Understanding medical billing terminology is essential for healthcare providers, billing staff, and anyone involved in the US healthcare revenue cycle. Mistakes often occur when basic billing terms are misunderstood, leading to claim denials, delayed payments, and patient confusion. This guide explains the most important medical billing terms and how they impact reimbursement.

Explanation of Benefits (EOB)

An Explanation of Benefits (EOB) is a statement sent by an insurance company to explain how a claim was processed. It details what the insurer paid, what the patient owes, and any denied or adjusted amounts. EOBs are crucial for providers and patients to understand coverage and financial responsibility.

Example: If a patient visits a clinic for a $200 service, the EOB may show $150 covered by insurance and $50 as the patient’s copay.

Electronic Remittance Advice (ERA)

An Electronic Remittance Advice (ERA) is the digital version of the EOB. It allows providers to automatically post payments and adjustments into billing software. ERAs improve accuracy, save time, and streamline the payment posting process.

Example: An ERA file can automatically update 100 claims in a billing system in minutes, compared to manual data entry.

ICD-10 Codes

ICD-10 codes are standardized diagnosis codes used in the US to describe a patient’s medical condition. ICD-10 ensures that diagnoses are clearly communicated to payers, supporting medical necessity for procedures.

Example: ICD-10 code E11.9 represents Type 2 Diabetes Mellitus without complications.

CPT Codes

CPT codes (Current Procedural Terminology) are used to describe medical services and procedures provided to patients. Accurate CPT coding ensures proper reimbursement.

Example: CPT 99213 indicates a level 3 office visit for an established patient.

HCPCS Codes

HCPCS Level II codes are used for supplies, medications, and durable medical equipment not covered by CPT. They help providers bill for services like wheelchairs or injectable medications.

Example: HCPCS code A0427 is for ambulance transportation, basic life support, non-emergency.

Deductible

A deductible is the amount a patient must pay out-of-pocket before insurance begins covering services. Deductibles reset annually and vary by plan.

Example: If a patient has a $1,000 deductible and incurs $500 in services, they pay the full $500. After reaching $1,000, insurance begins coverage.

Copay

A co-pay is a fixed amount a patient pays at the time of service. It is separate from deductibles and coinsurance.

Example: A primary care visit may require a $25 co-pay, regardless of the total cost of the visit.

Coinsurance

Coinsurance is a percentage of the allowed amount that the patient must pay after the deductible is met.

Example: If insurance covers 80%, the patient pays 20%. For a $200 service, the patient’s coinsurance is $40.

Clean Claim

A clean claim is one submitted with complete and accurate information, without errors that could cause rejection or delay. Clean claims are processed faster and improve cash flow.

Example: A claim with correct CPT/ICD codes, patient demographics, and insurance details is a clean claim.

Denied Claim

A denied claim is a claim rejected by the insurance payer due to errors, lack of coverage, or missing documentation. Denials require investigation and correction before resubmission.

Example: A claim is denied if the patient’s insurance coverage expired before the date of service.

Final Thoughts

Understanding medical billing terminology is critical for smooth US healthcare operations. From EOBs and ERAs to CPT, ICD-10, and coinsurance, each term affects how claims are processed and payments are received. Accurate use of these terms ensures faster reimbursement, fewer denials, and a more efficient revenue cycle.