1. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 1 Basics of Health Insurance Chapter 20

2. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 2 The Purpose of Health Insurance  The purpose of health insurance is to help individuals and families offset the costs of medical care.  Helps protect against financial losses resulting from illness or injury  Provides payment of monetary benefits for covered sickness or injury depending on the insurance policy purchased

3. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 3 Types of Health Insurance Benefits  There are various types of health insurance  accident insurance  disability income insurance  hospitalization  medical expense insurance  accidental death and dismemberment insurance  Health insurance typically covers services and procedures considered medically necessary  Most insurances do not cover “elective” procedures that are not considered medically necessary

4. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 4 Cycle of Health Insurance  The insured pays a premium  This premium pays for an insurance policy that covers the insured for a specific type(s) of coverage  When an insured becomes ill or suffers an injury, treatment is provided

5. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 5 Cycle of Health Insurance and Processing  Insurance billing and coding tasks typically completed by the medical assistant include: Obtaining information from the patient and insured Obtaining information from the patient and insured Verifying the patient’s eligibility, benefits, exclusions, special authorizations Verifying the patient’s eligibility, benefits, exclusions, special authorizations Performing diagnostic and procedural coding and review for completeness Performing diagnostic and procedural coding and review for completeness Calculating insurance deductibles and coinsurance amounts and provide to patient Calculating insurance deductibles and coinsurance amounts and provide to patient Obtaining preauthorization for procedures or services as needed Obtaining preauthorization for procedures or services as needed

6. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 6 Cycle of Health Insurance and Processing (cont’d)  Complete insurance claim form and submit to insurance company  Post payments and adjustments on patient account and examine (EOB), (EOMB) or the (RA) from insurance company  Make adjustments to the account as needed  Bill patient for outstanding balance, or, if applicable, complete the secondary insurance claim form and submit  Follow up on any rejected or unpaid claims

7. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 7 Types of Health Insurance  Group Policies  Insurance written under a group policy covers a number of people under a single master contract Group coverage usually provides greater benefits at lower premiums Group coverage usually provides greater benefits at lower premiums Physical examinations are normally not required, and preexisting conditions are often waived Physical examinations are normally not required, and preexisting conditions are often waived  Individual Policies  Individuals who do not qualify for inclusion in a group or government-sponsored plan risk that coverage may be denied, or the individual may be limited on benefits the policy will cover risk that coverage may be denied, or the individual may be limited on benefits the policy will cover Premiums almost always higher, often the benefits are less Premiums almost always higher, often the benefits are less

8. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 8 Types of Health Insurance (cont’d)  Government Plans  TRICARE dependents of military personnel receive treatment from civilian physicians at the expense of the government dependents of military personnel receive treatment from civilian physicians at the expense of the government  Medicaid agreements with states for assistance from the federal government to provide medical care for people meeting specific eligibility criteria agreements with states for assistance from the federal government to provide medical care for people meeting specific eligibility criteria  Medicare federal health insurance program that provides health care coverage for individuals age 65 and older federal health insurance program that provides health care coverage for individuals age 65 and older  Workers’ Compensation protects wage earners against the loss of wages and the cost of medical care resulting from occupational accident or disease protects wage earners against the loss of wages and the cost of medical care resulting from occupational accident or disease

9. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 9 Types of Health Insurance (cont’d)  Self-Insured Plans  Employer pays employee health care costs from the firm’s own funds  a self-funded plan is not insurance by true definition Medical Savings Account a type of self-insurance

10. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 10 Types of Insurance Benefits  Hospitalization  pays the cost of all or part of the insured person’s hospital room and board and specific hospital services  Surgical  pays all or part of a surgeon’s fee; some plans also pay for an assistant surgeon  Basic Medical  pays all or part of a physician’s fee for nonsurgical services, including hospital, home, and office visits  Major Medical  provides protection against especially large medical bills resulting from catastrophic or prolonged illnesses

11. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 11 Types of Insurance Benefits (cont’d)  Disability (Loss of Income) Protection  cash benefits provided to employed policyholders who are unable to work as a result of an accident or illness  Dental Care  preventive dental care is covered 100%, with most other coverage paid at 50%  Vision Care  may include reimbursement for all or a percentage of the cost for refraction, lenses, and frames  Medicare Supplement  a supplemental health insurance policy to help defray medical costs not covered, or only partially covered, by Medicare

12. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 12  Special Risk Insurance  protects a person in the event of a certain type of accident or for certain diseases  Liability Insurance  includes benefits for medical expenses payable to individuals who are injured in the insured person’s home or car, without regard to the insured person’s actual legal liability for the accident  Life Insurance  provides payment of a specified amount on an insured’s death  Long-Term Care Insurance  covers a continuum of broad-ranged maintenance and health services to chronically ill, disabled, or mentally retarded persons Types of Insurance Benefits (cont’d)

13. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 13 How Benefits are Determined  Indemnity schedules  traditional health insurance plans that pay for all or a share of the cost of covered services, regardless of which physician, hospital, or other licensed healthcare provider is used  Service benefit plans  plan the insuring company agrees to pay for certain surgical or medical services without additional cost to the person insured  Resource Based Relative Value Scale (RBRVS)  resources required to perform a service is determined through the use of relative value units (RVUs) assigned to the CPT codes system was implemented to standardize payment system was implemented to standardize payment  Determination of the usual, customary, and reasonable (UCR) fees  Charges for a specific service are compared with a database of charges for the same service to other patients by the same type of physician, and to patients by other physicians performing the same or similar services in the same geographic area  Relative Value Scale (RVS)  The most commonly performed procedures were compiled, given procedure numbers similar to those in the AMA’s Current Procedural Terminology (CPT) code list, and assigned a unit value

14. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 14 Managed Care  Plans that provide health care in return for scheduled payments and coordinate health care through a defined network of primary care providers, hospitals, and other providers  Advantages of managed care  Health care costs are usually contained.  There are established fee schedules.  Authorized services are usually paid for.  Most preventive medical treatment is covered.  Patients’ out-of-pocket expenses tend to be less than with traditional insurance.  Disadvantages of managed care  Access to specialized care and referrals can be limited.  Physician choices in treatment of patients can be limited.  The amount of paperwork may be increased.  Treatment may be delayed because of preauthorization requirements.  Reimbursement is historically less than that through traditional insurance

15. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 15 Managed Care (cont’d)  Models of Managed Care  (HMO) Health Maintenance Organization An HMO is a plan that contracts with a medical center or group of physicians to provide preventative as well as acute care for the insured An HMO is a plan that contracts with a medical center or group of physicians to provide preventative as well as acute care for the insured HMOs are state-licensed health plans that are regulated by HMO laws HMOs are state-licensed health plans that are regulated by HMO laws Always require referrals to specialists, precertification, and preauthorization for hospital admissions, outpatient procedures and treatments Always require referrals to specialists, precertification, and preauthorization for hospital admissions, outpatient procedures and treatments HMO providers receive payment in various structures but two most common provider’s payment structures are capitation and fee for service HMO providers receive payment in various structures but two most common provider’s payment structures are capitation and fee for service

16. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 16  Models of Managed Care  (PPO) Preferred Provider Organizations An insurer representing its clients contracts with a group of providers who agree on a predetermined list of charges for all services including those for both normal and complex procedures An insurer representing its clients contracts with a group of providers who agree on a predetermined list of charges for all services including those for both normal and complex procedures Typically there are deductibles or coinsurance payments PPOs furnish their subscribers with a list of member-providers Typically there are deductibles or coinsurance payments PPOs furnish their subscribers with a list of member-providers Rates are quite often lower than those charged to non-PPO patients Rates are quite often lower than those charged to non-PPO patients Managed Care (cont’d)

17. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 17 Independent Health Insurers  Blue Cross/Blue Shield  America’s oldest and largest system of independent health insurers  offers incentive contracts to healthcare providers  Most BC/BS benefits are based on the Fee-for- Service or Usual, Customary, and Reasonable (UCR) schedules for payment

18. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 18 Utilization Management and Utilization Review  Utilization management  a form of patient care review by healthcare professionals who do not provide the care make certain that medical care services are medically necessary make certain that medical care services are medically necessary study how providers use medical care resources study how providers use medical care resources

19. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 19 Verification of Insurance Benefits  To verify benefits, the following steps should be taken  When a patient calls for an appointment, identify what type of insurance the patient has or what managed care organization the patient belongs to  When the patient arrives for the appointment, photocopy both sides of the patient’s ID card  Contact the insurance carrier to verify that the patient is eligible for benefits, and determine the basic benefits, exclusions or non-covered services, and if preauthorization is required for referrals to specialists or for specific types of procedures and services

20. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 20 Verification of Insurance Benefits (cont’d)  Obtain the name, title, and phone number of the person contacted  Document the information collected in the patient’s medical record and on a Verification of Benefits form  Give the patient a letter to read and sign, outlining the plan requirements and possible restrictions or non-covered items  When referrals are required, explain the procedure to the patient so it is understood that without the referral, it is the patient’s responsibility to pay for the physician’s services  Collect any copayments or deductibles

21. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 21 Precertification and Preauthorization  Many insurance companies require precertification or preauthorization, usually within 24 hours, when a patient is going to be hospitalized or undergo certain procedures  Most managed care systems require preauthorization for a patient to be referred to a specialist or even for certain laboratory tests or other procedures  Insurance claims for payment will be denied if proper authorization is not obtained, so it is important the medical assistant obtains accurate information.

22. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 22 Precertification and Preauthorization (cont’d)  Information that should be obtained and recorded on the preauthorization form before the contact with the insurance carrier is made  Patient name, address, phone number and identification number(s)  Provider name, address, phone number, and provider identification number (PIN)  Plan name, address, and contact person  Telephone number (or numbers) of contact person and fax number  Preliminary diagnosis  Planned surgery, diagnostic test or reason for referring patient to a specialist  Name, address, phone number of facility or specialist  Copayment amount or deductible  Hospital benefits for inpatient and outpatient surgery  Participating hospitals, radiology service providers, laboratories, and physicians

23. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 23 Fee Schedules  The healthcare practitioner must place an estimate on the value of these three services  time  judgment (expertise)  services

24. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 24 Fee Schedules  Resource-Based Relative Value Scale consists of three parts  Physician work  Charge-based professional liability expenses  Charge-based overhead

25. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 25 Deductibles and Coinsurance  Many types of health insurance plans require a deductible and coinsurance amount that the patient must pay out of pocket  typically there is an annual deductible amount the patient must pay before the plan pays anything  members usually must also pay a percentage of each charge, which is called coinsurance

26. Copyright © 2011, 2007, 2004 by Saunders, an imprint of Elsevier Inc. All rights reserved. 26 The Federal Register  The Federal Register is the official daily publication for rules, proposed rules, and notices of federal agencies and organizations, as well as Executive Orders and other presidential documents  The system was established to regulate complex social and economic issues  Medical assistants can use the Federal Register for researching rules and regulations governing health insurance and coding