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Key Medical Billing Terminology You Need to Know
medical billing terminology

Unfortunately, learning vocabulary didn’t really end when we stopped getting vocab quizzes and booklets in school. Learning specific terminology, words, and definitions is a large part of working in the medical industry.

And that’s certainly true when it comes to medical billing. Medical billing terminology is important for you to know to make sure billing is done properly, but also so you’re familiar with common terms and meanings that will come up in the industry.

We’ve compiled a list of some of the most common terms used in medical billing. We’re going to go over these terms, what they mean, and where you’ll see them come up in medical billing situations.

Allowed Amount

The allowed amount refers to the amount of money an insurance provider will pay for a procedure, service, etc. If there is a leftover balance, that financial responsibility usually falls on the patient.


AMA refers to the American Medical Association. This is the largest organizations of physicians and doctors in the country. The focus of this organization is bettering healthcare and publishing cutting-edge techniques and findings in their journal (Journal of American Medical Association).


Similar to the meaning you’re probably familiar with in the law, an appeal is when patients or providers try to change a decision made by the insurance company. Usually, this involves a situation where the insurance company won’t cover/won’t fully cover a service and the appeal is to get them to cover more/cover the procedure in general.


ATD refers to “applied to deductible.” This refers to an amount that a patient owes that contributes to an annual deductible.


AOB refers to “assignment of benefits.” The AOB refers to when a payment is made from the insurance company directly to a medical provider after a claim has been made and fully processed.


A beneficiary is a person receiving benefits from an insurance plan. This could be the person paying for the plan or anyone covered under the plan (spouse, children, etc).


This is a fixed, arranged payment made to an insurance company that’s made on a per patient basis.

Charity Care

Charity care is exactly what it sounds like: care that is provided free of charge to a patient. This is done for patients who can’t afford certain services or procedures and is dependent on the providers’ choice.

Clean Claim

A clean claim is a claim made to insurance that has no errors, is processed quickly, efficiently, and without trouble.


CMS refers to the Centers for Medicare and Medicaid Services. This is a federal administration that manages Medicaid and Medicare coverage.


Insurance plans that use co-insurance divide the patient and insurance responsibility by percentages. Co-insurance is the percentage of the care that the patient is responsible for.


A co-pay is a set amount that the patient must pay in order to receive a medication, service, procedure, etc. This amount depends on the insurance plan and what you’re receiving.


This refers to the amount a patient has to pay before health insurance will begin to cover healthcare costs.


Downcoding is when the insurance company finds that there isn’t enough evidence to prove that a medical service was performed. When this occurs, they will either remove or reduce those codes from the claim.


EOB is the “explanation of benefits.” This is a document that fully explains all of the benefits provided and costs covered by a certain healthcare plan.


An ERA is essentially a digital version of the EOB.


HMO stands for “Health Maintenance Organization.” These organizations are networks of providers that offer coverage for services and procedures performed by physicians in that network.

Managed Care Plan

These insurance plans will only cover services and procedures done by physicians within the care plan’s network.

Medical Necessity

Most things will only be covered by insurance when there is what’s deemed “medical necessity.” This usually excludes cosmetic, investigative, or non-necessary procedures from coverage.

Non-Covered Charge

This is pretty straightforward as far as medical billing terms go: this is a medical charge that is not covered. It’s also written as an “N/C”.


PEC stands for “Pre-Existing Condition.” This refers to a condition that a person had before they got insurance coverage from a particular company/provider. Depending on the type of PEC, this can exclude a patient from certain healthcare plans.


PPO stands for “Preferred Provider Organization.” This is very similar to “HMO.” A PPO plan has a preferred network of providers that will be covered by that plan.


Certain procedures or services require authorization by the insurance company before they’re performed in order to make sure that the provider will cover it.

Supplemental Insurance

This type of insurance supplements a primary plan. This could be a secondary policy or a plan from another insurance company altogether.


TOP stands for “Triple Option Plan.” As the name suggests, this is a plan that gives a patient three options for coverage: a traditional plan, an HMO, or a PPO.


UCR stands for “Usual Customary and Reasonable.” UCR refers to a specific amount of money allocated by an insurance provider or company to pay for overall healthcare costs. Once a patient surpasses the UCR, they become responsible for services and fees.

Wrapping Up Medical Billing Terminology

While these terms we’ve gone over here just scratch the surface of the world of medical billing terminology, these words are the ones you absolutely must know. You’ll see these words appear time and time again on all types of billing; understanding what they mean and what they apply to is crucial for proper error-free billing.

If you need some more help with medical billing terms and figuring out medical billing in general, check out our blog. We can help you with all your billing, coding, and management needs.

Author: Mike Cynar

Mike Cynar brings buyers and sellers together by producing reviews and creating non biased webpages allowing users to share their experiences on various products and services. He and his staff write informative articles related to the medical field, legal, and other small business industries.

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