Claims adjudication is a term used in the insurance industry to refer to the process of paying claims submitted or denying them after comparing claims to the benefit or coverage requirements. The adjudication process consists of receiving a claim from an insured person and then using software to process the claims and make a decision or doing so manually. If it’s done automatically using software or a web-based subscription, the claim process is called auto-adjudication. Automating claims often improves efficiency and reduces expenses required for manual adjudication. Many claims are submitted on paper and are processed manually by insurance workers.
Many insurance companies take advantage of auto-adjudication as a method of managing the large number of claims that has to be processed on a regular basis. Claims are submitted electronically in most cases, although paper filing is still an option, and the information is entered into software that reviews the claims. The software checks for errors, eligibility requirements, and deductible payments, and some software programs will even check for fraud. If the claim meets the insurance requirements, then it will be paid. When the claim fails the auto-adjudication process, then it can be denied or sent to an insurance examiner to review the claim manually.
After the claims adjudication process is complete, the insurance company often sends a letter to the filer describing the outcome. The letter, which is sometimes referred to as remittance advice, includes a statement as to whether the claim was denied or approved. If the company denied the claim, it typically has to provide an explanation for the reason why under regional laws. The company also often sends an explanation of benefits that includes detailed information about how each service included in the claim was settled. Insurance companies will then send out payments to the providers if the claims are approved or to the provider’s billing service.
The insurance company might only make a partial payment to the provider as a result of claims adjudication. Insurance companies are often required by law to provide an explanation as to the reason why only partial payment was made. Another possible outcome is a request made by the insurance company for the person to resubmit the claim. The reason is often to obtain additional information or to provide information that was missing in the original claim. If the claim is denied, then the entity or person filing the claim can usually file an appeal.