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Basics of Health Insurance

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1 Basics of Health Insurance
TEACH Lesson Plan Manual for Kinn’s The Medical Assistant: An Applied Learning Approach 12th edition Chapter 20 Basics of Health Insurance

2 Types of Health Insurance
Lesson 20.1 Types of Health Insurance Define, spell, and pronounce the terms listed in the vocabulary. Discuss the purpose of health insurance. Differentiate among the various types of insurance policies.

3 The Purpose of Health Insurance
Help individuals and families offset costs of medical care Defined as contract for protection against financial losses resulting from illness or injury Provides payment of monetary benefits for covered sickness or injury, depending on policy purchased There are various types of health insurance, such as accident insurance, disability income insurance, hospitalization, medical expense insurance, and accidental death and dismemberment insurance. Most insurance policies do not cover "elective" procedures, such as certain cosmetic surgeries that are not considered medically necessary. More and more of today's health insurance policies cover "preventive" care.

4 Impact of Insurance Billing on the Medical Office
Nearly all of physician’s income comes from insurance payments received Regular expenses, such as rent, salaries, medical and office supplies, equipment, and so on, depend on practice’s cash flow Proper and timely filing of insurance claims to meet financial needs of medical office This is the most important job function of the coder/biller.

5 Cycle of Health Insurance
Insured or policyholder pays a set amount called a premium A premium is periodic payment of a specific sum of money to an insurance company for which insurer agrees to provide certain benefits Treatment is provided by physician or other provider in a doctor’s office, emergency room, or hospital, and fee is paid by insurance company when medical necessity and covered benefits are met Information that follows describes common types of insurance coverage and insurance carriers, the steps for obtaining insurance coverage information, and some of the terminology associated with obtaining insurance coverage and insurance billing.

6 Tasks Related to Cycle of Health Insurance
Obtain demographic, employment, and insurance data from patient and insured Verify patient’s eligibility for insurance payment by insurance carrier Perform diagnostic and procedural coding and review encounter form or charge ticket for completeness once patient has been seen by provider Verify the patient's eligibility for insurance payment by the insurance carrier or carriers, in addition to the benefits available and exclusions, and determining whether special authorizations are needed to refer the patient to specialists or for the performance of certain services or procedures (e.g., surgery or diagnostic tests).

7 Tasks Related to Cycle of Health Insurance, cont’d
Calculate insurance deductibles and co-insurance amounts and provide patient with statement showing out-of-pocket amount owed Obtain preauthorization for referral of patient to a specialist or for special services or procedures that require advance permission Complete insurance claim form and submit to insurance company for reimbursement for services and procedures performed

8 Tasks Related to Cycle of Health Insurance, cont’d
Post payments and adjustments on patient ledger or account and examine explanation of benefits (EOB), explanation of Medicare benefits (EOMB), or remittance advice (RA) from insurance company Adjust account to reflect an allowable amount, which is either written off (adjusted) or passed on to patient for payment, and also any courtesy or professional adjustment Allowed charges are also called allowable amounts.

9 Tasks Related to Cycle of Health Insurance, cont’d
Bill patient for outstanding balance or complete secondary insurance claim form and submit it to insurance company with a copy of EOB showing payment from primary insurance carrier Follow up on any rejected or unpaid claims; any requests from insurance carrier for more information about specific claims answered as soon as possible Meet timely filing requirements of medical office’s participating insurance carriers Failure to meet timely filing requirements results in zero payment from the insurance company and inability to bill the patient for the nonpayable amount.

10 Determining Primary and Secondary Coverage
When patient is the insured, patient becomes the guarantor, and patient’s insurance is primary If patient also is covered by another policy, that policy becomes secondary insurance Only exception to is when patient is not insurance policy holder, such as when a child is insured by each parent Apply the birthday rule; that is the insurance plan of the policyholder whose birthday comes first in the calendar year (month and day, not year) becomes the primary insurance.

11 Cost of Coverage Most insurance carriers do not reimburse full amount for services and procedures rendered Carrier is an insurance company or third party that pays for medical care The insured, or beneficiary, in most instances is required to pay certain out-of-pocket expenses Out-of-pocket expenses include deductibles, co-payment or co-insurance charges, and costs for noncovered services.

12 Cost of Coverage: Terms
Deductible is amount policyholder agrees to pay per claim or per accident toward total amount of insured loss before insurance company begins payment of benefits Normally ranges from $100 to $500 Under most circumstances deductible must be paid only one time per calendar year A deductible amount is stated in the insurance contract. Some policies have a deductible per occurrence.

13 Cost of Coverage, cont’d
Always verify effective date on patient’s insurance card Verify eligibility, benefits, and exclusions with insurance company before patient’s visit Verification done by phone, fax, or Web site An excellent policy for any provider's office is to call the insurance company to verify insurance eligibility, benefits, and exclusions before the patient’s appointment or encounter with the provider. Most major insurance carriers have a Web site dedicated to verifying eligibility and claims payments.

