Electronic Claims

An electronic claim is a bill or statement of charges for health care services submitted to an insurance carrier or managed care organization using an electronic data interchange (EDI) medium. An EDI application allows information to be transferred between the computer of one organization and the computer of another organization, thus avoiding the need to prepare paper forms for mailing or to transmit electronically. Claims data can be entered into an electronic form, uploaded or downloaded from an electronic file, or transmitted by fax.

Electronic claims can significantly reduce the amount of time a health care organization or physician provider waits to be paid for services provided. Estimates suggest that electronic claims are paid in approximately half the time required for paper claims. Electronic submission not only decreases turnaround time for payment but also accrues benefits by eliminating paper, labor, and mailing costs and by reducing errors.

Although large health care organizations and systems typically collect, process, and transmit their own billing information for payment, smaller organizations such as physician practices may outsource the billing function to a commercial vendor.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA), signed into law in August 1997, mandated development of standards for electronic health information transactions. Electronic transmission of financial and administrative transactions, including billing and electronic claims processing, were included in the provisions. Organizations whose data are not compliant with HIPAA standards may submit their data to a health care clearing-house that transforms the data into standard elements and standard transactions.