Chapter 3 Chapter 3 Basics of Health Insurance Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc.

2 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

3Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Insurance Contracts  Four considerations in valid insurance contracts:  The person must be a mentally competent adult and 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 concealment or misrepresentation of facts on the application.

4Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Insurance Contracts (cont’d.)  Four considerations in valid insurance contracts (cont’d.):  An exchange of value (the first premium payment) submitted with the application, known as a consideration, must be present.  A legal purpose must exist, which is an insurable interest in the case of a health insurance policy.

5Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Implied/Expressed Contracts  Implied contract: not manifested by direct words, but implied or 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

6Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. The Insurance Policy  Basic Coverage: most hospital, surgical, and other medical expenses  Major Medical: extended benefits contract to offset large medical expenses caused by prolonged illness or serious injury

7  Insured: individual or organization protected in case of loss under terms of the insurance policy  Also known as: subscriber subscriber member member policyholder policyholder recipient recipient Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc.

8  Guarantor: the person who promises to pay the medical bill by signing a form agreeing to pay  For a minor child, the guarantor is usually the person who brings the child to the appointment and signs them in However, be aware of different states’ laws, especially relating to divorced parents However, be aware of different states’ laws, especially relating to divorced parents  For an adult patient, the patient accepting treatment makes them presumed to be the guarantor Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc.

9 Emancipated Minor  Emancipated minors are treated as adults when it comes to all matters financial  Make sure you see a copy of the Court Ordered Emancipation  The patient’s record should also include a signed statement, from the patient, stating their emancipated status Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc.

10Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc.pg Policy Renewal Provisions  Five classifications:  Cancelable  Optionally renewable  Conditionally renewable  Guaranteed renewable  Noncancelable policy  Page 56 in Text Book

11Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Policy Terms  Premium: monthly, quarterly, or annual fee to keep insurance active (purchasing the insurance)  Deductible: specific amount of money paid each year before policy begins paying claims  Coinsurance/copayment: cost-sharing requirement in which the insured assumes a percentage of the fee or pays a specific amount for covered services

12Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. 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.

13Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. 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

14 Birthday Rule  Only pertains to Coordination of Benefits for children insured under both parents  The health plan of the person whose birthday (month and day, NOT year) falls earlier in the calendar year, pays first. The plan of the other parent is the secondary payer.  If the mother and father both have the same birthday, then the policy which has been in effect longer is primary. Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc.

15 General Policy Limitations  Exclusion: injury or illness that is not covered by the insurance policy  Examples: Attempted suicide Attempted suicide Military service Military service On-the-job injuries On-the-job injuries Fertility coverage Fertility coverage Pregnancy Pregnancy Preexisting conditions Preexisting conditions

16Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Preapproval  Requirements for preapproval:  Eligibility – Does this patient have this insurance ?  Precertification – Is this a covered benefit ?  Preauthorization – Is it covered for this patient for this diagnosis ?  Predetermination – The maximum dollar amount that the carrier will pay for this service.

17Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Classes of Health Insurance  Group Contract  Conversion Privilege – From group to private  Income Continuation Benefits – COBRA  Medical Savings Accounts  Health Savings Accounts  Health Reimbursement Account  Healthcare Flexible Spending Account  High-Deductible Health Plans  Individual Contract  Prepaid Health Plan

18Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Types of Health Insurance Coverage  The Civilian Health and Medical Program of the Department of Veteran Affairs (CHAMPVA)  Competitive Medical Plan (CMP)  Medicare HMO  Disability Income Insurance  e.g. Aflac  Exclusive Provider Organization (EPO)

19 (cont’d.)  Foundation for Medical Care (FMC)  Health Maintenance Organization (HMO)  Independent or Individual Practice Association (IPA)  Maternal and Child Health Program (MCHP)  Medicare (MC)  Medicaid (MCD)  Medicare/Medicaid (Medi-Medi) Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc.

20 (cont’d.)  Point-of-Service Plan (POS)  Preferred Provider Organization (PPO)  TRICARE  Unemployment Compensation Disability (UCD) – State Disability only available in 6 states  Veterans Affairs Outpatient Clinic (VA)  Workers’ Compensation Insurance (WC)

21Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Basic Methods of Processing Insurance Claims  Manually preparing claims for submission  In-office electronic filing by fax or computer  Contracting with an outside service bureau  Use of a telecommunications networking system

22Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Patient Registration Form  Patient’s name (first, middle initial, last)  Street address and telephone number  Business address, telephone number, occupation  Date of birth  Person responsible for account or insured’s name  Social Security number (no longer required)  Spouse’s name and occupation  Referral source (i.e., physician’s name)  Copy of Driver’s license  Emergency contact information  Insurance billing information

23Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Insurance Card

24Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Patient Signature Release

25Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Encounter Form (Superbill)  Attached to the patient’s medical record during an office visit  Combines a bill, insurance form, and routing document  Can also be a computerized multipurpose billing form to input charges and diagnoses into a patient’s account

26Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Financial Statement (Ledger Card)

27Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Minimum Information Required on CMS-1500 Claim Form  What was done? (services and procedures using procedure codes)  Why was it done? (diagnoses using diagnosis codes)  When was it performed? (date of service)  Where was it received? (place of service)  Who did it? (provider name and ID number)

28Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Provider’s Signature  Acceptable formats:  Handwritten  Signature stamp/Facsimile  Computerized Electronic signature Electronic signature Digital signature Digital signature

29Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Insurance Claim Follow-up

30Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. Insurance Claim Follow-up (cont’d.)  Electronic systems should generate a log of claims  Put the necessary information in the patient’s financial record