Transcript Slide 1

Unit 8
Medical Insurance
Class Overview
Medical Insurance
Purpose of Medical Insurance
• Provides protection from risk
and financial loss
• Money is paid to the insured
• Premiums are paid for by the
• Assists patients in covering costs
incurred for medical treatment
• Expenses covered by insurance
Regular medical expenses
Major medical expenses
Coverage Offered Through
Hospitalization Insurance
Cost of hospital room
Cost of meals
Use of the operating room
X-ray and lab fees
Usually limited to a total dollar amount or a
maximum number of days
Insurance Coverage for Surgery
• Charges typically based on “reasonable and
customary” charges
• Costs vary by region
• Copays and deductibles may apply
Fixed Payment Plans
• Payment of a fixed fee provides monthly
• The fixed fee is known as the premium
• Reimbursement is available once the premium
has been paid
Types of Health Care Insurance
Health Care
Managed care Fixed, prepaid-fee plans
GroupPurchased through commercial
sponsored or insurance companies
Plans financed and regulated by federal
and state governments
Managed Care Organizations
• Payment of fixed fee provides monthly
• Fixed fee is known as the premium
• Reimbursement is available once the premium
has been paid
• Plans referred to as prepaid plans
Why Managed Care?
• Advantages
– Lowers expenses for patients
– Requires nominal copayments for patients
– Offers plans with no deductibles
– Contains health care costs
– Provides payment for authorized services
– Ensures established fee schedules
– Usually covers preventive care
Why Managed Care?
• Disadvantages
– Increases amount of paperwork
– Requires preauthorization
– Lowers reimbursement rates
– Limits physician choices
– Lacks guarantee of coverage
– Limits specialized care
– Limits referrals
– Limits flexibility
Health Maintenance Organization
• Type of managed care plan
• Original concept was to control health care
• Membership limited to certain providers
• Services provided on a predetermined fee
• Patients must see physicians who participate
in the plan
• Emphasizes maintenance of health
Closed Panel Model
• The clinic is owned by
the HMO and the
providers are
employees of the HMO
Open Panel HMO
• The health care
providers are not
employees of the HMO
and do not belong to a
medical group owned
or managed by the
Preferred Provider Organization
Type of managed care plan
Purpose is to contain costs
Patient must use contracted provider
Fee-for-service program
Members not restricted to designated
physicians or hospitals
Point-of-Service Plan (POS)
• Type of managed care
• Offers more flexibility
than some HMOs &
• Out-of-network or innetwork provider may
be seen
Exclusive Provider Organization
• Managed care system
• Patients select
physicians from a list
• Providers are
reimbursed on a
modified fee-for service
Integrated Delivery System (IDS)
• Organization of provider sites contracted to
offer services to subscribers
• Example:
– Physician-hospital organization (PHO)
– Medical foundation
– Management service organization (MSO)
– Group practice without walls (GPWW)
– Integrated provider organization (IPO)
Commercial Insurance Carriers
• Typically for-profit organizations
• Often offer both traditional fee-for-service
plans and managed care plans
• Require subscribers to pay a premium for
The Health Insurance Card
Blue Cross/Blue Shield
• Largest prepayment medical insurance system
in U.S.
• Exist in every state
• Operate locally under state laws
• Provide coverage for medical procedures and
• Offer various types of health care plans
Government Programs
Worker’s compensation
Disability insurance
Coverage Provided by Basic Insurance
Office visits
Emergency room
Wellness exams
Major Medical Insurance
• Provides coverage for:
– Catastrophic illnesses or
– Prolonged illnesses
– Typically a supplemental
– Usually increases
insurer’s premiums
Surgical and Long-Term Care
• Surgical insurance:
– Provides coverage for surgical services
– Uncommon policies since most basic insurance
plans cover these costs
• Long-term care insurance:
– Provides coverage for the costs of nursing home
– Common policies since most basic insurance plans
do not cover these costs
Dental Insurance
• Typically provides coverage for:
– Dental examinations
– Cleaning
– Polishing
– Fillings
– Certain extractions
• Often requires a deductible
• 50% to 100% coverage offered by plans
Coverage Provided by Vision
Eye examination
Contact lens
Prescription frames
Prescription lenses
Laser corrective eye surgery
UCR Method
• UCR = usual, customary, reasonable
• Used to determine the portion that an insurance
company is obligated to pay
• Takes into consideration:
– The usual fee a provider charges for most patients for
a certain service/procedure
– The geographic location and specialty of the practice
– Any complications or unusual services or procedures
Indemnity Schedules
• Another method used to determine insurance
carrier payment
• Based on the maximum amount charged for a
specific service
• Payment is determined on the lowest charge
submitted by physician or by the physician’s
fee schedule
• Common method used in managed care
Relative Value Studies (RVS)
• A method to determine pricing factors in
• Areas considered in the accounting include:
– Time of the provider
– Skill of the provider
– The provider’s overhead expenses
• Each area is then turned into unit counts that
are applied to a specific service
Medicare and RVS
• Medicare payments based on resource-based
• Resource-based RVS:
– Utilizes the RVS
– Allows for increases in charges due to economic
changes and other factors
Filing Requirements
• Claims must be filed in a timely manner
• If deadline is not met than no money can be
retrieved from the insurance carrier
• Filing deadlines vary by carrier
• Correct claim form must be used for each
carrier. Most will accept the CMS-1500.
