Medical billing terms in plain language

Bills and explanations of benefits use words that do not always mean what they sound like. These definitions are general. Your plan’s documents say exactly how your plan uses each term, and your insurer has the final word. For more definitions, see the glossary at healthcare.gov.

Allowed amount

The most your plan will recognize for a covered service. For an in-network provider, this is generally the rate the provider agreed to with the plan. Your deductible and coinsurance are figured from it.

Appeal

A request that your insurer review a decision, such as a denied claim. The first step is usually an internal appeal to the insurer. See appealing a denied claim.

Balance billing

When a provider bills you for the difference between its charge and the amount your plan allowed. In-network contracts generally restrict it, and federal law limits it in some situations. See the No Surprises Act entry below.

Billed amount

The full price the provider lists for a service. It is often higher than the allowed amount, and it is not what you are expected to pay.

Claim

A request for payment that a provider, or sometimes you, sends to your insurer after care.

Coinsurance

Your share of a covered cost, shown as a percentage of the allowed amount, once any deductible has been met. For example, with 20 percent coinsurance you pay 20 percent of the allowed amount and the plan pays the rest, up to its limits. Check your own plan for its rate.

Coordination of benefits

The rules insurers use to decide which plan pays first when you are covered by more than one.

Copay

A fixed dollar amount you pay for a particular service, such as a visit. The amount is set by your plan and often appears on your insurance card.

CPT code

A code that describes a medical service or procedure so it can be billed. The codes are published by the American Medical Association, and they appear on itemized bills and EOBs.

Deductible

The amount you pay for covered services before the plan starts paying its share. Some services may be covered before you meet it. It generally resets at the start of each plan year.

Denial

A decision by an insurer not to pay for all or part of a claim. A denial notice should state the reason and how to appeal.

Diagnosis code

A code, usually from the ICD-10 system, that names the condition or reason for a visit. It is sent with the claim alongside the procedure code.

Explanation of benefits (EOB)

A statement from your insurer describing how a claim was processed. It is not a bill. See how to read an EOB.

External review

A review of an insurer’s denial by an independent party outside the insurance company. It generally follows an internal appeal.

Formulary

The list of prescription drugs a plan covers, often sorted into tiers that carry different costs.

Good faith estimate

An estimate of expected charges that, under federal rules, providers must give to patients who are uninsured or choose not to use insurance, before scheduled care. It is separate from the estimates insurers can give.

Grievance

A complaint about a plan or a provider’s service or conduct. Some plans use the word differently, so check how yours does.

In-network

Describes a provider that has a contract with your plan. Costs are usually lower in network.

Itemized bill

A bill that lists each service, its code and its date. You can ask a provider for one.

Medical necessity

The standard a plan uses to decide whether a service is appropriate for diagnosing or treating a condition. Your plan documents define how it applies the term.

Network

The group of doctors, hospitals and other providers that contract with your plan.

No Surprises Act

A federal law that protects patients from certain surprise bills, including for emergency services and some care from out-of-network providers at in-network facilities. It also created good faith estimates. The Centers for Medicare & Medicaid Services explains it at cms.gov/nosurprises.

Out-of-network

Describes a provider with no contract with your plan. Your plan may pay less or nothing, and the provider may bill you more.

Out-of-pocket maximum

The most you pay for covered, in-network services in a plan year. After you reach it, the plan generally pays 100 percent of covered costs. Premiums and charges for services your plan does not cover usually do not count toward it.

Patient responsibility

The amount your EOB says you owe after the plan has paid. Your bill should match it.

Plan year

The 12-month period your plan uses to track benefits. It may not be the calendar year, so check the date your deductible resets.

Premium

The amount you pay to have coverage, whether or not you use care. Premiums do not count toward your deductible.

Prior authorization

An insurer’s approval for a service before you receive it. Also called preauthorization or precertification. See the prior authorization checklist.

Provider

A doctor, hospital, lab, pharmacy or other business or person that gives you care.

Referral

An approval, often from a primary care doctor, to see a specialist. Some plans require one and some do not.

Subscriber

The person whose name the insurance policy is under. Dependents are covered through the subscriber.

Summary of benefits and coverage

A standard document that summarizes what a plan covers and what you pay, designed so you can compare plans. You can ask your insurer or employer for one.