alh 151 health insurance chap 1-5 4

Health Insurance:Chapters 1- 5Sheretta Moore

Chapter 1: Health Insurance Specialist

Dr. S. Scurry

Dr. S. ScurryDr. S. Scurry

In the past few years, many office practices have been forced to add additional staff to gather information, obtain referrals or authorizations, file claims, and track reimbursement. Factors that have necessitated this increase included increases in workload, federal regulations, and patient services provided.

Positions where insurance specialists may be employed (other than for physician practices) include: consulting/billing services, education institutions, and publishers of health insurance products

Insurance claims specialists should have good keyboarding skills and the ability to enter basic financial and insurance data into the practice's accounting system.


The health insurance specialist must draw on knowledge of medical terminology to translate written narratives of the health care provider into the code(s) used by the specific coding system.

A basic knowledge of anatomy and physiology is crucial for recognizing abnormal body conditions.

Health insurance specialists must be fluent in the language of medicine.

Job security is high for an individual who understands claim processing and billing regulations.


A Code of Ethics for health insurance specialists can be obtained from the following organizations: AAPC, AAMA, AHIMA.

The increase in managed care plans has affected the daily activities of physician practices. To be optimally effective in the insurance specialist position, one should be familiar with: referral requirements of major managed care companies with which physicians have contracted, various insurance cards used by each major managed care plan, and names of specialty physicians who contract with the managed care plan.


The health care provider cannot collect fees from the patient if the insurance has a “hold harmless clause" in the patient-provider contract.

A "patient-health care provider contract" exists to provide medical services in exchange for payment at the allowable fee schedule rate.

Charging the patient for the difference between the physician's fee and the insurance carrier's allowed fee is known as balance billing.

Employers frequently contract with managed health care plans to optimize access to health care and reduce the high cost of employee insurance.


Coding is the process of reporting diagnoses, procedures, and services as numeric and alphanumeric characters on the insurance claim.

Every service or procedure reported to the insurer must be linked to a condition that justifies the medical necessity for performing that service or procedure.

Poor attention to claims requirements will result in lower reimbursement to practices along with increased expenses.


Claims may be denied for payment if preauthorization requirements are not met.

Skills critical to differentiating the technical description of two different but similar procedures or diagnoses include reading and comprehension.

To prevent fraud, office staff should bill according to coding guidelines and submit complete and accurate information.


Written permission given by patients (or their representative) authorizing a provider of care to release treatment and diagnostic information to a specified party is known as authorization to release medical information.

Chapter 2: Introduction to Health Insurance

Dr. S. Scurry

Basic Insurance Terminology

Medical insurance (health insurance) is a written contract policy between a policy holder and a health plan.

Terms To Know

premium Amount of money paid by the policy holder to the insurance carrier.

benefits Medical services provided.

First Party The patient policy holder.

Second Party The physician who provides medical services.

Third Party The health plan.


The long-standing and traditional method of reimbursement between an insurer and a health care provider is fee for service.

Capitation is the method used by managed care plans to pay the health care provider a fixed amount on the basis of per capita (per person).

Episode of care reimbursement is exemplified by global surgical fees.

CPT stands for the following current procedural terminology.

The WHO, located in Geneva, Switzerland, is the originator of the ICD-9 coding system. The acronym WHO stands for World Health Organization.

Deductible - a fixed dollar amount that must be paid or met once a year before third-party payers begin to cover expenses.

Coinsurance - a fixed percentage of coverage charges after the deductible is met.

Co-payment - a small fee that is collected at the time of the visit.

Exclusions - uncovered expenses. Formulary - an approved list of drugs.


Liability Insurance Covers injuries caused by the insured

or on their property. Disability Insurance

Insurance that is activated when the insured is injured or disabled.


Types of Health Plans

Fee For ServicePlans

Managed CarePlans

• Oldest and most expensive type of plan• Covers costs of select medical services• Amount services determined by the physician

• Controls both the financing and delivery of healthcare to policy holders.

