Healthcare Billing Glossary: 57 Eligibility, Benefits and Claims Terms Explained

US healthcare billing has its own language, and most of it is acronyms. Before a clinic sees a patient it checks their insurance, and after the visit it sends a claim and waits to be paid. Each step has a name, a code and usually a numbered electronic transaction. This glossary covers the terms you meet most often when building or running that process, with each one defined in a sentence or two. It is grouped in roughly the order a visit happens: check eligibility, read the benefits, identify the patient and provider, code the service, then track the claim.

Eligibility checks (270/271)

Eligibility check. A question sent to an insurer before a visit: is this patient covered on this date, and what will the plan pay for? Electronically it is a 270 request, and the insurer replies with a 271 response listing active coverage and benefits.

Eligibility refresh (recheck). Running the eligibility check again closer to the visit, because coverage changes. Plans end, members switch plans and Medicaid can change month to month, so a check from three weeks ago may no longer be true on the day.

EDI. Electronic Data Interchange: computers exchanging business documents in a fixed, agreed format instead of by fax, phone or paper. In healthcare, eligibility checks, claims and payments all travel as EDI.

X12. The standards body, and the file format it defines, behind healthcare EDI in the US. X12 messages are made of segments and elements separated by special characters, and each transaction has a number: 270/271 for eligibility, 276/277 for claim status, 837 for claims and 835 for payments.

Service Type Code (STC). A short code in an eligibility request that says which kind of care you are asking about. 30 asks for general plan coverage, 98 for an office visit, MH for mental health and 35 for dental. Asking with the right code gets you the benefits that actually apply to the visit.

AAA error. The way a 271 response says “I couldn't answer that.” It carries a reason code, such as 72 for an invalid member ID, 75 for a subscriber who can't be found, or 42 when the payer's system is down. Each one points to a different fix.

Clearinghouse. A middleman that connects providers to many insurers. The provider sends every transaction to one place, and the clearinghouse checks the format, routes it to the right payer and passes the response back.

Transaction enrollment. Registering a provider with a payer before certain transactions are allowed. Many payers require it for claims, payment files (835s) and sometimes eligibility checks, and requests sent before enrollment is approved are rejected.

HETS. The HIPAA Eligibility Transaction System, run by CMS, which answers eligibility checks for Original Medicare. It takes a standard 270 and returns a standard 271, just like a commercial payer.

HIPAA. The Health Insurance Portability and Accountability Act of 1996. For billing it does two things: it requires insurers and providers to use standard X12 formats for electronic transactions, and it sets the rules for keeping patients' health information private and secure.

Benefits

Co-pay. A fixed amount the patient pays for a service, such as $30 for a doctor visit. It is the same whatever the visit actually costs.

Co-insurance. The patient's share of a bill as a percentage, such as 20%, after the deductible has been met. The plan pays the rest.

Deductible. The amount a patient pays for covered care each year before the plan starts sharing the cost. A $1,500 deductible means the first $1,500 of covered bills is the patient's. Some services, like preventive care, are often covered before it is met.

Out-of-pocket maximum (OOP). The most a patient will pay for covered in-network care in a plan year. Once deductibles, co-pays and co-insurance add up to this number, the plan pays 100% for the rest of the year. Premiums don't count towards it.

Network status (in/out of network). Whether a provider has a contract with the patient's plan. In-network providers have agreed rates, so the patient pays less. Out-of-network care costs more, and some plans don't cover it at all except in emergencies.

Network tier. A ranking some plans give to in-network providers. Tier 1 is usually the preferred, cheapest option, and higher tiers carry higher co-pays or co-insurance, even though they are all in network.

Prior authorization. Approval the plan must give before certain care, such as an MRI, surgery or an expensive drug. Without it, the claim can be denied even if the service is covered.

Coordination of benefits (COB). The rules for deciding which plan pays first when a patient has more than one, so that together they never pay more than the bill. For example, a child covered by both parents is often billed to the plan of the parent whose birthday comes first in the year.

Primary insurance. The plan that pays first under coordination of benefits. Whatever it leaves unpaid can then be sent to the secondary plan.

Patient and plan

Member ID. The number on the patient's insurance card that identifies them to the plan. It is the most important field in an eligibility check, and a wrong or outdated one is the most common reason a check fails.

Group number. Identifies the employer or group plan the patient belongs to. Two people at the same company usually share a group number but have different member IDs.

Policyholder (subscriber). The person who holds the insurance, usually the employee. Their information anchors the policy, and family members are covered under it.

Dependent. Someone covered under the subscriber's policy, such as a spouse or child. Some plans give dependents their own member ID, while others identify them through the subscriber's ID plus their name and date of birth.

Date of service (DOS). The day the care was provided. Eligibility is checked and claims are paid for a specific date of service, because coverage can be active on one day and not the next.

HMO. Health Maintenance Organization: a plan that covers care only from its own network, except in emergencies, and usually requires a primary care doctor's referral before seeing a specialist. Lower cost, less choice.

TPA. Third-party administrator: a company that runs a health plan for an employer that pays its employees' claims itself. The TPA processes claims and handles members, but the employer's money pays the bills. TPAs often rent a network from a larger insurer.

Carveout (behavioral). When a plan hands one type of benefit to a separate company. Mental health and substance use care is often carved out, so the check and the claim for a therapy visit go to the behavioral health company, not the plan on the patient's card.

