Chapter 20 Basics of Health Insurance

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

19. TRICARE • Public Law 569 passed in 1956 authorizing dependents of military personnel to receive treatment from civilian physicians at expense of government

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

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)

22. Workers’ Compensation • All states have passed workers’ compensation laws to protect wage earners • State laws differ as to coverage

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

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

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

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

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

28. Types of Insurance Benefits

29. Types of Insurance Benefits, cont’d

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

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

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

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

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

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

36. Vision Care • May include reimbursement for all or a percentage of cost for refraction, lenses, and frames

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

38. Special Risk Insurance • Special risk insurance protects a person in event of types of accident or for certain diseases • Usually a maximum benefit

39. Liability Insurance • Liability insurance covers losses to a third party caused by the insured • Types include automobile, business, and homeowners’ policies

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

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

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)

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

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

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

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

47. 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. Lesson 20.3

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

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