• Both policy holders and physicians (participating physicians) are enrolled by the Managed Care Organizations (MCOs).

• In a capitated managed care plan, providers are paid a fixed amount regardless of the number of times the patient is seen by the physician.

Preferred Provider Organization (PPO) A network of providers to perform services

to plan members. Physicians in the plan agree to charge

discounted fees. Health Maintenance Organization (HMO)

Physicians who contract with HMOs are often paid a capitated rate.

Patients pay premiums and a small co-payment, often $10.

Types of Health Plans (cont.)

Medicare is the largest federal program that provides healthcare to citizens aged 65 and older. Managed by the Centers for Medicare and Medicaid

Services (CMS) Part A

Hospital insurance available to anyone receiving social security benefits.

Part B Covers physician services, outpatient services and many other

services. Available to persons 65 and older that are US citizens A premium must be paid by all unlike Part A.


Types of Medicare Plans Fee-for-Service: The Original Medicare Plan

Allows the beneficiary to choose any licensed physician certified by Medicare.

A deductible was charged then Medicare paid 80 percent and the patient paid 20 percent.

Medicare + Choice Plans Allows patients to sign up for one of three plans:

Medicare Managed Care Plans Medicare Preferred Provider Organization Plans (PPOs) Medicare Private Fee-for-Service Plans



Medicare Managed Care Plans• Medical care is managed by a primary care physician (PCP)• A small co-payment for each visit is required but no deductibles• Some plans allow services from providers outside the network

Medicare Preferred Provider Organization Plan

Medicare Private Fee-For-Service Plan

• Patients do not need a PCP• No referrals are required• Costs less to use referrals within the network

• Operated by a private insurance company

• Co-payment may be required• Physicians can bill patients for

amount not covered by the plan

A health-benefit program designed for: Low-income Blind Disabled patients Temporary assistance to needy families Foster children Children born with disabilities

Not an insurance program Funded by the federal and state government Provides assistance such as:

Physician services Emergency services Laboratory and x-rays SNF care Vaccines Early diagnostic screening and treatment for minors

Types of Health Plans Medicaid


Medicaid

Accepting Assignment

Medi/Medi

Physicians agreeing to treat Medicaid patients also agree to the set reimbursements.

Older or disabled patients unable to pay the difference between the bill and the Medicaid payment may qualify for both Medicaid and Medicare.

State Guidelines

• Medicaid cards are issued monthly, so always ask the patient for a current card.

• Ensure that the physician signs all claims.• Authorization must be received in advance for medical services.

• Verify deadlines for claim submissions.• Treat Medicaid patients with the same professionalism and courtesy that you extend to other patients.


Types of Health Plans Tricare and Champva

Run by the Defense Department

Healthcare benefit for families of uniformed personnel and retirees

TRICARE for Life is offered to persons 65 and older that are eligible for both TRICARE and Medicare.

Covers the expenses of dependent spouses and children of veterans with disabilities

Also covers surviving spouses and dependent children of veterans who died in the line of duty or from service-connected disabilities

Types of Health Plans Blue Cross and Blue Shield

A nationwide federation of nonprofit and for-profit service organizations that provide prepaid healthcare services to subscribers.

Specific plans for BCBS can vary greatly because each local organization operates under its own state laws.

Insurance covering accidents or diseases incurred in the workplace.

Federal law requires that employers purchase a minimum amount of workers’ compensation insurance.

