Common Medical Billing and Insurance Terms: A Beginner’s Guide

Medical billing can often feel like a maze of codes, terms, and processes, leaving both patients and healthcare providers overwhelmed. Understanding these terms is essential for those involved in healthcare services to ensure smooth billing and accurate claims.

In this blog, we’ll break down common medical billing terms, explain their significance, and help demystify the often-complex language of medical billing.

List of Medical Billing and Insurance Terminologies

For a comprehensive list of billing and insurance terms and their definitions, keep reading.

A

Term	Definition
Account Number	Assigned by your healthcare provider to track medical treatment and billing.
Accounts Receivable (AR)	Amount owed to a provider for services rendered, tracked from claim filings to payments received.
Adjustment	Amount a provider writes off due to negotiated rates or insurance coverage.
Adjudication	Process where insurance reviews a claim to decide acceptance, denial, or rejection.
Admission Date (Admit Date)	Date you were admitted for treatment, marking the start of a hospital stay.
Admitting Diagnosis	Description of the patient’s condition at the time of admission.
Advance Beneficiary Notice (ABN)	Notice given by a healthcare provider when Medicare may not cover a service.
Allowable (Allowed Amount)	Maximum amount insurance will cover for a service.
Ambulatory Surgery	Surgery not requiring an overnight stay, often referred to as outpatient surgery.
Amount Not Covered	Portion of the bill not paid by insurance (e.g., co-pays, deductibles, or non-covered services).
Ancillary Service	Additional inpatient services like laboratory tests or physical therapy.
Appeal	Request to review a denial of coverage by an insurance company.
Applied to Deductible (ATD)	Portion of the bill contributing toward your deductible.
Assignment of Benefits (AOB)	Agreement allowing insurance to pay the provider directly.
Attending Physician	Doctor managing and ordering treatment during a hospital stay or care.
Authorization	Insurer’s approval for care, often required before treatment.
Authorization Number	Code from insurance confirming treatment approval.

B

Term	Definition
Balance	Amount due on the billing statement.
Balance Billing	Charging the patient for amounts not covered by insurance.
Beneficiary Eligibility Verification	Process of confirming insurance coverage for rendered services.
Benefit Contract	Legal agreement outlining benefits, rights, and responsibilities of the policyholder.
Benefits	Services and treatments covered by an insurance policy.
Bill/Invoice/Statement	Summary of medical services and amounts owed.
Brand-Name Drug	Medications sold by specific pharmaceutical companies, often at a higher price than generics.

C

Term	Definition
Certification Number	Code verifying insurance approval for treatment.
ChampVA	Insurance for eligible veterans and their families.
Claim	Request for payment submitted to insurance for medical services received.
Claim Number	Identifier for each medical claim issued by insurance.
Claims Review	Insurance process for assessing charges and medical necessity before payment.
Centers for Medicare & Medicaid (CMS)	Government agency administering Medicare and Medicaid programs.
Clinical Research	Studies testing new treatments, sometimes covered by insurance.
CMS 1500 Form	Standard form used to bill insurance for services rendered.
COBRA	Federal law allowing temporary continuation of health insurance after employment ends.
Coding of Claims	Process of converting diagnoses and procedures into standardized codes for billing.
Co-Insurance	Cost-sharing arrangement where the patient pays a percentage of the total cost.
Cost Share	Split healthcare costs between insurer and policyholder.
Commercial Insurance Plan	Insurance not provided by the government.
Consent for Treatment	Formal permission allowing providers to deliver medical services.
Co-payment (Co-pay)	Fixed amount paid at the time of service.
Co-pay Assistance	Programs reducing out-of-pocket costs for eligible patients.
Co-pay Maximizer	Program managing manufacturer payments for co-pays.
Coordination of Benefits (COB)	Insurance process for covering costs when multiple policies apply.
Covered Charges/Benefit	Services your insurance policy agrees to cover.
Current Procedural Terminology (CPT) Code	Codes identifying medical procedures for billing.
Credit Balance	A review reveals if the clinic owes a refund.

