Electronic vs. paper healthcare claims

Big takeaway: Electronic claims are built for scale. They’re standardized, can be automated, and are fast. Paper claims can work at smaller scales, but they tend to break down as claim volume and payer count grow.

Paper claim forms – like the CMS-1500 form for professional medical claims –  are still common in healthcare. And they’re a common source of payment delays for providers.

Payers take more time to process paper claims, which means they’re slower to pay them.

In comparison, electronic claims are fast, inexpensive, and built to scale. They use structured, machine-readable data, which allows EHRs and RCM tools to generate and submit claims automatically.

For most modern practices, electronic claims are now the default. Paper claims are a fallback.

This guide explains why. It outlines the advantages – and tradeoffs – of paper and electronic claims, and when to use each.

At a glance

There are three major types of healthcare claims: professional, dental, and institutional. Each bills for a different type of care. 

Each type also has a different type of electronic claim and a corresponding paper claim form. For more information, see Differences between 837P professional, 837D dental, and 837I institutional claims.

Advantages of electronic claims

Electronic claims support several submission methods

With Stedi, you can submit claims in multiple ways:

• JSON APIs

• X12 APIs

• X12 over SFTP

• For professional claims, the Stedi portal

HIPAA requires that electronic healthcare claim submissions use the X12 EDI data format. If you use Stedi’s JSON APIs or the Stedi portal, Stedi handles the translation to X12 for you.

Paper claims have one submission method
With paper claims, you can only submit claims one way: print and mail (or fax) the claim form.

Electronic claims have fewer data entry errors

Payers validate electronic claims using edits – automated rules that validate the claim’s data before processing. For example, an edit might confirm that phone numbers contain exactly 10 digits.

If a claim fails an edit, the payer may reject or deny the claim. Even though the process is automated, a payer’s edit-and-rejection cycle can take days, which can delay the provider’s payment.

Clearinghouse edits
To catch errors earlier, clearinghouses – like Stedi – run edits before claims reach the payer.

With Stedi’s JSON or X12 Claim Submission APIs, errors are returned in real time. For example:

{
  "errors": [
   {
      "code": "33",
      "description": "Billing provider phone number is in an invalid format. The expected format is 10 numeric digits (0123456789); no country code, punctuation, or extension. Correct and resubmit.",
      "followupAction": "Please Correct and Resubmit"
    }
  ],
  ...
}

With SFTP, rejections arrive within minutes as claim acknowledgments. The acknowledgment will include a related claim status category code, claim status code, and error message. For example:

STC*A3:N21*[DATE]**[AMOUNT]********Billing provider phone number is in an invalid format. The expected format is 10 numeric digits (0123456789); no country code, punctuation, or extension. Correct and resubmit

You can see our database of edits at https://edits.stedi.com/.

Repairs
Stedi also applies automatic corrections, called repairs, to claims when possible. For example, if a phone number in a claim includes dashes or spaces, Stedi will remove them so the claim passes payer validation.

Paper claims have fewer protections
With paper claims, there are no clearinghouse edits or repairs. Automated payer-side edits, if they happen, are run after the payer manually types the claim into their system.

If a payer does catch an error, the rejection cycle is longer. Sometimes that delay can bump up against timely filing deadlines the provider has to follow.

Electronic claims contain the same information as paper claims

A common misconception in the healthcare industry is that paper claim forms include different – or more complete – information than electronic claims. This isn’t the case.

Both electronic claims and paper claim forms represent the same underlying data:

• Patient information

• Provider information

• Dates of service

• Procedure and diagnosis codes

• Service line charges and totals

The difference is how that information is expressed and processed.

Electronic claims must translate to standardized X12 fields. That structure makes an electronic claim’s data predictable, validated, and machine-readable.

Paper claims allow you to enter that same data in a more free-form fashion. However, that flexibility comes at the cost of consistency and automation.

Electronic claims are adjudicated and paid more quickly

Adjudication – the payer’s process for determining payment for a claim –  is typically the bottleneck for provider payment.

Because electronic claims are received almost instantly and validated with automated edits, payers can move them through adjudication much more quickly than paper claims.

When combined with fast payment options, like electronic funds transfer (EFT), electronic claims can help providers shorten the time between claim submission and payment.

Paper claims require manual intervention
Most paper claims require manual data entry – a payer employee scans or types the paper claim into their system – or a human review. Industry benchmarks suggest 60-85% of electronic claims are auto-adjudicated without any human review.

Electronic claims are trackable end-to-end

You can track an electronic claim’s status – from submission and validation to adjudication and payment – through a lifecycle of electronic transactions, including claim acknowledgements and Electronic Remittance Advice (ERAs).

You can also check the status of an electronic claim at any point after submission using a real-time claim status check.

Paper claims require manual follow-up
Checking the status of a paper claim typically requires either making a telephone call to the payer or checking the payer’s web portal. Neither are standardized, programmatic, or easy to automate at scale.

Many payers require electronic claims

Several major payers – including Medicare, UnitedHealthcare, and Aetna – require providers to submit electronic claims.

Paper claims increase payer costs
Paper claims usually require manual handling at some or every step of payer processing. That increases costs for the payer and makes outcomes less predictable – for both the payer and the provider.

Advantages of paper claims

It’s easier to submit documentation and unstructured data with paper claims

Many payers require extra documentation, called attachments, to approve a claim. These can include X-rays, clinical notes, or a treatment plan that shows a service is medically necessary.

With Stedi, you can upload and submit electronic attachments using our API and SFTP. However, if the attachment is a handwritten note or printed report, it needs to be scanned as a PDF or image first before it can be uploaded.

With paper claims, providers can simply enclose physical attachments with the claim they mail or fax to the payer.

There’s no transaction enrollment for paper claims

Transaction enrollment is the process a provider must complete to exchange a type of electronic transaction with a payer. All payers require transaction enrollment for ERAs. For other electronic transactions, it varies by payer.

Stedi offers fully managed, API-based transaction enrollment. For many payers, you just submit a request. Stedi handles the paperwork. When that isn’t possible, we provide clear, actionable next steps.

Paper claims often require no enrollment. You only need the correct claim form and the payer’s mailing address or fax number. As a result, paper claims can be simpler for low-volume or edge-case scenarios, such as out-of-network claim submissions.

Some payers only accept paper claims

Although it’s increasingly rare, some payers don’t accept electronic claims. In these cases, mailing or faxing a claim form is your only option.

However, even if they don’t accept electronic claim submissions, most HIPAA-covered payers are still required to support ERAs.

Because ERAs contain structured data, they’re often easier to use than Explanations of Benefits (EOBs) – the form the payer mails instead – when posting payments, reviewing adjustments, or reconciling claims to payments.

Payer portals

Some providers, especially smaller practices, also use payer portals to submit claims electronically.

While portals can work well for one-off claims, they don’t scale across multiple payers. Each payer has its own login, workflow, and interface. That means mastering a new interface for each payer the provider accepts.

Payer portals also offer limited programmatic access, which makes automation difficult.

Process electronic claims with Stedi

Stedi helps you submit and track electronic claims through every part of the lifecycle – from submission to remittance.

You can sign up for free. Our free Basic plan includes 100 free claim submissions, ERAs, and claim status checks each month.

Signup takes less than two minutes. No credit card is required.