Billing and Financial Issues Jessica Tagerman, PharmD

Types of Insurance

What are the different payment options (payors) for drugs and dispensing services?

Payment for Drugs and Dispensing Services Consumers (Self-Pay) Private Insurance Public Payors

What does it mean to pay “out of pocket”?

Self-Pay Patients are responsible for 100% of the cost of the medication (which often includes a dispensing fee from the pharmacy) Patients can pay with: Cash Check Credit Debit

Private Insurance Includes 2 major forms: Pharmacy Benefit Manager: Indemnity Insurance Managed Care Insurance Pharmacy Benefit Manager: Organization that administers pharmacy benefits for private or public third-party payers.

Indemnity Insurance Reimburses you for your medical expenses after you pay out-of-pocket Patient can see any provider- no restrictions Offered by traditional insurers In comparison to managed care plans: Usually more out-of-pocket charges (i.e. deductibles and co-payments) Caps on amount of benefits you can receive in your lifetime More flexibility as to providers you are able to visit

Managed Care Involves an arrangement between the insurer and a selected network of healthcare providers 3 types of managed care plans: Health maintenance organizations (HMOs) Preferred Provider Organizations (PPOs) Point of Service Plans (POS) 2 types of managed care reimbursement: Capitation: Paying a fixed, prepaid fee per person to provide a range of health services (paid BEFORE the services are provided) Fee for service: A set fee is paid for each type of service that is performed and is paid at the time of service http://www.agencyinfo.net/iv/medical/types/indemnity-managed.htm

What is an HMO plan?

Managed Care- Health Maintenance Organizations Goal: Keep patients healthy! Proactive care vs. reactive Members pay a fixed monthly fee, regardless of how much medical care is needed Small co-pays Usually no deductibles Low premiums Must receive treatment from physicians within the HMO network; PCP directs all medical care for the provider Specialized providers require physician referrals Wide variety of medical services that are covered Office visits Hospitalization Surgery http://www.agencyinfo.net/iv/medical/types/indemnity-managed.htm

What is a PPO Plan?

Managed Care- Preferred Provider Organization Non-exclusive contract with network of providers Members may select a non-PPO provider, but will cost more than in-network provider Payment: Co-payment at time of service Deductibles Insurance pays a percentage of medical bills as opposed to a flat fee No referral is required for specialist services http://www.agencyinfo.net/iv/medical/types/indemnity-managed.htm

What is a POS plan?

Managed Care- Point of Service Plans A hybrid of both HMO and PPO plans HMO Characteristics Must designate a PCP PCP services not subject to a deductible and preventative care is usually included PPO Characteristics May receive care from out-of-network providers Higher out-of-pocket costs: may be responsible for co-payments, coinsurance and a deductible http://www.agencyinfo.net/iv/medical/types/indemnity-managed.htm

Private Insurance- Other Medication Assistance Programs Programs established by drug manufacturers and other organizations to qualified patients who are unable to afford medications Coupons Incentivizes physicians to distribute to patients with a new prescription from specific drug products Can co-bill with your regular insurance, so co-pay will be lower

What are some examples of federal funded healthcare programs?

Federal Funded Health Care Programs MedicARE For the elderly, persons with disabilities, patients with end-stage renal disease Part A Hospital care, skilling nursing facilities, hospice, home health care (No cost if the patient worked for 10 years in a Medicare covered employer) Part B Outpatient care, some physical and occupational therapy Part C (Medicare Advantage) Combination of parts A and B through an HMO or PPO Provides additional services at a higher cost Part D Prescription medications!!

Federal Funded Health Care Programs MedicAID Based on income and other circumstances Each state determines own eligibility rules, services provided, and copays Eligibility determined on a month-by-month basis Most often coverage includes: Physician visits, emergency care, hospital care, vaccinations, prescription drugs, vision, hearing, long- term care, and preventative care for children

What is a deductible? What is a co-pay?

Deductibles & Copays A deductible is a predetermined amount of money that must be spent on prescriptions before copayment begins Types of copayments: Fixed copayment Percentage copayment Variable copayment A variable or different payment based on the type of drug being dispensed Encourages use of generic and formulary drugs Lowers the cost of prescription drug benefit to the employer and shifts more of the drug cost to the members

What are some cost containment options for insurance companies?

Cost Containment Methods used include: Restrictive pharmacy networks Mail-order and Internet pharmacy Electronic claim submission Higher member copayments Tiered copayments Formulary management Prior authorization Competitive drug buying

Formulary A formulary is a list of medications approved for use or reimbursement under a prescription plan Each managed care organization determines its own formulary to be used 3 Types of formularies: Open Closed Restricted

Formulary Open formulary: Includes a variety of several medications in each therapeutic classification. Multiple tiers of pricing may be used. Closed formulary: A very limited number of drugs are available with a limited number of medications available in each therapeutic classification Restricted formulary: A selective, limited, partially closed formulary in which some nonformulary medications are available; an exception process does occur Formulary exception process: Process that allows the right to use select nonformulary and formulary medication to be dispensed

What is online adjudication?

Online adjudication The process by which a pharmacy submits prescription claim electronically to a third-party provider Ensures accurate copayments and timely payment Advantages: Provides an immediate response from Medicare (Part D), Medicaid, and other insurance providers It provides coverage information, reimbursement rates, and copays It allows the pharmacy to verify a patient’s eligibility and to determine the plan name, patient identification, and group number All pharmacies must possess a National Provider Identifier (NPI)

Prescription Drug Cards Information contained on a prescription drug card: BIN (bank identification number) Plan code Group code Issuer ID Subscriber (cardholder) name PCP Copays Help desk phone number Dispense as written (DAW) codes

Rejection of Claims Prescription claims that are rejected will have at least one rejection code The pharmacist or pharmacy technician must correct the prescription claim before resubmitting it to the managed care provider Possible reasons for rejection: Missing or invalid BIN Missing or invalid transaction code Missing or invalid pharmacy number Missing or invalid group number Missing or invalid birth date

Prior Authorization Requires a physician to obtain approval from a managed care organization for a specific medication before it is dispensed by the pharmacy It is an extra step in the prescription billing process before the insurance company decides to pay for the prescription Situations that may require prior authorization include: Brand name medications that have a generic available Expensive medications Medicines with age limits such as Retin-A® Drugs used for cosmetic purposes such as Propecia®

Misc. Math Formulas & Definitions

Math Formulas & Definitions Cost: Purchase price + cost to dispense Discount: Purchase price × discount rate Discounted price: Purchase price – discount Gross profit: Selling price – purchase price Markup: Selling price – purchase price Net profit: Overall cost × desired percent profit Overhead: Sum of all expenses Profit: Selling price – overall cost

Math Formulas & Definitions Average wholesale price (AWP): Average price that wholesalers sell a medication Not regulated by the government Does not take into account discounts based on volume Actual acquisition cost (AAC): Actual cost the pharmacy paid for the medication AAC + dispensing fee Maximum allowable cost (MAC): Used in calculating the reimbursement formula for generic medications: MAC + dispensing fee Determined by the managed care organization

Questions?