14 Co-Insurance Co-insurance is a policy provision common in medical insurance Policy holder and insurance company share cost of covered losses in specified ratio Co-payment is type of co-insurance collected at time of service Most managed care plans require co-payment A specified ration would be like 80/20 (i.e., 80% of services are paid by the insurance carrier and 20% by the insured). Co-payments usually range from $10 to $25 for office visits but can vary according to the services rendered. Any services or procedures that are not covered under the terms of an insurance policy are the responsibility of the policyholder or insured.

15 Types of Health Insurance
Health insurance is available to most in this country through group or individual plans Types of health insurance available include group insurance, individual insurance, government-sponsored insurance, self-insured plans, and medical savings accounts Many people are covered by government plans or entitlement programs Government plans (state or federal) include Medicare, Medicaid, TRICARE, Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA), and workers’ compensation A recent survey revealed that more than 40 million Americans have no regular source for obtaining medical care, and lack of health insurance was a major obstacle.

16 Group Policies Insurance written under a group policy covers a number of people under a single master contract that is issued to employer or to an association with which they are affiliated Group coverage usually provides greater benefits at lower premiums because of large pool of people from whom premiums are collected Physical examinations are normally not required, and preexisting conditions are often waived A group policy is subsidized by employers. Often the employee shares the cost of coverage through payroll deductions.

17 Individual Policies Individuals who do not qualify for inclusion in a group or government-sponsored plan may apply to companies that offer individual policies Applicant required to fill out extended health questionnaire and undergo a physical examination before acceptance With personal insurance there is a risk that coverage may be denied, and premiums are almost always higher with fewer benefits Individual policies are often called personal insurance. Individuals may have to accept a rider, or limitation, on benefits the policy will cover.

18 Government Plans Patient who is 65 or older is covered by Part A and Part B of Medicare Medically indigent patient may be eligible for Medicaid, with or without Medicare Dependents of military personnel covered by TRICARE Surviving spouses and dependent children of veterans covered by CHAMPVA Some are covered for loss of wages and cost of care through worker’s compensation insurance TRICARE was formerly the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS). Surviving spouses and dependent children of veterans who died as a result of service-related disabilities are covered by CHAMPVA.

19 TRICARE Public Law 569 passed in 1956 authorizing dependents of military personnel to receive treatment from civilian physicians at expense of government The program administering these benefits became CHAMPUS, which today is known as TRICARE.

20 Medicaid Medicaid started in 1965 to help medically indigent
Cost sharing between federal and state government to provide medical care for those meeting specific eligibility criteria Title XIX of Public Law 89-97, under the Social Security Amendments of 1965, provided for agreements involving cost sharing between federal and state governments to provide medical care for people meeting specific eligibility criteria.

21 Medicare Medicare started in 1965 and is a federal health insurance program for people age 65 and over; is part of Social Security Act Also covers some under 65 with disabilities or end-stage renal disease (ESRD) The HCFA now is known as the Centers for Medicare and Medicaid Services (CMS).

22 Workers’ Compensation
All states have passed workers’ compensation laws to protect wage earners State laws differ as to coverage All state legislatures have passed workers' compensation laws to protect wage earners against the loss of wages and the cost of medical care resulting from occupational accident or disease, as long as the employee was not proven negligent.

23 Self-Insured Plans Many large companies or organizations have a large enough employee base that they choose to fund their own insurance program, called a self-insured or self-funded plan Self-funded plan is not insurance by true definition; employer pays employee healthcare costs from firm’s own funds Tend to work best for companies large enough to offer lower rates, better coverage, and pay large claims for expensive medical services Often a third-party administrator (TPA) or fiscal intermediary handles paperwork and claim payments for a self-insured group.

24 Self-Funded Healthcare
Self-funded healthcare is a self-insurance arrangement where employer provides health or disability benefits to employees with its own funds Different from fully insured plans, in which employer contracts an insurance company to cover employees and dependents Employer assumes direct risk for payment of claims for benefits Terms of eligibility and coverage are set forth in a plan document Unless exempted, such plans create rights and obligations under the Employee Retirement Income Security Act of 1974 (ERISA).

25 Medical Savings Account
Type of self-insurance for small companies, self-insured, or uninsured Can purchase health insurance policies and make tax-free deposits to a medical savings account (MSA) Use MSA money to pay small healthcare expenses, leaving catastrophic expenses to be paid by high-deductible insurance policy Money remaining in MSA at year’s end earns tax-free interest People can also elect to use MSA money to pay their health insurance premiums during a job change, which should reduce job lock, a situation in which people do not change jobs for fear of losing their health insurance.

26 Medical Savings Account, cont’d
Generally associated with self-employed individuals Withdrawals tax-free if used to pay for qualified medical expenses MSA must be coupled with a high-deductible health plan (HDHP) MSA funds can cover expenses related to most forms of healthcare, disability, dental care, vision care, and long-term care Withdrawals from MSA go toward paying the deductible expenses in a given year. Once the plan deductible is met in a given year, the HDHP pays any remaining covered medical expenses in that year. MSAs have been superseded by health savings accounts (HSAs), which were established as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

27 Lesson 20.2 Insurance Benefits
Explain the numerous classifications of insurance benefits available. Explain how insurance benefits are determined.

