Final answer:
Entering 'SIGNATURE ON FILE' in block 12 of the CMS-1500 signifies that the patient has given an Authorization for Release, allowing their medical information to be shared with the payer for claim processing.
Step-by-step explanation:
When 'SIGNATURE ON FILE' is entered in block 12 of the CMS-1500 claim form, it means that the patient has signed a document authorizing the release of medical information to the insurance payer. The correct term for this document is an Authorization for Release. This indicates that the patient has provided formal consent to share their medical information with the insurance company, which may be necessary for the processing of a health insurance claim.