D

Term	Definition
Date of Service (DOS)	Specific date(s) medical services were provided.
Deductible	Amount you pay out-of-pocket before insurance starts covering costs.
Denial	Rejection of a claim or service by insurance, often requiring further review or appeal.
Denial Reason Code	Code explaining why a claim was denied.
Dependent	Person covered under a policyholder’s insurance plan, such as a spouse or child.
Diagnosis	Identification of a medical condition by a healthcare provider.
Diagnosis Code (ICD)	Standardized code for documenting and billing diagnoses.
Discounted Rate	Lower rate agreed upon between insurance and provider.
Durable Medical Equipment (DME)	Long-lasting medical equipment, like wheelchairs or crutches, often partially covered by insurance.

E

Term	Definition
Enrollee	A person covered under a health insurance plan.
Effective Date	The date your health insurance coverage begins.
Eligibility & Verification	The determination of whether you qualify for coverage under a health plan.
Eligible Payment Amount	The amount that your insurance agrees to pay for covered services.
Emergency Care	Immediate treatment required for urgent medical conditions, typically provided in an emergency department.
Emergency Department	The part of the hospital where emergency care is provided.
Estimated Insurance	An estimate from your insurance about how much they will cover for your medical services.
Estimated Amount Due	The estimated total amount you or your insurance need to pay for your medical services.
Experimental or Investigational Treatments	Treatments that are still being tested and haven’t been proven effective or safe, often not covered by insurance unless part of a research study.
EDI Enrollment	The process of registering with a clearinghouse and payers to submit electronic claims linked to your Tax ID, with some payers requiring extra paperwork.
Explanation of Benefits (EOB)	A detailed statement from your insurance company explaining how a claim was processed, including amounts billed, covered, and owed by you.
Electronic Data Interchange (EDI)	A system that connects your billing system to insurance companies, enabling the transfer of claim data.
Electronic Funds Transfer (EFT)	Automatic payments sent directly to your bank account, often required for compliance with provider networks.
Electronic Remittance Advice (ERA)	An electronic document that provides claim details, typically used for auto-posting payments in the billing system.
Evaluation and Management (E/M) Codes	CPT® codes used to bill for doctor-patient visits, covering new and established patients. E/M codes consist of three components: history, medical decision-making (MDM), and exam.

F

Term	Definition
Federal Tax ID Number	A unique number assigned to healthcare providers for tax purposes.
Financial Assistance Program	Programs offering reduced costs or free services to patients who qualify based on financial need.
Financial Responsibility	The total amount you are required to pay for your medical care, which may include co-pays, deductibles, and amounts not covered by insurance.
Flexible Spending Account (FSA)	A pre-tax savings account used for qualified medical expenses, where unused funds may not carry over after the year.
Formulary	A list of prescription drugs covered by your health insurance, organized by cost and effectiveness.
Fee Schedule	A set list of charges for medical services, procedures, or treatments, determined by a provider, facility, or insurance company.

G

Term	Definition
Generic Drug	Cost-effective alternative to brand-name medications.
Guarantor (Billing addressee)	The person responsible for paying the bill; usually the patient or their guardian
Global Period	Timeframe when follow-up care after a procedure is included in the original fee.
Group Number	Identifier for employer-provided insurance plans.

H

Term	Definition
HCFA 1500 Form	A standard document used by healthcare providers to submit claims for outpatient service reimbursement to Medicare, Medicaid, and private insurers.
Healthcare Common Procedure Coding (HCPC)	A five-digit code for standardizing billing of medical services.
Healthcare Provider	A party offering medical services, such as providers or hospitals.
Health Maintenance Organization (HMO)	Insurance plans requiring care from specific providers and often needing referrals.
Health Plan	A type of health insurance, including employer-sponsored or government plans.
Health Savings Account (HSA)	A tax-free account for medical expenses linked to high-deductible plans.
HIPAA	Federal law protecting the privacy of health information.
High Deductible Health Plan (HDHP)	A plan with a higher deductible and lower premiums, often paired with an HSA.
Home Health Agency	An agency providing healthcare in patients’ homes.
Hospice	Care services for terminally ill patients, in various settings.
Hospital-Based Billing	Charges for services in hospital outpatient clinics.
Hospital Charge	The amount a hospital charges for a specific service.