28 Types of Insurance Benefits
An insurance package is tailored to the needs of each individual or group policy, and the combinations of benefits are limitless.

29 Types of Insurance Benefits, cont’d
This is also called "cafeteria style," in which the employers can choose the benefits they want for their employees.

30 Hospitalization Hospital coverage pays cost of all or part of:
Hospital room and board Hospital services, such as having surgery Hospital policies usually set maximum amount payable per day and maximum days of care Hospital insurance policies frequently set a maximum amount payable per day and a maximum number of days of hospital care, per the diagnosis-related group (DRG). Some insurance companies require that the hospital be accredited or licensed.

31 Surgical Surgical coverage pays all or part of a surgeon’s fee
Some plans also pay for an assistant surgeon Surgery includes any incision or excision, removal of foreign bodies, aspiration, suturing, and reduction of fractures Insurer frequently provides subscriber with surgical fee schedule that establishes amount insurer will pay for commonly performed procedures Surgery may be performed in a hospital, physician's office, or elsewhere.

32 Basic Medical Pays all or part of physician’s fee for nonsurgical services, including hospital, home, and office visits Patient usually pays deductible and a co-payment or co-insurance payment each time May include provision for diagnostic lab, radiology, and pathology fees Some medical plans do not cover routine physical examinations or preventive health checkups, such as mammograms or prostate examinations, if the patient does not have a specific complaint or illness.

33 Major Medical Provides protection against large medical bills resulting from catastrophic or prolonged illnesses Covers most serious medical expenses up to a maximum amount, usually after a deductible and co-insurance have been met Major medical insurance was formerly called catastrophic coverage.

34 Disability (Loss of Income) Protection
Insures beneficiary’s earned income against risk that a disability will make working uncomfortable, painful, or impossible Encompasses paid sick leave, short-term and long-term disability benefits Many policies do not start payment until after a specified number of days or until a certain number of sick leave days have been used Payment is made directly to individual, intended to replace lost income Weekly or monthly cash benefits are provided to employed policyholders who become unable to work as a result of an accident or illness.

35 Dental Care Dental coverage included in many fringe benefit packages
Programs offer a variety of options of either fee-for-service or managed care plans Some policies are based on a co-payment and incentive program Dental benefits programs offer a variety of options in the form of either fee-for-service or managed care plans that reimburse a portion of a patient's dental expenses and may exclude certain treatments.

36 Vision Care May include reimbursement for all or a percentage of cost for refraction, lenses, and frames Some vision plans also pay for corrective procedures, such as laser eye surgery.

37 Medicare Supplement A supplemental health insurance policy to help defray medical costs not covered or only partially covered by Medicare Medicare supplements that cover Medicare recipients’ out-of-pocket expenses, called Medigap policies Federal regulations now require Medicare supplement contracts to be uniform in benefits to avoid confusion for the purchaser.

38 Special Risk Insurance
Special risk insurance protects a person in event of types of accident or for certain diseases Usually a maximum benefit Special risk insurance protects a person in the event of a certain type of accident, such as an automobile or airplane crash, or for certain diseases, such as tuberculosis or cancer.

39 Liability Insurance Liability insurance covers losses to a third party caused by the insured Types include automobile, business, and homeowners’ policies Liability policies often include benefits for medical expenses resulting from traumatic injuries, lost wages, and sometimes pain and suffering 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.

40 Life Insurance Provides payment of specified amount on the insured’s death Sometimes provide monthly cash benefits if policyholder becomes permanently and totally disabled Sometimes proceeds from life insurance are used to meet expenses of insured person’s last illness Life insurance provides payment of a specified amount on the insured's death, either to his or her estate or to a designated beneficiary or, in the case of an endowment policy, to the policyholder at a specified date.

41 Long-Term Care Insurance
Covers a broad range of maintenance and health services for chronically ill, disabled, or mentally retarded individuals Services may be provided on an inpatient basis, on an outpatient basis, or at home Long-term care insurance is a relatively new type of insurance. The Health Insurance Portability and Accountability Act (HIPAA) of 1996 improved access to long-term care services and coverage.

42 How Benefits Are Determined
Indemnity schedules Service benefit plans Resource-based relative value scale (RBRVS) Determination of the usual, customary, and reasonable (UCR) fees Relative value scale (RVS) Insurance benefits may be determined and paid in one of several ways.

43 Indemnity Schedules More flexible yet more costly option
Traditional health insurance plans that pay for all or a share of cost of covered services, regardless of which provider is used Often called fee-for-service plans In exchange for premiums members pay, indemnity plan reimburses members or provider when claims are filed Also known as major medical, these plans preceded the advent of managed care. Policyholders of indemnity plans and their dependents choose when and where to get healthcare services.