Coverage Includes Basic medical treatment Weekly or monthly amount paid

to patient while not employed Rehabilitation costs

Workers’ Compensation

The Claims Process: An Overview

Services Provided by the Physician’s Office

• Obtain patient information• Determine diagnosis and fees based on services provided• Records patient payments• Prepares healthcare claims• Reviews the insurer’s processing of the claim

Tasks Supported by usinga Billing Program

• Gathering and reporting patient information• Verifying patient’s insurance coverage• Recording procedures and services performed• Filing insurance claims and billing patients• Reviewing and recording payments

Obtaining Patient Information

Personal Information• Name• Home address• Telephone number• Date of birth• Social security number• Emergency contact person

• Current employer• Employer address and telephone number• Insurance carrier and date of coverage• Insurance group plan• Insurance identification number• Name of subscriber or insured

Release Signatures• Form to release insurance

information to insurance carrier

• Form for assignment of benefits

Coordination of Benefits

Legal clauses that prevent duplication of payment.

Primary or main insurance plan pays first then the secondary or supplemental plan pays the deductible and co-payment.

The Birthday Rule

If a husband & wife both have a family insurance plan the insurance plan of the person born first will become the

primary payer.

Physician’s Services The physician writes the diagnosis and

treatment The medical assistant translates the medical

terminology into codes for reimbursement Referrals to Other Services

The medical assistant may also be requested to secure authorization from the insurance company for additional services.

Coordination of Benefits

Insurer’s Processing and Payment

Insurance claims are reviewed for:

Medical Necessity Allowable Benefits Payment and Explanation of Benefits

Payment and Remittance Advice

Information found on the Remittance Advice (RA) Form: Insured name and identification number Name of beneficiary Claim number Date, place, and type of service Amount billed and amount allowed Amount of co-payment and payments

made Notation of any services not covered

Reviewing the Insurer’s RemittanceAdvice and Payment

Verify all information on the remittance advice (RA) line by line.

If a claim is rejected check the diagnosis codes for accuracy.

Track all unpaid claims using either a follow-up log or computer automation.

Fee Schedules and Charges

Medicare Payment System: RBRVS The payment system used by Medicare is called the resource

based relative value scale (RBRVS).

A nationally uniform conversion factor

The nationally uniform relative value

A geographic adjustment factor

The current annual Medicare Fee Schedule (MFS) is published by CMS in the Federal Register.


Payment Methods

Allowed Charges

ContractedFee Schedule

Capitation

Allowed Charges This represents the most the payer will

pay any provider for that work. Other equivalent terms are:


Maximum allowable fee Maximum charge

Allowed amount

Maximum charge

Allowed feeAllowable charge

Billing the patient for the difference between the higher usual fee and a lower allowed charge is called balance billing.

Contracted Fee Schedule Fixed fee schedules are established particularly

with PPOs and participating physicians. Participating providers can bill patients for

procedures and services not covered by the plan.

Capitation The fixed prepayment for each plan member.

Calculating Patient Charges All payers require patients to pay for non-

covered services.


Communication with PatientsAbout Charges

Some practices may require that the patient sign an assignment of benefits statement or that they pay in full for services at the time they are rendered.

The policies should explain what is required of the patient and when payment is due.

Unassigned Claims

Assigned Claims

Managed Care Members

Unless other prior arrangements are made, payment is expected at the time service is delivered.

The patient is responsible for any amounts not covered by the insurance carrier.

Co-payments must be paid before patients leave the office.

Preparing and Transmitting

Healthcare Claims

HIPAA Claims Electronic and

predominately used Information entered is

called data elements X12 837 Health Care

Claim is the official name

Data must be entered in CAPS in only valid fields

No prefixes allowed

Paper Claims A CMS-1500 paper

form is used May be mailed or

faxed to the third-party payer

Not widely used as a result of HIPAA requirements

CMS-1500 require 33 form indicators

Preparing and Transmitting Healthcare Claims

Transmission of Electronic Claims There are three major methods of transmitting

claims electronically:

Direct transmission to the payer

Using a clearing house

Direct data entry

Preparing and Transmitting

Healthcare Claims

Service facility name, address information

Medicare or benefitsassignment indicator

Part of the name or identifier ofthe referring provider

Or invalid subscriber’s birth date

Information about secondaryinsurance plans

Payer name and/or identifier

Generating Clean Claims requires preventing common errors such as:

Preparing and Transmitting Healthcare Claims

Claims Security The HIPAA rules set standards for protecting

individually identifiable health information when maintained or transmitted electronically.