• Supporting materials with claims may be
required. These must be turned in correctly
and on time.
• Also called precertification
• To obtain permission from the insurance carrier to
provide services to a patient
• Must be acquired prior to patient appointment
unless an emergency
• Patient may or may not be aware of need for
• Failure may delay treatment
• If service is provided without preauthorization
insurance carrier may refuse to pay
Calling the Insurance Carrier for
• If possible obtain at
least 24 hours prior to
patient services being
• Gather all pertinent
patient information
prior to calling
Pertinent Information
• Patient’s insurance information
• Precertification form
• Procedure or service request with specifics
regarding number of treatments and for how
• Documentation by the physician requesting
the procedure or service
• Information on the provider who will be
performing the procedure or service
Acquired Information When
Approval is Obtained
• Precertification or preauthorization information
• Preauthorization numbers are often provided
• Any precertification numbers that are obtained
must be included on the insurance claim form
• Copy of completed precertification form must be
placed in the patient’s medical record
Steps to Take When Preauthorization is
• Physician can write a
letter to the carrier
providing rationale for
the treatment
• Subscriber of the
insurance can send a
letter of appeal
• Any letters sent to the
insurance company
should be kept in the
patient’s file
Guidelines for Verifying Insurance
• Obtain all insurance information from patient
at initial contact
• Provide the patient with a copy of the
practice’s written policies and procedures for
dealing with insurance carriers
• Discuss the patient’s insurance benefits prior
to services rendered
Cost Containment Measures for
Health Care
• Peer Review Organization (PRO)
– Occurred when Congress amended the Social
Security Act of 1972 and created the Professional
Standards Review Organization (PSRO)
• Diagnosis-related groups (DRGs)
– Developed in the late 1960s
– Used by hospitals to determine their Medicare
reimbursement rates
– Not used for to calculate outpatient payments
Federal Register
• Published daily by the National Archives and
Records Administration (NARA)
• Used by MAs to obtain information on:
– Federal rules, regulations, and notices
– Executive orders and proclamations
– Presidential documents
• Can be viewed by going on the Internet
• Managed Care
Role Play
• Insurance Authorization
Medical Insurance Claims
Purpose of the Health Insurance
Claim Form
• Report patient procedures and services to the
insurance carrier
• Help standardize reporting
• Improve communication between the medical
facility and the insurance carrier
Main Elements to Improve
Communication Process
• Use of the correct health insurance claim form
• Accuracy of information provided in the
health insurance claim form
• Submission of the health insurance claim form
to the correct insurance carrier
Types of Health Insurance Claim
• CMS-1500
– Most common health insurance claim form
– Used to file claims for physician services
– Submitted to the insurance carrier electronically
or by standard mail
• UB-92 (also referred to as the CMS-1450)
– Used to report services related to hospitalization
Submitting a Blue Cross/Blue Shield
• May provide their own
health insurance form
• Forms can be obtained
• CMS-1500 may be
Submitting a Claim for a Managed Care
• Form used will depend
on managed care
• Most will accept the
• Use of incorrect form
may cause claim to be
rejected causing
delayed or no payment
Submitting a Medicare Claim
• Covered benefits change
• Keeping up-to-date is important for accurate
claims submission
• Critical to know:
– Coverage
– Benefit period
• CMS-1500 used for Medicare claims
• Claims to Medicare can be sent electronically
or by standard mail
Submitting a Medicaid Claim
• Claim submission varies
from state to state
• Typically patients must
qualify for benefits
monthly. Eligibility is not
• Preauthorization is
required for some
• Critical to verify patient
eligibility at each visit
Submitting a TRICARE Claim
• DD Form 2642:
– Form completed and sent by patient or family member
– Payment sent to patient who is responsible to then pay the
• CMS-1500:
– Form completed and sent by the physician’s office
– Payment is sent directly to the provider’s office
• UB-92:
– Form completed and sent by the hospital
– Payment is sent directly to the hospital
Submitting a Workers’
Compensation Claim
• Claim form depends on the state and
insurance carriers in that state
• Typically the CMS-1500 is accepted
• Important for MA to call and verify what form
must be used for claims submission
• Patient does not pay for procedures and
services provided by workers’ comp
• Employer is ultimately responsible
Methods to Submitting Claims
• No matter the method
the same information is
• Method is dependent
on insurance carrier
• Two methods used
– Faxing or mailing paper
– Submitting claim
Advantages of Paper Claims
• Basic costs are minimal
• Materials needed for
paper claims:
– Claim forms
– Coding books
Disadvantages of Paper Claims
• Costs to complete the paper claim process can
be costly
• These costs include costs for:
– Time required to complete the form
– Higher chance of errors
– Storage space
– Postage
– Copies of claim forms
Advantages of Electronic Claims
• Decreases turnaround time in the processing
of claims
• Increases speed of claims processing by both
the insurance carrier and the provider
• Provides the capability for direct electronic
deposit of payments in provider account
• Saves money on postage and labor costs for
the provider
Disadvantages of Electronic Claims
• Initial start-up expenses:
– Internet service provider
– Computer
– Software
– Training of those who will be using the system
– Printer
– Backup or storage devices
• Computer down times
Three Ways Claims are
• Sent directly to payer via EDI (electronic data
• Transmitted through a clearinghouse
• DDE (direct data entry)
Statuses of a Claim
• Clean claims:
– Form is completed without any errors or
omissions and submitted on time
• Dirty claims:
– Form is incorrect because of missing data or
errors, causing the claim to be rejected
Statuses of a Claim
• Invalid claims:
– Form is complete but has some type of incorrect
• Denied claims:
– Procedure or services are not covered by the
insurance policy or the patient has not met
his/her deductible. Ineligible procedures or
services can also cause a claim to be denied.