44 Service Benefit Plans Insuring company agrees to pay for certain surgical or medical services without additional cost to person insured No set fee schedule Surgery with complications would warrant a higher fee than uncomplicated procedure Premiums are sometimes higher for this type of coverage, but often payments are larger Consider this example: the service benefit plan states that it will pay $900 for a cholecystectomy. If Dr. Jones charges $1,500 for this procedure, he has the right either to accept the $900 as payment in full and write off the balance due, or to request payment of the remaining $600 balance from the patient or the guarantor.

45 Resource-Based Relative Value Scale
Physician fee schedule amounts vary, depending on facility or nonfacility Amount of resources required to perform a service is determined through use of relative value units (RVUs), which CMS assigns to Current Procedural Terminology (CPT) codes System was implemented to standardize payment while providing an adjustment for overhead costs in different geographic areas Takes into account these elements: physician expense, malpractice, geographic practice cost index, and conversion factor The CMS annually publishes physician fee schedule information on its Web site, in addition to the formula for calculating physician fee schedule payment amounts.

46 Usual, Customary, and Reasonable Fee
Charges for a specific service are compared with a database showing: Charges to other patients for same service by same type of physician Charges to patients by other physicians performing same or similar services in same geographic area Insurance company determines whether provider’s charge is UCR, and any amount over allowed charge is not paid Sometimes UCR is used synonymously with fee allowance schedule when that schedule is set relatively high.

47 Managed Care Plans and Major Third-Party Payers
Lesson 20.3 Managed Care Plans and Major Third-Party Payers Differentiate among the different types of managed care options. List and discuss other major third-party payers.

48 Health Insurance Providers
Include managed care plans, Blue Cross/Blue Shield (BC/BS), commercial insurance companies, and federal and state government programs, including Medicare, Medicaid, TRICARE, workers’ compensation, and disability insurance

49 Managed Care Umbrella term for all healthcare plans that provide healthcare in return for preset scheduled payments and coordinated care through a defined network of physicians and hospitals Health maintenance organizations (HMOs) provide comprehensive healthcare to an enrolled group for a fixed periodic payment Some of these plans pay by capitation, which means that the provider is paid a fixed amount for each individual enrolled in the plan during a specified period (usually 1 year), regardless of the expenses or number of services provided to the patient.

50 Managed Care, cont’d Be familiar with individual managed care contract benefits and with procedures and processes for filing insurance claims Review managed care plan’s specific handbook, contracts, and required forms This familiarizes the medical assistant with that plan's benefits and preauthorization and referral requirements, which enables him or her to discuss those requirements with the patient and to prepare the required forms and insurance claims properly. Procedure 20-1 (p. 359) describes the process for properly applying managed care policies and procedures.

51 Managed Care Policies and Procedures
Advantages of managed care include the following: Healthcare costs are usually contained Established fee schedules are used 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 Managed care has been met with considerable controversy, and it has pros and cons that must be considered.

52 Disadvantages of Managed Care
Access to specialized care and referrals can be limited Physicians’ choices in the treatment of patients can be limited More paperwork may be required Treatment may be delayed because of preauthorization requirements Reimbursement historically is less than with traditional insurance It is important that medical assistants be well versed in the various types of managed care plans to fully understand their impact on healthcare costs.

53 Comparison of HMO Models
HMO, Health maintenance organization; IPA, Independent practice association; PCP, primary care provider. The two basic models of managed care are the HMO and the preferred provider organization (PPO). The HMO can be structured as an IPA, a staff model, or a group model or as an exclusive provider organization (EPO).

54 Health Maintenance Organization
Plan that contracts with a medical center or group of physicians to provide both preventive and acute care for insured Regulated by HMO laws, which require them to include preventive care as part of their benefits package Always require referrals to specialists, precertification, and preauthorization for hospital admissions, outpatient procedures, and treatments An HMO member is typically enrolled for a specified period (month, quarter, or year). If the HMO is a capitation plan, it receives a "per member per month" (pmpm) fee for each enrollee.

55 Health Maintenance Organization, cont’d
Providers receive payment according to various structures: Capitation is payment in advance to provider by HMO for contracted group of patients Fees charged for services to group members may be billed directly to IPA rather than to patient Most common HMO models are IPA, staff model, group model, and EPO In capitation, if the physician provides services that cost less than the capitation amount, the physician makes a profit. Conversely, if the physician's services cost more than the capitation amount, the physician takes a loss.

56 Independent Practice Association
IPA is independent group of physicians and other healthcare providers under contract to provide services to members of different HMOs, in addition to other insurance plans Usually at a fixed fee per patient Payments to providers by an IPA can be structured either as a capitation or fee for service The physicians in the IPA, who have separately owned practices, formally organize a physician association and continue to practice in their own offices. A physician may be contracted with several IPAs.

57 Staff Model A staff model HMO hires physicians and pays them a salary
HMO owns the network Medical care is given or authorized by patient’s PCP No capitation or fee-for-service payment structure is used with this model The physicians may receive bonuses biannually or annually based on the number of patients treated and/or the cost savings.