Common security measures used consists of: Access control, passwords, and log files to

keep intruders out Backups (saved copies of files) Security policies to handle violations that do

occur

Tips for the Office/Data Elementsfor HIPAA Electronic Claims

Pay-to provider (the office) Rendering provider (the physician)

The billing provider is the entity that transmits the claim to the payer.

A taxonomy code is a 10-digit number representing the physician specialty.

This code matches the physician’s : license certification education

Reporting ProviderInformation

Taxonomy Information

HIPAA National IdentifiersIdentifiers are numbers of predetermined length and structure like social security numbers.

National identifiers must be established for: Employers Health plans Healthcare providers Patients


Between 1965 and 1966, three government- sponsored programs for health care were instituted.

These programs were CHAMPUS, Medicare, Medicaid. CHAMPUS stands for Civilian Health and Medical

Program of the Uniformed Services. In the late 1990s the CHAMPUS program was

reorganized and the name was changed to Tricare. A prospective payment system affecting hospital billing

of Medicare outpatient claims is ambulatory payment classifications.

Other common names for the government-run Medicaid program include: Title XIX, Welfare or Public Assistance.


A policyholder, who contracts with the insurance company for coverage, may also be referred to as a beneficiary, insured, or subscriber.

A contract between a policyholder and an insurance carrier to reimburse the provider for all or a portion of the cost of medical treatment or preventive care rendered by the health care professional is called health insurance.

A specified annual out-of-pocket expense for covered medical services that the insured must pay each policy year to a health care provider before the insurance company will pay benefits is called a deductible.

A policyholder is offered protection against risk, loss or ruin by a contract in which an insurance company guarantees to pay a sum of money to the policyholder in the event of some contingency such as death, accident, or illness in return for the payment of a deductible.


A policy that covers losses to a third party caused by the insured, by an object owned by the insured, or on

the premises owned by the insured is called liability insurance.

When negligence by another party is suspected in an injury claim, the health insurance carrier will not reimburse the patient for medical treatment of the injury until it is established that the incident is covered by the negligent party's liability insurance and whether there was third-party negligence.

If the liability insurer denies payment, a claim is filed with the patient's insurance plan. The other document that must accompany the claim form is a photocopy of the written denial of responsibility from the liability insurer.


A managed care term that describes the number of persons enrolled in their program is covered lives.

Types of provider reimbursement commonly found in today's health care practices include: capitation, fee schedule, and fee for service.

A physician who has not agreed to accept the carrier-determined allowed rate as payment-in-full for covered services performed and, therefore, expects to be paid the full amount of the fees charged for the services rendered is called a nonparticipating physician.


The specified percentage of insurance for each service that the patient must pay through the health care provider is called

coinsurance. Reimbursement for lost income resulting from a

temporary or permanent illness or injury is provided through disability insurance.

A method of reimbursement by episode of care that is applied only to inpatient billing is called diagnosis-related groups.

Electronic data interchange (EDI) is the electronic transfer of health claims in a standardized format that is fast and cost-effective.

Chapter 3: Managed Health Care

Dr. S. Scurry

Dr. S. ScurryDr. S. Scurry The provider who is responsible for

supervising and coordinating health care services for enrollees and preauthorizing referrals to specialists and inpatient hospital admissions is called a primary care provider.

Payments made directly or indirectly to health care providers to serve as encouragement to reduce or limit services are called physician incentives.

http://www.urmc.org/managedcare/managedcare.html

Dr. S. ScurryDr. S. Scurry A program that includes activities that assess

the quality of care provided in a health care setting is a Quality assurance program.

The organization that assesses the quality of managed care plans in the United States is the National Committee for Quality Assurance.

A review that occurs to ensure the medical necessity of tests and procedures ordered during an inpatient hospitalization is called a concurrent review.


