Glossary

Health claims administration glossary

Plain definitions of the terms that come up when you run a health plan, a sharing ministry, or a TPA.

270 / 271 (eligibility inquiry and response)

The 270 and 271 are the X12 EDI transactions for eligibility checking: a 270 asks whether a member is covered, and for what, and the payer answers with a 271 carrying coverage status and benefit detail. Real-time 270/271 checking is what powers instant eligibility verification instead of a phone call.

276 / 277 (claim status inquiry and response)

The 276 and 277 are the X12 EDI transactions for claim status checking: a provider sends a 276 asking where a submitted claim stands, and the payer answers with a 277 showing its current status. It's the EDI equivalent of a claims-status phone call.

834 / 835 / 837 (X12 EDI)

The three X12 EDI transactions a health plan runs on: the 834 carries enrollment, the 837 carries claims in, and the 835 carries remittance advice back out.

999 acknowledgement

The 999 is the X12 EDI transaction confirming a submitted file was received and passed structural validation, before anyone checks whether the claims or enrollment records inside it are actually correct. A missing or rejected 999 usually means the file never reached adjudication at all.

Accumulator

An accumulator is a running total a health plan tracks against a member over the plan year — most commonly how much of the deductible has been satisfied and how close the member is to the out-of-pocket maximum.

Allowed amount

The allowed amount is the dollar figure a health plan actually recognizes for a service — from a fee schedule or a usual-and-customary benchmark — as opposed to what the provider billed. Every downstream number on a claim is calculated from it, not from the billed charge.

ASO vs TPA

ASO (administrative services only) is a self-funded plan administered by the insurance carrier itself, using its own network and systems. A TPA (third-party administrator) is an independent, non-carrier company that administers self-funded plans, typically network-agnostic.

Auto-adjudication

Auto-adjudication is when a claims system carries a claim from intake to a final pay-or-deny decision without a person touching it. A claim that fails any check along the way pends into a queue for manual review instead.

Balance billing

Balance billing is when a provider bills a member directly for the gap between what they charged and what the plan's allowed amount recognized, on top of the member's normal cost-share. It happens when no network agreement obligates the provider to accept the allowed amount as payment in full.

Capitation

Capitation is a payment model where a provider or provider group is paid a fixed amount per member per month (PMPM) to cover an agreed scope of care, regardless of how many services that member actually uses that month.

Claims adjudication

Claims adjudication is the process a health plan runs to decide what it pays on a medical claim — confirming eligibility, matching the claim to a benefit plan, pricing it, applying cost-sharing, and producing the payment and explanation of benefits.

Clearinghouse

A clearinghouse is the intermediary that validates and routes electronic claims (EDI 837) between a provider's billing system and a payer, checking the transaction for format and completeness before it reaches adjudication.

Coordination of benefits

Coordination of benefits (COB) is the process of determining which of a member's two or more health plans pays first when they have overlapping coverage. The primary plan adjudicates first; the secondary plan then pays against what's left, up to its own benefit limits.

Eligibility verification

Eligibility verification is confirming a member has active coverage, and what that coverage actually pays for, before or at the time of service. It runs as either a real-time electronic check or a batch process, and the underlying transaction is the X12 270/271 pair.

Encounter data

Encounter data is the record of a medical visit or service submitted to a payer or plan for reporting purposes, rather than for fee-for-service payment. It's most common in capitated arrangements, where a provider is paid a flat PMPM rate and no per-visit claim payment is triggered.

Explanation of benefits

An explanation of benefits (EOB) is the member-facing statement a plan generates after a claim adjudicates, showing what was billed, what the plan paid, and what the member owes. It is not a bill — it's a summary of a payment decision that's already been made.

Fee schedule

A fee schedule is a list of the rates a plan pays for specific procedure codes, negotiated with a provider or network, or set by the plan itself. It's the first source a claim is priced against at adjudication, before any fallback rate applies.

A health sharing ministry is an organization whose members contribute monthly and voluntarily share one another's eligible medical needs under the ministry's guidelines, often organized around a shared statement of beliefs. It is not insurance, and no specific bill is guaranteed to be shared.

Healthshare

A healthshare is a membership-based program where participants contribute monthly and voluntarily share one another's eligible medical needs under the program's guidelines. It is not insurance, and no specific bill is guaranteed to be shared.

IBNR (incurred but not reported)

IBNR is the estimated cost of claims for care that has already been delivered but has not yet been submitted to or processed by the plan. Self-funded plans hold an IBNR reserve so the books reflect what they owe, not just what they have paid.

Level-funded health plan

A level-funded health plan is a self-funded arrangement structured to look and feel fully insured: the employer pays a fixed amount each month covering expected claims, administrative fees, and a stop-loss premium, then settles against actual claims experience at year-end.

Member responsibility amount

The member responsibility amount is the portion of an eligible sharing need a health sharing ministry member covers themselves before the remaining cost is eligible for sharing among the membership. It's set by the ministry's program guidelines — not by an insurance contract or an actuarially priced deductible.

Pended claim

A pended claim is one a claims system routes to a human adjudicator instead of resolving automatically, because eligibility, pricing, or an edit check needs judgment the system isn't authorized to apply on its own.

PMPM (per member per month)

PMPM is a per-member-per-month rate — a cost or fee multiplied by the number of covered members each month. It differs from PEPM, which counts employees rather than covered members.

Prior authorization

Prior authorization is a requirement that a specific service be approved by the plan before it's delivered. At adjudication, a claim for a service that required one and doesn't have a matching authorization on file pends for review — or, on plans configured that way, denies with a no-authorization reason code.

Reference-based pricing

Reference-based pricing (RBP) prices claims off a public benchmark, most often a percentage of what Medicare would pay for the same code, instead of a negotiated network fee schedule. It replaces the network contract as the source of the allowed amount, which shifts how balance-billing risk shows up on a claim.

Run-out

Run-out is the period after a plan year ends, a plan terminates, or a TPA transition happens during which claims for services rendered before that date can still be submitted and must still be processed.

Single case agreement

A single case agreement (SCA) is a one-off negotiated rate between a plan and an out-of-network provider, covering one member's specific episode of care instead of an ongoing network contract. It sets the allowed amount for that claim by direct negotiation rather than a fee schedule or U&C benchmark.

Stop-loss insurance

Stop-loss insurance is a policy a self-funded health plan buys to cap its own claims exposure. Specific stop-loss caps what the plan pays on any one member; aggregate stop-loss caps total claims across the whole plan for the year.

Subrogation

Subrogation is a plan's right to recover claim dollars it already paid when a third party — an at-fault driver — was legally responsible for the injury that caused the claim. The plan pursues reimbursement from the member's settlement or judgment rather than absorbing the cost permanently.

Timely filing limit

A timely filing limit is the deadline, set by a plan document or network contract, by which a provider must submit a claim after the date of service. A claim submitted past that window is subject to denial for exceeding timely filing, separate from whether the service itself was covered.

Usual and customary (U&C)

Usual and customary (U&C) is the benchmark rate a plan pays for a service when no negotiated fee schedule applies, typically set from what providers in that geography usually charge for the same procedure code.