58 Group Model Group model HMO contracts with a multispecialty medical group to deliver care to its members HMO reimburses physicians’ group, which is responsible for reimbursing physician members and contracted healthcare facilities Multispecialty group may organize a physician association; group members typically practice together in one facility This arrangement is similar to an IPA in that the multispecialty group may organize a physician association. The payment structure to the providers can be either capitation or fee for service.

59 Exclusive Provider Organization
EPO combines features of an HMO and a PPO “Exclusive” because providers agree not to contract with any other plan Members must choose medical care from network providers with certain exceptions for emergency or out-of-area services Regulated under insurance statutes, not federal and state HMO regulations An EPO combines features of an HMO (e.g., an enrolled group or population, primary care providers, and an authorization system) and a PPO (e.g., flexible benefit design and fee-for-service payments).

60 Preferred Provider Organizations
Managed care network of physicians and hospitals joined to contract with insurance companies, employers, or other organizations to provide healthcare to subscribers for discounted fee Preserves fee-for-service concept that many physicians prefer No capitation or prepaid care Sometimes called a participating provider organization. An insurer representing its clients contracts with a group of providers; the providers agree on a predetermined list of charges for all services, including those for both normal and complex procedures.

61 Preferred Provider Organizations, cont’d
Typically patient pays deductibles or co-insurance payments of 20% to 25% of predetermined charge and insurer pays balance Physician treats patient and bills PPO Furnish subscribers with list of member-providers to get PPO rates Rates often lower than those charged to non-PPO patients A provider who joins a PPO does not need to alter the manner of providing care and continues to treat and bill the patients on a fee-for-service basis. Technically PPOs are not HMOs, but they do have more patient care management than regular indemnity insurance plans. If a patient goes to a physician who is not in the PPO network, the out-of-pocket cost is higher.

62 Blue Cross/Blue Shield
America’s oldest and largest system of independent health insurers Offers incentive contracts to healthcare providers Participating providers agree to write off difference between amount charged by provider and approved fee established by insurer Agree to bill patient only for deductible and co-pay/co-insurance amounts BC/BS agrees to reimburse providers directly and in a shorter time It began in 1929 when an executive at Baylor University in Dallas came up with a plan for teachers to budget for their future hospital bills. If the provider chooses to sign a member contract, he or she becomes a participating provider (PAR).

63 Blue Cross/Blue Shield Identification Card
BC/BS identification (ID) cards carry the subscriber's name and ID number with a three-character alphabetic prefix (or a single alphabetic prefix if it is a government policy). The letters are an important part of the number and must be included on the claim form.

64 Medicaid All states and District of Columbia have Medicaid programs, but programs vary widely Person eligible for Medicaid in one state may not qualify in another; services may differ Federal government provides basic funding to state, after which states individually elect whether to provide funds for extension of benefits The state determines the type and extent of medical care that will be covered within the minimum requirements established by the federal government. Some local areas and states are developing HMOs that serve only patients who qualify for Medicaid.

65 Medicaid, cont’d Physician may accept or decline to treat Medicaid patients Physician who does accept Medicaid patients automatically agrees to accept Medicaid payment as payment in full Patient cannot be billed for difference between Medicaid fee and physician’s normal fee Patient can be billed for any services not covered by Medicaid Eligibility for benefits is determined by the respective states.

66 Examples of Those Who Qualify for Benefits
Individuals who are medically needy Recipients of Aid to Families with Dependent Children (AFDC) Individuals who receive Supplemental Security Income (SSI) Individuals who receive certain types of federal and state aid Individuals who are qualified Medicare beneficiaries (QMBs) Individuals in institutions or receiving long-term care in nursing and intermediate-care facilities Individuals who are qualified Medicare beneficiaries (QMBs)—Medicaid pays for Medicare Part B premiums, deductibles, and co-insurance for qualified low-income elderly. Depending on the state in which Medicaid is administered, Medicaid recipients are identified with a Benefits ID Card (BIC), a monthly sticker, a label, or a letter showing proof of eligibility.

67 Medicaid Benefits ID Card
A BIC looks like a white credit card and is verified by a point of service (POS) device similar to a credit or debit card verification machine. Verify coverage each time the patient comes into the office, regardless of the type of ID the recipient is issued.

68 Medicare Medicare is a federal health insurance program for the following: People age 65 years or older People who are permanently disabled or blind People receiving dialysis for permanent kidney failure or who have undergone kidney transplantation Medicare was established July 1, 1966, under the Social Security Administration as a national health insurance program for those age 65 or older. Before Medicare was created, only 50% of the nation's elderly had any health insurance. The scope of coverage increased in 1973 to include disabled persons younger than age 65 receiving Social Security benefits, railroad retirees, and civil service retirees.

69 Medicare Part A Part A is hospital insurance covering:
Inpatient hospital care Skilled nursing facilities Home healthcare Hospice services Financed with special contributions deducted from employed individuals’ salaries, with matching contributions from employers These sums are collected, along with regular Social Security contributions, from wages and self-employment income earned during a person's working years. A hospitalized patient on Medicare must pay a deductible toward hospital expenses. Typically the deductible amount changes annually by congressional enactment.