The development of patient care plans for the coordination and provision of care for complicated cases in a cost-effective manner is called case management.

A voluntary process that a health care facility or organization undergoes to demonstrate that it has met requirements in addition to those required by law is called accreditation.

Medicare established the Quality Improvement System for Managed Care to ensure the accountability of managed care plans in terms of objective, measurable standards.

Dr. S. ScurryDr. S. Scurry Managed care in the United States has been operational nearly three-quarters of a century. A management service organization is

usually owned by physicians or a hospital and provides practice management services to individual physician practices.

In managed care, a TPA is third-party administrator.

Dr. S. ScurryDr. S. Scurry The options available through health

maintenance organizations (HMOs) are: individual practice association (IPA); group model; and the staff model. Prior to scheduling elective surgery, managed

care plans often require a second opinion in which a second physician is asked to evaluate the necessity of surgery.

A managed care plan that provides benefits to subscribers if they receive services from network providers is an exclusive provider Organization.

Dr. S. ScurryDr. S. Scurry The National Committee on Quality Assurance (NCQA)

is a nonprofit organization that measures and evaluates the quality of an HMO's performance.

A health care integrated delivery system offers linked records, multiple provider and facility agreements, full spectrum of managed health care to subscriber.

PHOs are physician hospital organizations. An EPO is an exclusive provider organization. The POS (point-of-service) plan allows patients the

option to use in-network or out-of-network providers.

Chapter 4: Life Cycle of an Insurance Claim

Dr. S. Scurry

A new patient is defined as a patient who has not received any professional service from the health care provider or another provider (same specialty) in the same group practice within the last 36 months or who has never received services from the provider.

A completed patient registration form is used in the physician office to record

demographic, insurance, and financial information.

Updates to patient information forms should be done as often as the patient's demographic information changes.

Office staff should make copies of the front and back of each insurance identification card.

All patients must sign a release of medical information form.

Front-office staff should check the authorization status on all managed care patients.


The parent who lives with and has custody of a child is the custodial parent.

For a child of divorced parents whose custodial parent has remarried, the custodial parent insurance is primary, the noncustodial birth parent is tertiary, and the custodial stepparent is secondary.

A patient who is listed as a dependent on a primary insurance policy is a secondary policyholder.

Dr. S. ScurryDr. S. Scurry The birthday rule refers to insurance

coverage for dependent children provided by the parent whose birthday falls first in the calendar year or month.

An exception to the birthday or custodial parent rule may occur if a court order specifies that a particular parent must cover the child's medical expenses.


Allowed charges may also be termed eligible or maximum allowable amount.

The minimum information recorded on the fee slip is date, patient's name, and balance due on the account.

Dr. S. ScurryDr. S. Scurry The charge ticket in the physician's

office may also be called an encounter form, fee slip, or superbill.

Financial source documents may be called a charge slips, superbills, or encounter forms.

The purpose of an encounter form is to serve as document used to record services rendered and diagnosis treated during a patient visit.

The patient ledger is referred to as the patient's financial record and can be found in automated or manual formats.

Dr. S. ScurryDr. S. Scurry Coinsurance is defined as a specified percentage of

the insurance-allowed fee for each service that the patient must pay to the health care provider.

Patients with no insurance coverage are expected to pay the full amount for the services rendered.

A primary care physician in a managed care panel is an internal medicine, pediatric, or family practice physician.

A health care specialist is a term a nonprimary care physician or specialty-care provider.

Dr. S. ScurryDr. S. Scurry Claim attachments might take the form of pathology reports, operative reports, or written authorization. Any medical condition that was diagnosed and/or

treated within a specific period of time immediately preceding the enrollee's effective date of coverage is a preexisting condition.

When an insurance company processes a claim, all of the following occurs except diagnosis codes on the claim form are coded using CPT codes.

