How Are Insurance Codes Used?


Quick Answer

Insurance codes are used by both medical providers and health insurance companies to classify medical conditions by diagnosis or procedure to provide consistent billing information, according to the Illinois Department of Human Services. Coding standards are meant to provide consistency, and they are updated periodically.

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How Are Insurance Codes Used?
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Full Answer

Medical insurance codes for diagnosis are based on the International Classification of Diseases, a set of standards disseminated by the World Health Organization to provide a consistent tool for member states to record, store, analyze and share information on health and health care, as explained by the World Health Organization. The codes are used to evaluate and improve health care services to medical administrators, who may use the information to alter financing systems used for medical services. They are also used to assist in automating claim processing.

Insurance codes used to classify procedures use the current procedural terminology developed by the American Medical Association, developed to provide standardized billing information to government and private health care payers, as explained by the American Medical Association.

CPT codes are used to identify equipment, supplies, home health services, prescription medication, clinical laboratory services and medical services dispensed by a medical provider, according to the Centers for Medicare and Medicaid Processing. Codes are listed annually in the Physician Fee Schedule.

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