70 Medicare Part B Part B is medical insurance, requires a monthly premium, and covers: Outpatient hospital care Durable medical equipment Physicians’ services Other medical services Those eligible for Part A are also eligible for Part B, but they must apply for this coverage and pay a monthly premium. Some federal employees and former federal employees who are not eligible for Social Security benefits and Part A may enroll in Part B. Certain disabled people younger than age 65 are also eligible.

71 Medicare Part B, cont’d Patient with Medicare Part B must meet annual deductible before benefits become available After which Medicare pays 80% of covered, or allowed, benefits Physician usually accepts assignment of benefits for Medicare patients and is paid directly Physician must accept payment that Medicare allows and bills patient only for 20% If physician does not accept assignment, patient must pay entire bill and receives reimbursement check directly from Medicare Many Medicare enrollees also carry private supplemental insurance (Medigap policy) that pays the deductible and the 20% co-payment not covered by Medicare.

72 Medicare Health Identification Card
Medicare health insurance cards typically show nine numbers with a suffix of one or two alphabetic characters that denote the patient's status, such as wage earner (A), spouse of a wage earner (B), widow (D), or other designations. (From Fordney MT: Insurance handbook for the medical office, ed 12, St Louis, 2012, WB Saunders.)

73 Medicare Advantage (formerly Medicare + Choice)
Medicare Advantage offers expanded benefits for a fee through private health insurance programs, such as HMOs and PPOs that have contracts with Medicare Patients must have a referral from their PCP before seeking treatment from another entity The Medicare Advantage program is commonly referred to as Part C, although Medicare does not label it as such.

74 Medicare Part D Part D offers a prescription drug plan at a reduced cost All Medicare recipients eligible for Part D, hopefully reducing prescription drug costs Private companies provide the Medicare prescription drug plans Beneficiaries choose drug plan and pay monthly premium In 2006, drug and prescription benefits were added to Medicare, creating Part D. As with other insurance, beneficiaries who decide not to enroll in a drug plan when they are first eligible may pay a penalty if they choose to join later.

75 TRICARE Comprehensive healthcare program for family members of active duty personnel, military retirees and their eligible family members under age of 65, and survivors of all uniformed services Managed by military in partnership with civilian hospitals and clinics All military hospitals and clinics are part of TRICARE program and offer high-quality healthcare at low costs to plan users Before January 1994, this program was known as CHAMPUS, created in 1966 under Public Law

76 TRICARE Eligibility Individual must be a TRICARE or CHAMPVA recipient
Entitled to retired, retainer, or equivalent pay Must be listed in Defense Department’s Defense Enrollment Eligible Reporting System (DEERS) Also available for a TRICARE-eligible spouse under age 65 and dependent, unmarried children under age 21, or age 23 if in college full-time Eligible spouses and children of active duty service members may enroll, as may TRICARE-eligible widows, widowers, and certain former spouses (those who have not remarried).

77 Types of TRICARE Plans TRICARE Prime: Department of Defense’s managed care plan, similar to a civilian HMO TRICARE Extra: preferred provider network plan TRICARE Standard: traditional fee-for-service plan (formerly CHAMPUS) More information about TRICARE eligibility requirements and the benefits of the three plans is available on the Evolve Web site.

78 CHAMPVA Health benefits program similar to TRICARE for spouses and dependent children of veterans suffering total, permanent, service-connected disabilities and for surviving spouses and dependent children of veterans who died as result of service-related disabilities Department of Veterans Affairs (VA) shares with eligible beneficiaries cost of certain healthcare services and supplies After eligibility for CHAMPVA has been determined and ID cards issued, the insured may obtain covered services and supplies from any provider who is appropriately licensed or certified to perform the services offered. Exceptions include certain mental health categories and freestanding ambulatory surgical centers.

79 Workers’ Compensation
Federal and all state legislatures require employers to maintain workers’ compensation coverage for work-related illnesses and injuries The law also protects wage earners against the loss of wages and the cost of medical care resulting from occupational accident or disease No state’s workers’ compensation laws cover all employees; check with patient’s employer to verify insurance coverage State laws differ as to the classes of employees included and the benefits provided. If a patient says that he or she was injured in the workplace or is suffering from a work-associated illness, check with the patient's employer to verify the insurance coverage.

80 Workers’ Compensation, cont’d
Compensation benefits include medical care benefits, weekly income replacement benefits for temporary disability, permanent disability settlements, and survivor benefits when applicable Provider of service accepts workers’ compensation payment as payment in full and does not bill patient Employee is obligated to promptly notify employer, who must then notify insurance company and refer employee to medical care Time limitations are set for the prompt reporting of workers' compensation cases. The purpose of workers compensation laws is to provide prompt medical care to an injured or ill worker so that the person may be restored to health and return to full earning capacity in as short a time as possible.

81 Disability Programs Health insurance that provides periodic payments to an individual to replace income when a sickness, injury, or disability that is not a work-related condition results in insured being unable to work A disability insurance policy can be obtained through employer-sponsored and/or government-funded programs, or private policies can be purchased through a commercial insurance company.

