Lesson 2: Insurance Overview Topic 1: Policy CBS 115 Medical Billing Lesson 2: Insurance Overview Topic 1: Policy

Copyright © 2008 by Elsevier Inc. All rights reserved. History Insurance is one of the world’s largest businesses Health insurance offsets the costs of illness and/or injury Escalating medical costs have limited insurance coverage options Patients may have more than one insurance policy to defray health care costs Health insurance is a contract between the patient and third-party payer or government entity. Managed care organizations gained popularity in the 1980s to help control the rising costs of health care in the US. Patients can have more than one insurance plan. Copyright © 2008 by Elsevier Inc. All rights reserved.

Copyright © 2008 by Elsevier Inc. All rights reserved. Insurance Contracts Four considerations for insurance contracts: The person must be a mentally competent adult & not under the influence of drugs or alcohol. The insurance company must make an offer (the signed application) and the person must accept the offer (issuance of the policy), without misrepresentation of facts on application. Explain the more common term for the insurance contract. (Policy is the more common term for an insurance contract.) Copyright © 2008 by Elsevier Inc. All rights reserved.

Copyright © 2008 by Elsevier Inc. All rights reserved. Insurance Contracts An exchange of value (the first premium payment) submitted with the application, known as a consideration. A legal purpose must exist, which is an insurable interest in the case of a health insurance policy. Explain when a policy can be challenged. (When a fraudulent statement is made by the subscriber.) When does a policy become incontestable? (After 2 years, or 3 years in some states.) Copyright © 2008 by Elsevier Inc. All rights reserved.

Implied/Expressed Contracts Implied contract: not manifested by direct words, but deduced from the circumstance, the general language, or the conduct of the patient. Most physician contracts are implied Expressed contract: can be a verbal or written contract. If a patient is unconscious when treatment is rendered, is the contract expressed or implied? (Implied) Define “. guarantor” (An individual who promises to pay the medical by signing a form agreeing to pay or who accepts treatment, which constitutes an expressed promise.) What is an emancipated minor? (A person younger than 18 years old who lives independently, is totally self-supporting, and possesses decision-making rights) Explain how managed care plan patients are handled by the insurance specialist. (He/she needs to understand the managed care plan requirements.) Describe how employment and disability and workers’ compensation cases are handled. (The relationship is between the physician and insurance carrier, not the patient, in these cases.) Copyright © 2008 by Elsevier Inc. All rights reserved.

Copyright © 2008 by Elsevier Inc. All rights reserved. Guarantor An individual who promises to pay the medical by signing a form agreeing to pay or who accepts treatment an expressed promise Copyright © 2008 by Elsevier Inc. All rights reserved.

What is an emancipated minor? A person younger than 18 years old who lives independently, is totally self-supporting, and possesses decision-making rights Copyright © 2008 by Elsevier Inc. All rights reserved.

Copyright © 2008 by Elsevier Inc. All rights reserved. The Insurance Policy Major medical: extended benefits contract to offset large medical expenses caused by prolonged illness or serious injury. Insured: individual or organization protected in case of loss under terms of the insurance policy. Also known as: subscriber member policyholder recipient List what is included in basic health insurance coverage. (benefits for hospital, surgical, and other medical expenses) Describe who is considered the insured in a group policy. (the employer; employees are the risks) Who can be considered a dependent? (Spouse, children, domestic partners, parents, family members) Define “applicant.” (A person applying for insurance coverage) Define “contract.” (A legally enforceable agreement) Copyright © 2008 by Elsevier Inc. All rights reserved.

Policy Renewal Provisions Five classifications: Cancelable Optionally renewable Conditionally renewable Guaranteed renewable Noncancelable policy Explain what renewable provisions are. (Stated circumstances when the insurance carrier can refuse to renew a policy, cancel a policy, or increase premiums.) Copyright © 2008 by Elsevier Inc. All rights reserved.

Copyright © 2008 by Elsevier Inc. All rights reserved. Policy Terms Premium: monthly, quarterly, or annual fee to keep insurance active Deductible: specific amount of money paid each year before policy benefits begin Coinsurance/copayment: cost-sharing requirement in which insured assumes a percentage of the fee or pays a specific amount for covered services Define “grace period.” (The period before a policy is cancelled for non-payment of the premium) The higher the deductible, the lower the cost of the policy. Explain why you shouldn’t waive copayments. (The provider has agreed to accept copayments as part of the insurance contract) Explain when deductibles and copayments are usually collected. What is the major exception? (Medicare patients) Describe how insurance companies usually handle accidents. (Some policies cover accidents from day one, while others have a waiting/elimination period before accident coverage starts.) Copyright © 2008 by Elsevier Inc. All rights reserved.

Copyright © 2008 by Elsevier Inc. All rights reserved. Policy Terms (cont’d.) Insurance billing specialist abstracts information from the patient record to: code diagnoses and services rendered. complete insurance claim form. post entries to patient’s financial accounting record (ledger). follow up on unpaid claims. Define “claim.” (Written notice of services sent to the insurance company for reimbursement) What is indemnity? (Benefits paid to an insured while disabled; also known as reimbursement) Describe what happens if one of the actions listed is not done correctly. (Reimbursement/payment may not be received.) What is an adjuster? (A claims representative.) Copyright © 2008 by Elsevier Inc. All rights reserved.

Coordination of Benefits When patient has more than one insurance policy, this statement requires insurance companies to coordinate the reimbursement of benefits to determine the primary and secondary carriers. Prevents duplication or overlapping of payment for the same expense Discuss the birthday law. Have students come up with examples of how the law may be applied. (For dependent children, the primary carrier is the parent whose birthday comes first during the calendar year. Examples will vary.) Copyright © 2008 by Elsevier Inc. All rights reserved.

General Policy Limitations Exclusion: injury or illness that is not covered by the insurance policy Examples: Attempted suicide Military service On-the-job injuries Fertility coverage Pregnancy Preexisting conditions Give some other examples of exclusions. (Injury, illness, attempted suicide, pregnancy, etc. Depends on policy.) Explain what happens if an insurance policy states that a procedure or service is not covered when the state law says it is a mandated benefit. What are some examples? (the service will be covered by the state; reconstructive breast surgery after mastectomy, jaw surgery, infertility) Explain what preexisting conditions are and give some examples. (conditions that existed before the insurance policy began; diabetes, hypertension, answers will vary) What are waivers or riders? (attachment that modifies clauses or provisions within the policy) Copyright © 2008 by Elsevier Inc. All rights reserved.

Copyright © 2008 by Elsevier Inc. All rights reserved. Preapproval Requirements for preapproval: Eligibility Precertification Preauthorization Predetermination Students can refer to Figure 3-3 on p. 62 in the textbook for a sample of a precertification form. An excellent way to be sure all necessary information is at hand when calling for precertification. Most insurance policies require precertification prior to surgical procedures, tests, and hospitalization. Students can refer to Figure 3-4 on p. 63 in the textbook for a sample of a predetermination form. Used to find out the maximum dollar amount covered for surgery, consulting services, postoperative care, etc. Copyright © 2008 by Elsevier Inc. All rights reserved.