What is the difference between a deductible and coinsurance?

A deductible is the amount you pay for covered services before your insurance starts paying. Coinsurance is your percentage share of costs after meeting your deductible (e.g., 20% of the allowed amount). Both count toward your out-of-pocket maximum.

What does EOB stand for and why is it important?

EOB stands for Explanation of Benefits — a document from your insurer showing how a claim was processed. It's important because it tells you what your plan paid, what was denied, and what you may owe. Always review it before paying any medical bill.

What is the difference between in-network and out-of-network?

In-network providers have a contract with your insurer at negotiated rates, resulting in lower out-of-pocket costs and protection from balance billing. Out-of-network providers do not have such a contract, generally costing more and potentially resulting in surprise bills.

What does 'balance billing' mean?

Balance billing is when a provider bills you for the difference between their full charge and what your insurance paid. It is generally prohibited for in-network providers and in certain situations protected by the No Surprises Act.

What is prior authorization?

Prior authorization is a requirement that your provider obtain approval from your insurance company before performing certain services. Failure to obtain it can result in a denial. Some plans waive this requirement for emergency services.

Medical Billing Glossary: Insurance and Billing Terms Explained

2026-07-2012 min read

Medical billing is full of specialized terms that most patients only encounter when something goes wrong. This glossary defines the most common terms in plain language, with cross-references to detailed guides for the most important concepts.

Use the links below to jump to any term. Each term includes a short definition and a link to a relevant guide where available.

A

Allowed Amount

The maximum amount your insurance plan will pay for a covered service, based on the negotiated rate between your insurer and the provider. You are not responsible for charges above the allowed amount when seeing an in-network provider.

Appeal

A formal request to your insurance company asking them to reconsider a denied or underpaid claim. See the CO-50 denial guide for step-by-step appeal instructions, or check your state's appeal deadline.

Assignment of Benefits

An agreement that allows your provider to receive payment directly from your insurance company rather than billing you first.

B

Balance Billing

When a provider bills you for the difference between their full charge and what your insurance paid. Balance billing is generally prohibited for in-network providers. The No Surprises Act provides additional federal protections against balance billing in certain situations.

Benefit Limit

The maximum amount your plan will pay for a specific service or category of services (e.g., "12 physical therapy visits per year").

Bundled Payment

A single payment for a group of services that are typically provided together. If you see separate charges for services that should be bundled, the provider may be "unbundling" to increase reimbursement.

C

Capitation

A payment model where a provider receives a fixed monthly payment per patient, regardless of how many services are actually provided. Common in HMO plans.

CARC (Claim Adjustment Reason Code)

A standardized code used by insurers to explain why a claim was paid differently than billed. CARCs have a two-letter group code (CO, PR, CR, OA) and a numeric reason code. See how to read an EOB for guidance on decoding these.

COB (Coordination of Benefits)

A process used when a patient has multiple insurance policies (e.g., through their employer and a spouse's employer). The plans coordinate to determine which pays first and which pays second, ensuring total payments do not exceed 100% of the allowed amount.

Coinsurance

Your share of the costs for a covered service, calculated as a percentage of the allowed amount (e.g., 20%). You pay coinsurance after meeting your deductible, until you reach your out-of-pocket maximum.

Copay (Copayment)

A fixed dollar amount you pay for a covered service at the time of service (e.g., $30 for a primary care visit). Copays are separate from deductibles and coinsurance.

CPT Code (Current Procedural Terminology)

A standardized five-digit code used to describe medical procedures and services. Developed and maintained by the American Medical Association. CPT codes are the primary language of medical billing.

D

Deductible

The amount you pay for covered health care services before your insurance starts to pay. For example, if your deductible is $1,500, you pay 100% of covered services until you've paid $1,500.

Denial

A decision by your insurance company not to pay for a service you received. Denials are coded with CARC codes explaining the reason. Common denial codes include CO-50, CO-4, CO-16, and CO-96.

Diagnosis Code (ICD-10)

A standardized code (from the International Classification of Diseases, 10th Revision) that describes a patient's medical condition. Diagnosis codes must support the medical necessity of the procedure performed.

E

EOB (Explanation of Benefits)

A document from your insurance company explaining how a claim was processed — what was paid, what was denied, and what you may owe. An EOB is not a bill. See the full how to read an EOB guide.