82 Eligibility Procedures
Lesson 20.4 Eligibility Procedures Explain the procedure for verifying insurance benefits. Perform eligibility and verification of benefits procedures. Explain how to make managed care referrals and obtain precertifications. Perform a preauthorization procedure. Discuss the different types of fee schedules. Demonstrate how insurance benefits are determined by calculating deductible and co-insurance payments.

83 Commercial Insurance Many people are covered by health insurance issued by private (commercial) insurance companies Physicians and medical societies control neither premiums paid nor benefits received from such policies Payment is normally made to subscriber unless subscriber or insured has authorized that payment be made directly to physician Some examples of private (commercial) insurance companies include Aetna, Connecticut General, Metropolitan, and Prudential.

84 Understanding Insurance Plan Requirements
Be familiar with handling of other tasks associated with an individual insurance plan or policy Review carrier’s handbook, contracts, and required forms to familiarize themselves with plan’s benefits and preauthorization and referral requirements Prepare required forms and insurance claims properly It is important for one to be familiar with the particular procedures and processes for filing insurance claims set by individual insurance carriers, third-party payers, and government programs. Procedure 20-2 (p. 364) describes the process for properly applying third-party payer policies and procedures.

85 Utilization Management/ Utilization Review
A form of patient care review by objective professionals Component of managed care to control costs Utilization review committee reviews cases to ensure services provided were medically necessary and see how providers use medical care resources Also reviews physician referrals and emergency/urgent care cases The specificity of diagnosis coding is critical. For referrals, the committee reviews the referral and either approves or denies it, so it is important to submit exact documentation and precise statements.

86 Verification of Insurance Benefits
Verifying benefits is necessary to ensure patient is covered by insurance and to determine what benefits will be paid for routine and special procedures and services Verification protects physician and patient against unexpected medical care costs It is important to verify insurance benefits before providing services to patients. Procedure 20-3 on p. 366 describes how to perform a verification of eligibility and benefits.

87 Verification of Insurance Benefits Form
An example of a Verification of Insurance Benefits form is shown.

88 Steps for Verification of Benefits
When patient calls for appointment, identify type of insurance or managed care organization to which patient belongs When patient arrives for appointment, photocopy both sides of patient’s ID card Contact insurance carrier to verify patient is eligible for benefits and determine basic benefits, exclusions or noncovered services; also find out whether preauthorization is required for specific types of procedures and services Obtain name, title, and phone number of person contacted Photocopying of the patient's ID card is done to ensure the information obtained is correct, and because co-payments or amounts to be paid may appear on the back for hospital, office, and emergency department visits.

89 Steps for Verification of Benefits, cont’d
Document information in patient’s medical record and on a verification of benefits form Give patient a letter to read and sign outlining his or her insurance plan’s requirements and possible restrictions or noncovered items When referrals are required, explain procedure to patient Collect any co-payments or deductibles Make sure he or she understands that without the referral, the patient is responsible for paying for the physician's services.

90 Sample Patient Responsibility Notification
This letter can also outline the patient's responsibility in helping with this process.

91 Precertification and Preauthorization
Many insurance companies require precertification or preauthorization if a patient is to be hospitalized or undergo certain procedures Most managed care systems require preauthorization for patient to be referred to specialist or even for certain laboratory tests or other procedures Insurance claims for payment will be denied if proper authorization is not obtained Many insurance companies require precertification or preauthorization, usually within 24 hours.

92 Precertification and Preauthorization, cont’d
For new patients, collect type of insurance and demographic information of patient and the insured For an HMO, check plan’s contract for precertification or preauthorization requirements Document information in writing or EMR before any services are given Typically, only HMOs require preauthorization (precertification); however, it is wise to check on the need for preauthorization for all insurance carriers during the verification of eligibility and benefits.

93 Sample Preauthorization and/or Referral Form
This information should be obtained and recorded before the insurance carrier is contacted.

94 Precertification and Preauthorization, cont’d
Fax form to insurance company In emergency, obtain authorization by phone and fax form as soon as possible Form faxed back with authorization number and other vital information PCP or “gatekeeper” generally responsible for obtaining authorization Obtaining preauthorization for referrals or certain procedures and services is required. Typically, the PCP, or "gatekeeper," is responsible for obtaining the authorization.

95 Referrals When a patient is referred to specialist by PCP
Referral form must be completed in entirety for approval or denial Three types of referral: Regular Urgent STAT Approval or denial of a referral can take anywhere from a few minutes to a few days. Procedure 20-4 on p. 369 describes how to perform a preauthorization and a referral procedure.

96 Three Types of Referrals
Regular referral: usually takes 3 to 10 days for review; used when PCP thinks patient must see specialist for further treatment Urgent referral: usually takes 24 hours for review; used when urgent, but not life-threatening situation occurs STAT referral: can be approved immediately by phone; used for emergencies Never tell the patient the referral has been approved unless you have a hard copy of the authorization. A referral becomes an authorization after it is reviewed by utilization management and/or the medical director and has been approved. The patient must bring the authorization to the specialist's office on the day the services will be provided.