Information Needed to Complete the
• Name of insured’s
insurance company
• Insured’s name
• Insured’s ID#
• Insured’s address
• Telephone # of insured
Reading the CMS-1500
• Boxes (Blocks) 1-13:
– Patient data
• Boxes (Blocks) 14-33:
– Provider information
– Information on services provided to patient
– Reason for services
Completion of the CMS-1500:
Boxes 1-8
Completion of the CMS-1500:
Boxes 9-13
Completion of the CMS-1500:
Boxes 14-23
Completion of the CMS-1500: Box
24 A-J
Completion of the CMS-1500:
Boxes 25-33
Prior to Submitting a Claim
• Check for accuracy on the claim form
• If a paper claim, make a copy for the patient’s
• Enter data on the insurance claims log
• Send the completed CMS-1500 with required
documentation to the insurance carrier
Confidentiality and the CMS-1500
• As with all patient data,
information must remain
• Release of information
must be signed by the
• Signed standard release
form may be used
• Form is placed in patient
Signature and Payment of Benefits
• Box 12:
– Patient signature indicates permission for
releasing information on the claim form
• Box 13:
– If signed by patient, payment will go directly to
service provider
– If not signed, payment is sent to the insured
– SIGNATURE ON FILE can also be used for this box
Assignment of Benefits
• Allowed by Medicare and other carriers
• One time form signed by patient
• Provides authorization for patient information
to be released
• Once signed, usage of SIGNATURE ON FILE can
be used
• Form must be permanently kept in the
patient’s record
Participating vs. Nonparticipating
• Advantage:
– Payment sent directly to
the practice, typically in
a timely manner
• Disadvantage:
– Reimbursement might
be at a less desirable
rate leading to write-offs
Materials Needed to Complete the
Patient’s medical record
Patient’s ledger card
Black ink pen
Computer with a printer
or typewriter
The Superbill
• Contains:
Patient’s name
Space for claim
The Birthday Rule
• Used to determine which parent’s insurance plan is
• Only used for parents who are legally married
• Primary plan is the one held by the parent whose
birthday falls first in the year
• If parents have birthday on the same day, parent who
has had the coverage the longest would hold the
primary plan
• Primary plan of divorced parents is determined by
Prior to Submitting a Claim
Check for accuracy on the claim form
If a paper claim, make a copy for patient’s file
Enter data on the insurance claims log
Send the completed CMS-1500 with required
documentation to the insurance carrier
Maintaining Confidentiality of Patient
• Responsibility of all
health care workers
• Breach of
confidentiality occurs
when information is
provided to individuals
who have not been
authorized to receive it
How to Keep Patient Information
• Ensure information is only
provided to approved
• Limit access to patient
information in work areas
• Create work areas where
confidential information
can be discussed privately
• Follow rules established
Documentation of Permission
• Authorization for Release of Medical
• Block 12 on CMS-1500
• Release form created by medical practice
Insurance Claims Log
Used to track claim forms
Can be done manually or electronically
Data entered when claim form is completed
Information on log:
Patient’s name
Date of service
Insurance carrier
Date of claim submission
Amount of the claim submitted
Most Common Reasons for
Claim Rejection
• Missing or incorrect information
• Missing or incorrect patient registration
information (name, address, insurance
• Missing or incorrect name of referring
• Missing or incorrect diagnosis code
• Overlapping, incorrect, or duplicate dates of
Most Common Reasons for
Claim Rejection
Incorrect place of service
Invalid, missing, or incorrect procedure code
Incorrect or missing number of days or units
Incorrect or missing modifier
Resubmitting Claims
• Information must be
corrected and
• Use of patient data and
other resources is
important for accuracy
• Accuracy on claims is
• Time limits for re-filing
must be met!
Ways to Minimize the Number of
Rejected Claims
• Review the claim for accuracy prior to submitting it
• Pay close attention to detail
• Keep current reference materials, books and
equipment readily available and use them
• Limit distractions that can occur in the medical office
• Have a specific time of the day to focus solely on
claims processing
• Have another medical office staff member review
each claim
• CMS-1500 Form
Small Group Activity
• Critical Thinking Scenarios
• Financial Impact of Rejected Claims
• Topics Covered