Electronic Claims

Publication Date :

27 Jan, 2025

Blog Author :

Edited by :

Reviewed by :

Table Of Contents

What are Electronic Claims?

Electronic Claims are electronic or e-submissions of insurance claims. Healthcare providers use them to submit documents for reimbursement for their services to insurance companies. Compared to filling out physical forms on paper, electronic claims submissions are more streamlined and secure. Moreover, the probability of errors and time taken for the process is significantly improved.

You are free to use this image on your website, templates, etc.. Please provide us with an attribution link.

These claim submissions contain a series of details, including, but not limited to, patient/client information, treatment/service provided, additional costs, and diagnosis codes. The process is streamlined with the help of formats such as Electronic Data Interchange (EDI), which is HIPAA compliant. Therefore, insurers and healthcare providers can ensure more efficient payments with minimal chances of errors.

Key Takeaways

Electronic claims are digital applications for reimbursement of services provided. It is a more streamlined way to pass on a claim application.
Apart from being time-efficient, it is also cost-efficient, as care providers do not have to spend on mailing, stationery, storage, and other such costs.
The error rates on e-claims are drastically lower than that of paper claims. Therefore, there is virtually no requirement to re-apply for claims.
If there are any errors, they can be edited and submitted quickly. Typically, these errors are rectified within 24 hours.

Electronic Claims Explained

Electronic claims are digital submissions concerning reimbursement for services provided to an insurance company. It is most prominently used in the healthcare industry. Instead of filling out forms physically on paper, digital claims are more streamlined and efficient.

The digitization of the claim process brings a wide array of advantages for service providers. The biggest one (for any business, including healthcare) is that it helps with continuous cash flow. In comparison, if claims have to be filed physically, it takes more time as the logistics of to and fro of the paperwork take more time. Moreover, the status of the claims can also be tracked in real-time through the insurance company's online platform.

When reimbursement of funds at any level in any industry is subject to severe checks, it is crucial to ensure accuracy. Electronic claims have experienced a significant decrease in errors compared to paper claims. As a result, claim rejections because of omissions, inaccuracy, and other such errors are few to none in most cases.

Electronic claims processing ultimately reduces the turnaround time for a claim and ensures that service providers and insurance companies do not incur high operational costs. Therefore, it is often considered a win-win-win for clients, service providers, and insurance companies. Clients can fill in forms quickly, the service provider can process the form efficiently, and the insurance company can disburse funds timely.

Requirements

Electronic claims in the United States are expected to meet a handful of criteria. A few of the most prominent ones are:

Service providers must have a functioning computer with a stable internet connection and electronic claim software to help them submit claims.
Each claim must have a unique health identifier to ensure exclusivity and avoid confusion.
All claims must adhere to (Electronic Data Interchange) EDI Standards of version 5010 or above.
As directed by the Healthcare Common Procedure Coding System (HCPCS), claims must follow a standardized set of codes.

All developments on the claim front must be communicated to all stakeholders through email. Email is an integral part of the process, and it is a requirement that everyone involved knows the status of their claim.

How to Submit?

The two ways a claim can be submitted to an insurance provider are Manual and Electronic. The manual process is long and tedious. Below is the method for electronic claim submission:

First, claims are submitted electronically through a computer with software that meets HIPAA standards and CMS requirements.
The Medicare Administrative Contractor (MAC) reviews the application and checks if fundamental requirements are fulfilled. If errors are found at this juncture, the entire claim is rejected.
After the initial check, the claims are sent for secondary edits/audits, where each HIPAA claim standard is tested. Failure to meet requirements will only result in the rejection of that particular claim.
At each stage of approval or denial, the applicant is communicated about the same.
After all the checks are completed, the approval letter is disbursed through email.

The funds are transferred after a set number of days, which can depend on the size of the claim, the company, and the service provider's relationship with them.

Examples

Now that the theoretical aspect of electronic claim processing is out of the way, it is time to understand the practical application aspect of the concept through the examples below.

Example #1

Mrs. Harris underwent minor surgery. The healthcare providers informed her that she could file a claim either manually or electronically. Mrs. Harris chose the latter. She filed claims for the surgery, the medical equipment used for the surgery, medications, and fees for post-operation services. The bill amounted to approximately $32,000.

Upon filing the claim digitally, she received an email response that the claim for post-operation care of $3,400 is not covered in her policy and cannot be covered. Therefore, the remaining amount after deducting that fee was disbursed to her.

Example #2

In March 2024, hackers breached the security of one of the largest healthcare payment systems in the United States. The breach sent the system into a fit and left millions of patients stuck without options at hospitals and care centers.

Leading newspapers also observed that a Bitcoin address (allegedly belonging to the hackers) was credited $22 million around the same time. The United States may have transferred the sum as a ransom to revive its cybersecurity breach. However, United and the security company that spotted the transaction have denied the claims.

Benefits

The benefits of seeking reimbursement through an electronic claim software are:

Increased cost savings
Faster processing of claims and reimbursement
Decreased probability of errors
Improved accuracy of information
Excellent transparency & tracking for all stakeholders
The process is significantly more streamlined

More efficient cash flow

Limitations

Despite the benefits mentioned above and throughout the article, there are factors from the other end of the spectrum as well. The limitations of electronic claim submission are:

Technical issues such as internet connectivity problems or glitches can prevent a claim from being filed.
If the client does not have proper documentation or the know-how to file electronically, filing a claim can be an uphill task.
There is a significant initial cost to implement the system and teach staff about it.
If claims are denied or rejected because of minute errors, such as a different code, it happens because the system might think the claim is unnecessary.

The involvement of a clearing house might increase the provider's cost and decrease the client's transparency.

Electronic Claims vs Paper claims

The distinctions between electronic claim submissions and paper claims are:

Electronic claims

Electronic claims are digital means of filing for reimbursement for services provided. The reimbursement to the service provider is processed and sent within 14 days of filing the claim.
The rejection rate for these claims due to errors is less than 1%
If there are any errors in these claims, they are identified and corrected within 24 hours of filing.
With the reduction in paperwork, healthcare providers can focus more on caring for their patients' health.
Since filing, correcting, and processing take minimal time, care providers and carriers can process hundreds or thousands of claims daily.

Paper Claim

Paper claims are physical applications for reimbursement for a service. The average reimbursement in these cases is 70 working days.
The error rate for paper claims in the United States is 30%, which allows for multiple iterations.
It may take weeks for many carriers to check the application for errors and correct/reject them.
The volume of papers involved forces carriers to slow down. As a result, minimal claims can be processed every day.

Healthcare or service providers are engrossed by paperwork that might distract from their primary responsibilities.