Dr. S. ScurryDr. S. Scurry An EOB can indicate that payment was

denied because termination of coverage occurred when the patient was no longer covered by the insurance policy.

The deductible is the total amount of covered out-of-pocket medical expenses a policyholder must incur each year before the insurance company is obligated to pay any benefits.

Chapter 5: Legal and Regulatory Considerations

Dr. S. Scurry


Federal and state statutes are passed by legislative bodies.

Most states have special laws covering release of medical information for patients with mental disorders.

The purpose of the privacy standards is to outline individual rights for the protection of health information by health care providers, health plans, and health care clearinghouses. They are prohibited from using or disclosing health information except as authorized by the patient or specifically permitted by HIPAA.


The Administrative Simplification aspect of HIPAA developed standards for the maintenance and transmission of health information. The standards were designed to improve efficiency and effectives of the health care system by standardizing the interchange of electronic for specified administrative and financial transactions; and to protect the security and confidentiality of electronic health information.


To verify telephone inquiries from the patient's insurer, the insurance specialist should put the caller on hold until you have a file copy of patient's form in hand.

Breach of confidentiality can result from discussing patient's health information over the phone to unauthorized sources, sending records to unauthorized requestors, faxing medical records.

Dr. S. ScurryDr. S. Scurry The federal government allows three

exceptions to the required authorization for release of medical information to insurance companies.

One exception is for patients covered by Medicaid and another for patients covered by Workers’ Compensation.

The third exception involves providers who file insurance claims for medical services provided to patients seen at a hospital but who are not expected to receive follow-up care in the physician’s office.

Dr. S. ScurryDr. S. Scurry When a patient signs a release of

medical information at a physician's office, that release is considered to be valid for one year from the date entered on the form.

Faxed medical information should be limited to only the information required to satisfy the immediate needs of the requesting party.

Medical practices should keep a dated log of all receipt of transmittal verifications signed and returned by the authorized recipient.

Dr. S. ScurryDr. S. Scurry One of the goals of the Health Insurance

Portability and Accountability Act of 1996 was to amend the Internal Revenue Code of 1986 to combat waste, fraud, and abuse in health insurance and health care delivery.

Offices wishing to prevent fraudulent practices should never change or delete medical record information or add diagnoses to the claim form not approved by medical personnel.

Examples of health care fraud include overutilization of health care services, billing for services not performed, billing patients twice for the same service.

Dr. S. ScurryDr. S. Scurry Upcoding is the assignment of an ICD-9-CM

diagnosis code that does not match patient record documentation for the purpose of illegally increasing reimbursement.

Unbundling is the reporting of multiple codes to increase reimbursement from a payer when a single combination code should be reported.

Self-referral involves providers ordering services to be performed for patients by organizations in which they have a financial interest.

Dr. S. ScurryDr. S. Scurry There are seven elements of the Compliance Program

Guidance for Individual and Small Group Physician Practices: The seven elements include :

(1) implementation of written policies and standards of conduct;

(2) designation of a compliance officer or contact; (3) development of training and education programs; (4) creation of accessible lines of communication; (5) performance of internal audits to monitor compliance; (6) enforcement of standards through well-publicized

disciplinary directives; and (7) prompt corrective action to detect offenses.


The Correct Coding Initiative of 1996 was implemented by HCFA to reduce Medicare program expenditures by detecting inappropriate coding on claims and denying payment on these claims.

The unique identifiers mandated for use by the Administrative Simplification aspect of HIPAA are the National Provider Identifier (NPI), the National Health Plan ID (PlanID), the Employer Identifier, and the Unique Individual Identifier.


The standard to be used as established by the final HIPAA rule for each transaction or code set listed are:

(a) diagnosis and inpatient hospital services - International Classification of Disease, 9th Revision, Clinical Modification (ICD-9-CM);

(b) physician services - Current Procedural Terminology (CPT), and

(c) dental services - Current Dental Terminology (CDT).

alh 151 health insurance chap 1-5 4

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