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What is Auto-Adjudication?

By Daphne Mallory
Updated May 16, 2024
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Auto-adjudication is the process of paying or denying insurance and public benefit claims quickly, and without making a decision on each claim manually. Companies often rely on software to check claims for accuracy and to adjudicate those claims in order to improve efficiency in claim processing and to reduce costs. The auto-adjudication process is not immune to fraud, and employees and others have tampered with software to steal money based on claims that were submitted. The auto-adjudication rate is a measurement of the claims processed automatically as compared to the total number of claims submitted. Insurance companies use that rate to improve their claims operations.

Software used for auto-adjudication performs most of the functions that insurance employees can do manually, but at lower costs. Some of those functions include checking that medical or other services provided were authorized by the insurance company, reviewing claims to ensure that they meet eligibility requirements, and checking claims for co-pays and deductible payments. There are also services that are web-based and offer a subscription to insurance companies to utilize software that is hosted someplace other than at the insurer’s location.

Claims can be entered into auto-adjudication software electronically, which is often the most efficient method for insurance companies to process claims. The other option the insurance companies use is to hire employees to enter insurance claims or claims for benefits manually. The claims are then processed by computer software. It’s not as automated as the electronic method, but it’s often faster than manually processing claims without the use of software. Some insurance companies make real-time auto-adjudication available to customers, such as physicians filing for reimbursement. Those same companies often need real-time audits in place to prevent gross inaccuracies and to detect fraud.

There are ways to prevent fraud in the auto-adjudication process, and some software applications are specifically designed to combat it. For example, some programs audit a percentage of the claims processed on a regular basis to ensure that the claims were interpreted correctly. Fraudulent claims are often flagged prior to adjudication if the software is capable of detecting fraud. Employees of either the insurance company or the software company can review claims that are flagged for fraud and manually adjudicate the claim. Software is often designed with checks and balances in place to ensure that the information on claim forms is coded properly, which can affect whether the claims are denied or paid.

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Discussion Comments

By JaneAir — On Jun 15, 2011

@indemnifyme - The company I work for doing medical billing works with some insurance companies that I know do auto-adjudication. You're correct that it is a good system but it's been my experience that there is still room for human error.

To submit a claim for auto-adjudication and have the decision return correctly you must first enter the data correctly as well. This leaves basically no margin for error. One wrongly coded diagnosis and you're out of luck!

If they could find a way to make the software a little more intuitive as far as coding it would be so much better.

By sunnySkys — On Jun 12, 2011

@indemnifyme - The company you work for may take the opportunity to provide good service when a customer submits a claim but most companies don't. The last time I had to submit a claim to an insurance company the experience was positively miserable!

I had to speak to a ton of different people and they all kept tell me different things. One would say one thing, than one would say another thing. It was a total nightmare. I would have much preferred an online claim system that would have allowed me to just submit the claim myself.

By indemnifyme — On Jun 10, 2011

I've found auto-adjudication to be a pretty decent claims system. In my experience having staff members manually submit the claims to then be processed by the claims processing software is the best way.

Even though the software can detect fraud it's helpful to have a person entering the data. If a customer making a claim says something that is really off the claims representative can red flag it and investigate it right away. However if the questionable claim actually makes it into the system the process for investigating it is much longer.

I think manually entering claims into the software also increases customer satisfaction. A lot of customers seem to feel reassured by speaking to a person especially after experiencing something like a car accident. This also gives the insurance company an opportunity to increase their renewal rates by providing good service.

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