ERISA (Employee Retirement Income Security Act)

A federal law that sets minimum standards for employer-sponsored health plans, including claims processing and appeal rights. ERISA plans (self-funded plans) are regulated by the Department of Labor, not state insurance departments.

External Review

A review of a denied claim by an independent third party, outside of your insurance company. You generally have the right to external review after exhausting the internal appeal process. See appeal deadlines by state.

G

Group Code

The two-letter prefix on a CARC code that determines who is financially responsible: CO (Contractual Obligation — provider writes off), PR (Patient Responsibility — you may owe), CR (Correction and Reversal), OA (Other Adjustment). See the PR-50 vs CO-50 comparison.

H

HCPCS Code (Healthcare Common Procedure Coding System)

A standardized coding system maintained by CMS, used primarily for Medicare, Medicaid, and non-physician services (ambulance, medical equipment, prosthetics, etc.).

Health Plan Identifier (HPID)

A unique identifier assigned to health plans under HIPAA administrative simplification rules.

I

ICD-10

International Classification of Diseases, 10th Revision — the standard medical diagnosis coding system used in the United States. See Diagnosis Code.

In-Network

Providers and facilities that have a contract with your insurance company to provide services at negotiated rates. Seeing in-network providers generally means lower out-of-pocket costs and protection from balance billing.

Internal Appeal

The first level of appeal within your insurance company. You submit documentation supporting why the claim should be paid, and the insurer reviews its initial decision. See appeal deadlines by state.

M

Medical Necessity

A determination by your insurance company that a service is appropriate, reasonable, and necessary for your condition based on accepted medical standards. Denials for lack of medical necessity are coded as CO-50 or PR-50.

Modifier

A two-character code added to a CPT or HCPCS code to provide additional information about the service performed (e.g., RT for right side, 50 for bilateral procedure). Incorrect modifiers are the cause of CO-4 denials.

O

Out-of-Network

A provider or facility that does not have a contract with your insurance company. Out-of-network care generally costs more and may result in balance billing, though the No Surprises Act provides some protections.

Out-of-Pocket Maximum

The most you will have to pay for covered services in a plan year. After you reach this amount (including deductible, copays, and coinsurance), your insurance pays 100% of covered services for the rest of the year.

P

Prior Authorization (Pre-Authorization)

A requirement that your provider obtain approval from your insurance company before performing certain services or prescribing certain medications. Failure to obtain prior authorization can result in a CO-57 denial.

Provider Network

The group of doctors, hospitals, and other health care providers that have contracted with your insurance company to provide services at negotiated rates.

R

RARC (Remittance Advice Remark Code)

A code that provides additional explanation about a claim adjustment, paired with a CARC code. The RARC tells you why the adjustment was made. See how to read an EOB.

Referral

A formal recommendation from your primary care physician to see a specialist. Some plans require referrals before they will cover specialist visits.

S

Summary of Benefits and Coverage (SBC)

A standardized document that summarizes a health plan's benefits, cost-sharing, coverage limits, and exclusions. You should receive an SBC when you enroll in a plan and can request one at any time.

Surprise Bill

An unexpected bill for out-of-network services that you received without knowing the provider was out-of-network. The No Surprises Act provides federal protection against many surprise bills.

T

Third-Party Administrator (TPA)

A company that processes claims and administers benefits for self-funded employer health plans. TPAs handle the administrative functions but do not assume insurance risk.

How Hedical Can Help

Upload any medical document to the Medical Bill & Denial Navigator and our AI will decode every code and term specific to your document. No need to memorize a glossary — we translate it for you.

Try the Bill & Denial Navigator — free for basic analysis.

Sources

AMA CPT Professional Edition — code definitions
CMS HCPCS Level II Guidelines
CMS ICD-10-CM Official Guidelines for Coding and Reporting
29 CFR §2560.503-1 — ERISA claims procedure
45 CFR §147.136 — External review standards
Public Law 116-260, Title I — No Surprises Act
NAIC, "Summary of Benefits and Coverage" template

Hedical uses AI to analyze documents and draft letters. Always review before sending. Not a substitute for professional legal, medical, or financial advice.

A