Payer and provider

Payer. The organization that pays for care: a private insurer, Medicare, a state Medicaid program, a TPA or a self-funded employer.

Payer ID. The code a clearinghouse uses to route a transaction to the right payer. Payer IDs aren't universal: the same insurer can have different IDs at different clearinghouses, and sometimes different ones for eligibility and claims.

Provider. Anyone who delivers care and bills for it: a doctor, therapist, hospital, lab or clinic.

NPI. National Provider Identifier: a unique 10-digit number issued by CMS to every US healthcare provider. Type 1 NPIs belong to individual clinicians, and Type 2 NPIs belong to organizations such as clinics and hospitals.

Tax ID (TIN). The 9-digit number the IRS uses to identify the business that gets paid, usually an Employer Identification Number. A payer links the provider's NPI and TIN together to know where the money goes.

Codes

CPT. Current Procedural Terminology: five-digit codes, maintained by the American Medical Association, for medical procedures and services. 99213, for example, is a routine office visit with an established patient.

HCPCS. The Healthcare Common Procedure Coding System. Level I is simply CPT. Level II, maintained by CMS, covers things CPT doesn't, such as equipment, ambulance rides and some drugs, using a letter followed by four digits.

CDT. Current Dental Terminology: the dental code set, maintained by the American Dental Association. Codes start with D, such as D1110 for an adult cleaning.

Procedure code. The general name for any code that says what was done for the patient, whether CPT, HCPCS or CDT. Every line on a claim has one, and it determines what the payer will pay.

Government programs

Medicare. The federal health insurance program for people aged 65 and over, and some younger people with disabilities or end-stage kidney disease.

Original Medicare. Medicare run directly by the federal government (Parts A and B). Patients can see any provider that accepts Medicare, and claims go to Medicare itself.

Medicare Advantage. Also called Part C: Medicare benefits delivered by a private insurer instead of the government. The patient has a new member ID and plan rules, and claims go to that insurer, not to Medicare.

Medicare Part A/B. Part A is hospital insurance: inpatient stays, skilled nursing and hospice. Part B is medical insurance: doctor visits, outpatient care, tests and equipment.

Medicaid. Health coverage for people with low incomes, funded by the federal government and the states together but run by each state. Its rules, and how you check eligibility, vary from state to state.

Medicaid managed care. Medicaid delivered through private health plans that the state contracts with. Most Medicaid members are in one. The patient's coverage comes from their plan, with its own member ID, so you have to know which plan they are in today.

CMS. The Centers for Medicare & Medicaid Services: the federal agency that runs Medicare, oversees state Medicaid programs, and maintains many of the codes and identifiers on this list, including the NPI and HCPCS Level II.

Claims (276/277 claim status)

Claim. The bill a provider sends to a payer after a visit, listing who was treated, by whom, on which date, what was done and what it cost. Electronically it is an 837 transaction.

Claim status. Where a claim is in the payer's process: received, still being processed, paid or denied. A provider asks with a 276 request, and the payer answers with a 277 response.

Claim status category code. The high-level answer in a 277. The letter tells the stage: A for acknowledged (A1 received, A2 accepted for processing, A7 rejected for bad data), P for pending, F for finalized (F1 paid, F2 denied).

Claim status code. The detail that goes with the category code, explaining the reason for the status, such as which piece of information is missing or invalid.

Adjudication. The payer's review of a claim to decide whether to pay it and how much, by checking it against the patient's coverage, the provider's contract and the plan's rules. Most claims are adjudicated automatically.

Finalized claim. A claim the payer has made its decision on: paid in full, paid in part or denied. Category codes starting with F.

Pending claim. A claim still being processed. Category codes starting with P. Usually there is nothing to do but wait, unless the payer has asked for more information.

Claim denial. The payer refusing to pay a claim or part of it, for example because coverage wasn't active, prior authorization was missing or the service isn't covered. A denial is different from a rejection: a rejected claim was never accepted for processing, usually because of a data error.

Service line. One row on a claim: a single service with its procedure code, date, units and charge. A claim can have many service lines, and a payer can pay some and deny others.

Billed amount. What the provider charged, the sum of all service line charges. It is rarely what gets paid: the payer pays its contracted allowed amount, minus the patient's share.

Timely filing limit. The deadline for sending a claim, counted from the date of service. It is often 90 days to a year depending on the payer; for Medicare it is 12 months. A rejected claim doesn't pause the clock, so it has to be fixed and resent before the deadline.

CARC / RARC. Claim Adjustment Reason Codes say why a payer paid less than was billed. For example, 45 means the charge was above the allowed amount. Remittance Advice Remark Codes add detail to a CARC, such as which information is missing.

ERA / 835. The Electronic Remittance Advice, X12 transaction 835: the payer's itemized explanation of a payment. It lists what was paid on each claim and service line, and uses CARC and RARC codes to explain every adjustment. One ERA can cover many claims.

Institutional claim / Professional claim. The two main claim types. A professional claim (837P, on paper the CMS-1500) bills for services a clinician performs, like an office visit. An institutional claim (837I, on paper the UB-04) bills for a facility's costs, like a hospital stay, using revenue codes for room, equipment and supplies.

Put together, these terms describe one loop. Check eligibility with a 270/271 and read the benefits, identify the patient, provider and payer correctly, code what was done, send the claim, follow it with a 276/277, and read the 835 when the money arrives. Most denials trace back to a mistake in one of the earliest steps, which is why getting the eligibility check right matters so much.