How Insurance Claims Work: From Doctor Visit to Payment
When you visit the doctor, see a specialist, or go to the hospital, a lot happens behind the scenes that you never see. Understanding the insurance claims process helps you catch errors, understand delays, and know what to expect when bills arrive.
The journey from your appointment to final payment involves multiple steps, multiple parties, and multiple opportunities for things to go wrong.
Step 1: You Receive Healthcare Services
This is the only step you directly see. You visit your doctor, have a test, undergo a procedure, or fill a prescription. During this visit, your provider documents everything—what symptoms you reported, what they observed, what tests they performed, and what treatments they provided.
At this point, you might pay a copay, but the full bill hasn't been calculated yet. The provider's office captures all the information needed to create your claim.
Step 2: Medical Coding
This is where things get technical. A medical coder (often working in the provider's billing department) translates everything that happened during your visit into standardized codes:
Diagnosis codes (ICD-10): These describe what's wrong with you—your symptoms, conditions, or diseases. There are over 70,000 possible ICD-10 codes.
Procedure codes (CPT): These describe what the doctor did—tests, treatments, surgeries. Each specific action has its own code.
Example: A routine checkup where the doctor discovers you have high blood pressure would involve multiple codes—one for the office visit level, one for the blood pressure reading, and one for the high blood pressure diagnosis.
This coding step is critical. A single-digit error in a code can cause your insurance to deny the claim or process it incorrectly.
Step 3: Claim Creation and Submission
The provider's billing department creates a claim that includes:
- Your personal information
- Your insurance information
- The diagnosis codes
- The procedure codes
- The charges for each service
- The date(s) of service
- The provider's information
This claim is sent electronically to your insurance company. Over five billion claims are submitted to health insurers annually in the United States.
Step 4: Initial Insurance Review
Your insurance company's system immediately checks for basic errors:
- Is your policy active?
- Is the provider in-network?
- Is the information complete and correctly formatted?
If there are problems at this stage, the claim is rejected (not denied—there's a difference). Rejected claims are sent back to the provider to fix errors and resubmit.
If the claim passes initial checks, it moves to the next stage.
Step 5: Detailed Claim Adjudication
This is where your insurance company decides what they'll pay. They evaluate:
Coverage verification: Is this service covered under your plan?
Medical necessity: Does the insurance company agree the service was necessary?
Prior authorization compliance: If the service required pre-approval, was it obtained?
Network status: Is the provider in-network or out-of-network?
Benefits calculation: Based on your deductible, copay, coinsurance, and out-of-pocket maximum, what do you owe versus what does insurance pay?
Some of this review is automated by computer algorithms. Increasingly, artificial intelligence systems flag claims for denial based on specific patterns or criteria.
According to research from KFF and federal data, approximately 850 million claims are denied each year—about 17% of all claims submitted.
Step 6: Payment or Denial
If approved, the insurance company sends payment to the provider (or to you if you already paid). They also send you an Explanation of Benefits (EOB) showing what was paid and what you owe.
If denied, both you and the provider receive a denial notice explaining why the claim wasn't approved.
Step 7: Patient Billing
After insurance processes the claim, the provider bills you for:
- Your deductible (if not yet met)
- Your copay or coinsurance
- Any services insurance didn't cover
- The full amount if the claim was denied
This is when you receive the actual bill, which might arrive weeks or even months after your visit.
Common Delays and Problems
Several things can slow down or complicate this process:
Coding errors: Wrong codes lead to claim rejections or denials.
Missing information: Incomplete claims get sent back for more details.
Prior authorization issues: Services provided without proper pre-approval get denied.
Eligibility questions: Disputes about whether you were covered on the date of service.
Medical necessity disputes: Insurance disagrees with your doctor about whether treatment was needed.
Out-of-network complications: Additional paperwork and different reimbursement rates.
Where Denials Happen
Denials can occur for many reasons:
- The service isn't covered under your plan
- Insurance determines the service wasn't medically necessary
- Prior authorization wasn't obtained
- The provider is out-of-network
- You've reached your coverage limits
- The claim was submitted too late (missing filing deadlines)
- Coding errors make the claim look like something else
Less than 1% of denied claims are appealed, even though studies show up to three-quarters of appeals are successful.
What You Can Do
Understanding this process helps you:
Before treatment:
- Verify your provider is in-network
- Confirm whether services need prior authorization
- Get cost estimates in advance
After treatment:
- Review your EOB carefully when it arrives
- Compare the EOB to the services you actually received
- Check that your deductible and out-of-pocket calculations are correct
- Question anything that doesn't match your understanding
If problems arise:
- Contact your provider's billing department about coding errors
- Call your insurance company to clarify coverage questions
- File an appeal if your claim is denied and you believe it should be covered
The Timeline
The entire process typically takes:
- 30-45 days for straightforward claims
- 60-90 days if there are complications
- Longer if claims are denied and appealed
This is why you might not receive a bill until months after your visit.
The Bottom Line
The insurance claims process involves many steps, multiple parties, and complex rules. Understanding how it works helps you identify when something goes wrong and take action to fix it.
Every claim is an opportunity for errors—in coding, in coverage determination, or in calculating what you owe. The more you know about the process, the better equipped you are to catch mistakes before they cost you money.
Most importantly, remember that denials aren't always final. If you receive a denial that doesn't seem right, you have the right to question it and appeal the decision.
Stay Protected
Reviewing medical bills and insurance claims takes time most patients and caregivers don't have. HealthLock monitors your claims automatically, alerting you to errors, denials, and fraud so you can focus on what matters most. HealthLock's members have saved over $243 million by catching billing errors, denied claims, and fraud before they became major problems.
Disclaimer: We're not medical billing experts or attorneys—we're patients and caregivers sharing resources to help you navigate a broken system. This information is for educational purposes only and should not be considered medical or legal advice.
Affiliate Disclosure: This site may contain links to services like HealthLock that help monitor medical claims and billing. We may earn a commission if you sign up through our links, at no extra cost to you. We only recommend services we believe can genuinely help.