Certified Medical Administrative Assistants (CMAA) Practice Exam

What does predetermination refer to in health insurance?

1. The process of appealing an insurance denial

2. The maximum amount an insurance company will pay for a service

3. Determining patient eligibility for services

4. Setting up a payment plan for patients

The correct answer is: The maximum amount an insurance company will pay for a service

Predetermination in health insurance refers specifically to the maximum amount an insurance company will pay for a particular service. This process involves the insurance provider evaluating a proposed treatment or procedure to establish the allowable charges and to determine the coverage limits before the service is rendered. By having this information in advance, healthcare providers can better understand how much of the service will be reimbursed, allowing them to inform patients about potential out-of-pocket costs. This ensures that all parties are aware of financial responsibilities ahead of time, improving transparency and minimizing surprises regarding medical bills. The other options relate to different aspects of health insurance management, such as appealing a denial, determining eligibility, or setting up payment plans, but they do not encapsulate the core meaning of predetermination as it pertains to maximum allowable payments.