97 Provide Information to Specialist and PCP
Authorization code Date on which referral request was received by utilization review department Date on which referral was approved and its expiration date Diagnosis code An authorization is typically good for 60 days. If the authorization expires and services have not been provided, an extension may be requested. If services are provided after the expiration date, the claim will be denied.

98 Provide Information to Specialist and PCP, cont’d
Name, address, and telephone number of contracted specialist Comments section: this is most critical area of a referral, because this area designates services that have been approved Sometimes the PCP refers the patient to a specialist but does not receive approval for that specialist and must get approval for another. Always be sure that any specialist to whom the physician refers a patient is contracted with the same managed care plan as the PCP.

99 Denial of a Referral PCP’s office notified if referral is denied because of insufficient information or lack of medical necessity When PCP’s office provides lacking information, referral is reviewed again Some medical groups notify both the PCP and the patient.

100 Self-Referral To be more competitive, some insurance companies allow patient to self-refer Authorization not required to see specialist Procedure for obtaining a self-referral is essentially the same as for a provider of service Authorization form is completed by patient or with assistance of referred provider and faxed to insurance company Many plans for senior citizens now have a self-referral and a co-payment, in addition to some other insurance coverage.

101 Fee Schedules Healthcare practitioner must place a value on three commodities: time, judgment (expertise), services Fees differ for each office based on type of practice and needs of facility The physician or physicians normally set the fees for procedures and services.

102 Third-Party Payers and Fee Schedules
Government and managed healthcare organizations influenced costs by establishing allowable charges (maximum amount paid out for a procedure or service) When providers set a fee schedule, RBRVS and the lesser used RVS also affect charges RBRVS-based fee schedule adjust fees for amount of resources required for services Resources required determined through use of RVUs, assigned to CPT codes The CMS developed the first comprehensive RBRVS-based fee schedule, which was adopted by Medicare in 1992. The amount of resources required to perform a service is determined through the use of RVUs, which are assigned to the CPT codes developed by the AMA with an adjustment for overhead costs in different geographic areas. Since Medicare's introduction of RBRVS, most third-party payers have adopted similar approaches in developing their fees.

103 Resource-Based Relative Value Scale
RVRVS fee scale consists of three parts: Physician work Charge-based professional liability expenses Charge-based overhead The physician work component includes the degree of effort invested by a physician in a particular service or procedure and the time it consumed. The professional liability and overhead components are computed by the CMS.

104 Resource-Based Relative Value Scale, cont’d
RBRVS fee schedule designed to provide uniform payments, after adjustment Conversion factor is a single national number applied to all services, set by Congress Provider either writes off difference between RBRVS schedule and fee or passes on nonallowed portion of charge to guarantor for payment Contracts between the provider of service and the insurance payer vary greatly, depending on the insurance or third-party payer. It is important to know the contract terms for each different third-party payer and, upon receipt of payment, to examine the EOB from the carrier closely to ensure that all benefits have been reimbursed correctly.

105 Deductibles and Co-Insurance
Many plans require patient to pay out-of-pocket deductible and co-insurance Often have annual deductible amount patient must pay before plan pays anything Most indemnity plans have annual out-of-pocket limit on amount members pay for co-insurance payments Takes major expense out of medical bills and helps keep premium costs down

106 Calculation of Deductible and Co-Insurance
Column A shows that Mrs. Jones' total out-of-pocket expense is $1,000. She paid the $500 deductible, and 5% of $10,000, or an additional $500. The insurance company then paid the remaining balance of $9,000.

107 Calculation of Allowable Amount
Column B shows that the cardiac surgery in this instance cost $20,000. Mrs. Jones' total out-of-pocket expense remains $1,000; therefore, in this case the insurance company is responsible for payment of the balance of $19,000. Because her maximum out-of-pocket expense, according to the plan described, is $1,000, even though the charges were doubled, she still pays only the $1,000 total out-of-pocket expense.

108 Allowable Amounts Limit placed on amount that will be reimbursed for any procedure or service is called an allowable amount Amount can be all or part of a charge Examine EOB from insurance carrier closely; contracts vary Deductibles and co-insurance generally deducted from total charge for services rendered Allowable amounts are almost always deducted from an individual charge.

109 Calculating Deductible, Co-Insurance, and Allowable Amounts
Deductible and co-insurance are subtracted from total charge for services and procedures Sum becomes patient’s responsibility Can be billed to secondary insurance carrier if patient has one The steps for calculating deductible, co-insurance, and allowable amounts are presented in Procedure 20-5 (p. 372).

110 Closing Comments Responsibilities include keeping patient informed and answering questions as they arise Use good communication skills, patience, and tact when discussing third-party reimbursement issues with patients Written release must be given for medical information to insurance claims processing Understanding how insurance plans handle reimbursement of benefits is challenging both for patients and for medical assistants. If patients are well advised and comfortable with insurance facts before treatment begins, the medical experience will go more smoothly, and collection of fees not covered by the carrier will be easier.

111 Questions?


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