I

Term	Definition
In-Network Provider	A contracted healthcare provider with your insurer, also called a preferred provider.
Insurance Waivers	Excluded services in your insurance plan, like certain treatments or pre-existing conditions.
Insured Group Name	The name of your insurance plan or group.
Insured Group Number	A unique identifier for your insurance group.
Insured’s Name (Beneficiary)	The insured person’s name on the policy.
Intensive Care	A unit for patients needing intensive medical attention.
International Classification of Diseases (ICD-10) Code	Code system for diagnoses and procedures in the U.S.
Invoice/Bill/Statement	A summary of charges for medical services.
Itemized Statement	A detailed list of services with CPT and diagnosis codes for insurance claims; not a bill.
Incremental Nursing Charge	Extra charges for nursing services beyond basic room fees.
Individual Insurance	Health insurance purchased directly by an individual.

L

Term	Definition
Lifetime Maximum	Maximum amount an insurance plan will pay during a policyholder’s lifetime.
Limitation of Benefits	Specific restrictions or limits on coverage within an insurance plan.
Line Item	Specific service or charge listed on a medical claim.
Local Coverage Determination (LCD)	Medicare contractor decisions on specific codes. Regular review ensures accurate claims and prevents delays.

M

Term	Definition
Managed Care	Insurance plans requiring care from specific contracted providers.
Medicaid	Government-funded health insurance for low-income individuals.
Medicare	Federal insurance for those 65+ or with certain disabilities.
Medical Record Number	An identifier for your medical records.
Medicare + Choice	A Medicare HMO plan that includes preventive care.
Medicare Advantage	A Medicare plan offering additional coverage.
Medicare Assignment	Providers agree to accept Medicare’s payment as full.
Medicare Number	A unique identifier for Medicare beneficiaries.
Medicare Part A	Covers hospital and inpatient care.
Medicare Part B	Covers doctor visits and outpatient care.
Medicare Part C	A plan offered by private companies that provides Medicare Part A and B benefits, covering services through the plan instead of Original Medicare.
Medicare Summary Notice (MSN)	A statement showing how Medicare processed your claims.
Medicare Supplements/Medigap	Insurance to fill in gaps in Medicare coverage.
Medicare Beneficiary Identifier (MBI)	An 11-character number on a Medicare card that replaces the SSN-based Health Insurance Claim Number (HICN).
Modifier	A code added to HCPCS or CPT® codes to provide extra details about a service or procedure for claim processing.

N

Term	Definition
Network	A group of contracted healthcare providers.
Non-Covered Charges	Services not covered by your insurance.
Non-Participating Provider	Providers not contracted with your insurance plan.
National Correct Coding Initiative (NCCI) Edits	Prevent incorrect bundling/unbundling of CPT® and HCPCS codes.
National Coverage Determination (NCD)	Determines if Medicare will cover a service or item.
National Provider Identifier (NPI) Number	A 10-digit number assigned to healthcare providers for HIPAA compliance.

O

Term	Definition
Out-of-Network	Providers or facilities not contracted with an insurance plan, often costing more to the patient.
Out-of-Pocket Costs	Expenses not covered by insurance that the patient must pay.
Overpayment	Excess payment made to a provider, often requiring adjustment or refund.

P

Term	Definition
Paid to Provider	The amount the insurance pays to your medical provider.
Paid to You	The amount paid to you or your guarantor.
Participating Provider	Providers who accept your insurance as payment in full.
Patient Amount Due	The amount you owe for medical services.
Pay This Amount	The total amount you need to pay toward your medical bill.
Physician Practice	A group of healthcare professionals working together.
Physician Practice Management	Staff handling the business side of a medical practice.
Provider	A healthcare service supplier, such as providers or pharmacists.
Point of Service (POS)	A plan offering in-network and out-of-network options.
Policy Number	A unique identifier for your insurance contract.
Power of Attorney	A legal document allowing someone to make decisions on your behalf.
Pre-Admission Approval	Insurance approval before receiving medical treatment.
Pre-Existing Condition	A health issue present before enrolling in a new insurance plan.
Pre-Service Payment	A required payment set by the clinic to be made before your visit.
Pre-Certification	Authorization from your health plan for hospital admissions or surgeries, required beforehand.
Preferred Provider Organization (PPO)	A plan offering better coverage for in-network providers.
Prepayments	Payments made before receiving medical care.
Primary Care Network (PCN)	A group of primary care providers.
Primary Care Physician (PCP)	A doctor handling general medical needs.
Primary Insurance Company	The insurance that pays first for claims.
Prior Authorization (Prior)	A process where insurance determines if a treatment is necessary and covered before provision.
Per Diem Reimbursement	A fixed daily rate paid to an institution instead of reimbursing each service individually.

