name | Used For |
|---|---|---|
| CMS-1500 | Centers for Medicare & Medicaid Services 1500 | Professional services (physician office, ambulatory care) |
| UB-04 | Uniform Billing 2004 | Institutional services (hospitals, SNFs, home health) |
Key Fields on the CMS-1500
| Box | Content | CMAA Relevance |
|---|---|---|
| Box 1 | Type of insurance (Medicare, Medicaid, TRICARE, etc.) | Determined by insurance verification |
| Box 2 | Patient's name | From registration |
| Box 3 | Patient's date of birth and sex | From registration |
| Box 4 | Insured's name | From insurance verification |
| Box 9 | Other insured's name (secondary insurance) | From COB verification |
| Box 11 | Insured's policy group or FECA number | From insurance card |
| Box 21 | ICD-10-CM diagnosis codes | From provider/coder |
| Box 24 | CPT codes, dates of service, charges | From encounter form/coder |
| Box 33 | Billing provider's name, address, NPI | Office information |
The Claims Submission Process
| Step | Description |
|---|---|
| 1 | Charge entry — Codes and charges are entered into the billing system from the encounter form |
| 2 | Claim scrubbing — Automated software checks for errors (missing data, invalid codes, inconsistencies) |
| 3 | Clearinghouse submission — Clean claims are submitted electronically to the clearinghouse |
| 4 | Clearinghouse review — The clearinghouse performs additional edits and forwards claims to the correct payer |
| 5 | Payer adjudication — The insurance company processes the claim (checks eligibility, benefits, medical necessity, authorization) |
| 6 | Payment/denial — The payer issues payment, denial, or requests additional information |
What Is a Clearinghouse?
A clearinghouse is an intermediary that receives electronic claims from providers, checks them for errors (edits), reformats them to meet payer specifications, and forwards them to the appropriate insurance companies. This streamlines the billing process and reduces claim rejections.
Explanation of Benefits (EOB) / Electronic Remittance Advice (ERA)
| Term | Format | Recipient |
|---|---|---|
| EOB | Paper statement | Patient and/or provider |
| ERA | Electronic file (835 format) | Provider's billing system |
EOB Components
| Component | Description | Example |
|---|---|---|
| Billed amount | What the provider charged | $250 |
| Allowed amount | What the insurance company agrees to pay for the service | $180 |
| Contractual adjustment | Difference between billed and allowed (write-off) | $70 (write-off) |
| Insurance payment | What the insurance pays (allowed minus patient responsibility) | $144 (80% of $180) |
| Patient responsibility | Copay, coinsurance, or deductible amount the patient owes | $36 (20% coinsurance of $180) |
| Denial reason (if applicable) | Why a charge was denied, with a reason code | "Authorization not obtained" |
Common Denial Reasons and Prevention
| Denial Reason | Prevention | CMAA Role |
|---|---|---|
| No prior authorization | Obtain authorization before scheduling the service | Verify auth requirements during pre-visit |
| Patient not eligible | Verify eligibility before the visit | Verify insurance 2-3 days before appointment |
| Non-covered service | Check benefits before performing the service | Verify coverage during eligibility check |
| Incorrect/invalid coding | Use correct ICD-10 and CPT codes | Ensure encounter form is complete |
| Duplicate claim | Check for existing claims before resubmitting | N/A (billing function) |
| Timely filing limit exceeded | Submit claims within the payer's filing deadline | Ensure encounter forms reach billing promptly |
| Missing information | Complete all required fields on the claim | Accurate registration and data entry |
| Coordination of Benefits | Determine correct primary/secondary payer order | Verify COB at registration |
Aging Reports
An aging report (also called an accounts receivable aging report) categorizes outstanding balances by the number of days since the date of service:
| Aging Category | Status | Action |
|---|---|---|
| 0-30 days | Current | Normal processing time; monitor |
| 31-60 days | Aging | Follow up with insurance; check claim status |
| 61-90 days | Overdue | Escalate; resubmit if needed; contact insurance |
| 91-120 days | Seriously overdue | Urgent follow-up; consider appeal |
| 120+ days | At risk | May exceed timely filing limits; aggressive follow-up |
Government Insurance Programs
| Program | Population | Funding | Key Facts |
|---|---|---|---|
| Medicare | Individuals 65+, certain disabilities, ESRD | Federal (CMS) | Part A (hospital), Part B (physician/outpatient), Part C (Medicare Advantage), Part D (prescription drugs) |
| Medicaid | Low-income individuals and families | Federal and state (jointly) | Eligibility varies by state; always the payer of last resort |
| TRICARE | Active military, retirees, and dependents | Federal (Department of Defense) | Multiple plan options (Prime, Select, For Life) |
| CHAMPVA | Dependents of disabled/deceased veterans | Federal (VA) | Not the same as TRICARE |
| Workers' Compensation | Employees injured on the job | Employer-funded (state-regulated) | No deductible or copay for the patient |
Key Rule: Medicaid is always the payer of last resort. If a patient has Medicaid and any other insurance, the other insurance pays first.
What is the role of a clearinghouse in the claims submission process?
It provides insurance coverage to patients
It receives electronic claims, checks for errors, and forwards them to the correct insurance company
It determines the amount the insurance company will pay
It collects copayments from patients
An EOB shows: Billed $200, Allowed $150, Insurance Paid $120, Patient Responsibility $30. What is the contractual adjustment?
$30
$50
$80
$120
A patient has both Medicare and Medicaid. Which program pays first?
Medicaid pays first because it covers low-income individuals
Medicare pays first because Medicaid is always the payer of last resort
The patient chooses which program to bill first
Both programs split the payment equally
A claim is denied because the timely filing limit was exceeded. What is the most likely cause of this denial?
The patient did not pay their copay
The encounter form was not routed to billing promptly, causing the claim to be submitted too late
The patient's insurance was terminated
The wrong CPT code was used
What is the primary difference between the CMS-1500 and UB-04 claim forms?
CMS-1500 is for Medicare and UB-04 is for Medicaid
CMS-1500 is for professional (physician) services and UB-04 is for institutional (hospital) services
CMS-1500 is paper-only and UB-04 is electronic-only
CMS-1500 is for outpatient and UB-04 is for outpatient claims
A patient's Workers' Compensation claim for a workplace injury is approved. What is the patient's financial responsibility?
The patient pays the standard copay for their insurance plan
The patient pays nothing — Workers' Compensation has no deductible or copay for the patient
The patient pays 20% coinsurance after the deductible
The patient must pay upfront and be reimbursed later
What is the encounter form (superbill) used for in the revenue cycle?
To verify the patient's insurance eligibility
To capture the diagnoses and procedures performed during a patient visit for billing purposes
To submit claims electronically to insurance companies
To calculate the patient's copay amount
An aging report shows a claim in the 91-120 day category. What does this indicate?
The claim was recently submitted and is being processed normally
The claim is seriously overdue and requires urgent follow-up to avoid exceeding timely filing limits
The claim has been paid and the money is in transit
The claim has been automatically written off
Sections you finish are checked off in the contents.