1. Billing and Financial Issues
Jessica Tagerman, PharmD

2. Types of Insurance

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

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

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

6. 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

7. 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.

8. 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

9. 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

10. What is an HMO plan?

11. 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

12. What is a PPO Plan?

13. 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

14. What is a POS plan?

15. 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

16. 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

17. What are some examples of federal funded healthcare programs?

18. 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!!

19. 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

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

21. 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

22. What are some cost containment options for insurance companies?

23. 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

24. 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

25. 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

26. What is online adjudication?

27. 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)

28. 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

29. 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

30. 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®

31. Misc. Math Formulas & Definitions

32. 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

33. 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

34. Questions?