Claim Adjudication

Adjudication is the process by which a health plan or PBM decides how a claim is paid — reviewing the submitted claim against the member's coverage, the provider's contract, and the plan's rules to determine the allowed amount, the plan's payment, and the member's cost-share. Every claim goes through adjudication before an EOB is issued or a payment is sent.

The mechanics are largely automated. When a provider submits a claim (typically an EDI 837 file for medical or an NCPDP transaction for pharmacy), the plan's adjudication engine checks: is the member currently eligible, is the service covered under the plan, is the provider in-network, is there an active prior authorization if required, does the billed CPT and diagnosis combination make clinical sense, has the deductible been met, what's the applicable coinsurance. Most claims adjudicate in seconds without human intervention — the system applies the contract logic and issues a payment decision. Complex claims (high-dollar, unusual coding, coordination of benefits with a second plan, potential fraud flags) route to human review. Denied claims fall into two categories: denials that can be corrected (missing prior auth, coding error, coverage question) and denials that require formal appeal (medical-necessity dispute, excluded service). Modern adjudication engines from major TPAs and carriers process millions of claims per day.

The takeaway: when a claim is denied, the EOB will show a denial reason code. Most denials are administrative and correctable — call the plan or ask the provider's office to resubmit with corrected information before assuming the denial is final.