Health insurance claims processing is a highly regulated, technology-driven workflow that involves healthcare providers, insurers (payers), clearinghouses, and sometimes patients. It’s governed by strict rules under HIPAA, ACA, and ERISA, among others.

Patient Receives Medical Services

• The patient visits a healthcare provider.
• Provider verifies insurance coverage at the point of care using electronic eligibility systems.
• Services rendered are documented in the Electronic Health Record (EHR).

Claim Generation by Provider

• Provider uses medical billing software to:
  • Assign ICD-10 codes (diagnoses),
  • CPT/HCPCS codes (procedures),
  • Attach provider and patient details.
• A claim is generated in standard HIPAA-compliant EDI 837 format.

Claim Submission

• The claim is submitted to:
  • A clearinghouse (intermediary for formatting and error checks),
  • Or directly to the payer (insurance company).
• Common clearinghouses: Availity, Change Healthcare, Waystar.

Payer Review & Adjudication

• The insurer (payer) processes the claim using automated rules engines.
  • Check policy validity
  • Verify codes and documentation
  • Detect fraud or upcoding
• Claim status responses use EDI 277 and 835 for remittance advice.

Determination

The insurer may:

• Approve the claim (fully or partially)
• Deny it (due to lack of coverage, coding errors, etc.)
• Request more information (called a “pended” claim)

Remittance & Payment

• Approved payments are sent to the provider via:
  • Direct deposit (EFT)
  • Explanation of Benefits (EOB) sent to both provider and patient
• Denials require:
  • Provider resubmission
  • Appeals if necessary