R

Term	Definition
Reasonable and Customary (R&C)	The maximum amount an insurance company will pay for covered medical services.
Referral	A written order from your primary care provider to see a specialist or receive specific services. Required by many HMOs before seeing anyone outside your primary care provider.
Registration	The process of enrolling with a healthcare provider, creating a record, and receiving a medical record and billing account number.
Revenue Code	A code used in billing to specify a particular service, room, or charge associated with a medical procedure or treatment.
Remittance Advice Remark Codes (RARCs)	Provide further explanation for claim adjustments or processing details.
Rejected Claim	A claim that hasn’t been processed or received by a payer or clearinghouse.
Retinal Health Screening/Imaging Consent Form	A form signed by patients acknowledging responsibility for retinal imaging costs, as most vision plans and Medicare do not cover it.
Revenue Cycle Management (RCM)	A process managing billing, claims, payments, and revenue to streamline operations and improve revenue collection.

S

Term	Definition
Specialty (Specialist)	A provider focused on a specific area of medicine, such as an orthopedist for bones and joints or a dermatologist for skin conditions.
Secondary Insurance	The insurance that processes a claim after the primary insurance has determined its payment.
Self-Insured Plan	A plan where the employer covers medical costs, often using third parties for administration, and is exempt from certain state regulations.
Self-Pay Patient	A patient without insurance or who opts not to use insurance, requiring pre-service payment.
Supplemental Insurance	A private plan that helps cover out-of-pocket costs not fully paid by Medicare or commercial insurance.
Supplemental or Secondary Claim Form	A form submitted to secondary insurance when a patient has supplemental coverage.
Service Area	A geographic region where an insurance plan provides coverage and enrolls members. For HMOs, it includes areas served by the network of providers and hospitals.
Social Security Disability Insurance (SSDI)	A federal program providing income support for individuals with long-term disabilities lasting at least a year, being permanent, or expected to result in death. Benefits start after a 5-month waiting period and are based on Social Security contributions.

T

Term	Definition
Third-Party Administrator (TPA)	An entity responsible for managing administrative tasks, and sometimes utilization reviews, for self-funded health plans.
Third-Party Payer	An entity, such as an insurance company, government, or employer, that pays healthcare claims on behalf of the patient.
Tier Network	A benefit structure where the cost-sharing level depends on the provider network. Tier 1 offers the highest benefits at the lowest cost with a limited network, Tier 2 provides broader options at higher costs, and Tier 3 covers out-of-network providers at the highest cost.
Tricare	A healthcare program for active duty and retired military personnel and their families. Once eligible, members are no longer eligible for ChampVA benefits.
Telehealth	Healthcare services provided remotely, including patient monitoring, medical education, and administrative tasks.

U

Term	Definition
UB04 Form	A standard form used by healthcare providers to submit claims for inpatient services, nursing homes, and rehab centers to Medicare, Medicaid, and private insurers.
Uninsured Patient	A patient without health insurance, required to make a deposit before receiving care at Mayo Clinic.
Usual, Customary, and Reasonable (UCR) Charge	The maximum amount an insurer will pay for covered medical services or procedures, also known as allowable or fee allowance schedule.
Utilization Limits	Medicare’s annual limits on some services; claims may be denied if exceeded.
Utilization Review	A process of reviewing and assessing care through methods like pre-certification, recertification, retrospective review, and concurrent review.
Units of Service	Measures of medical services a patient receives, such as hospital days, blood pints, treatments, or lab tests.

V

Term	Definition
Visit Number	A unique number assigned to each episode of care, used to track services and payments; also called account number.

W

Term	Definition
Write-Off	Amount a provider agrees to accept as a discount, not billed to the patient.
Workers’ Compensation	Insurance providing benefits to employees injured on the job.

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