Healthcare Market Overview ___________________________________________________________________

Table of Contents

1 Healthcare Market Overview......................................................................5 1.1 Introduction............................................................................................5 1.2 What is an HMO?.....................................................................................5 1.3 The Industry Outlook................................................................................5 1.3.1 Trends in Healthcare – Provider Space....................................................6 1.3.2 Trends in Healthcare – Payer Space........................................................7 1.4 Key Players.............................................................................................7 1.5 References..............................................................................................8 2 Healthcare Overview..................................................................................9 2.1 Unit Objectives .......................................................................................9 2.2 Genesis Of Healthcare .............................................................................9 2.3 How the industry Works?........................................................................10 2.4 Healthcare pillars...................................................................................12 2.4.1 Members...........................................................................................12 2.4.2 Providers...........................................................................................12 2.4.3 Benefits.............................................................................................13 2.4.4 Claims..............................................................................................14 2.4.5 Sales................................................................................................15 2.4.6 External Agents..................................................................................15 2.5 Healthcare workflow...............................................................................16 2.6 Summary..............................................................................................17 2.7 Review Questions...................................................................................18 2.8 References............................................................................................18 3 Members..................................................................................................21 3.1 Unit Objective........................................................................................21 3.2 Introduction..........................................................................................21 3.2.1 Insurance Business: An Overview.........................................................21 3.3 Individual and Group Insurance in detail...................................................23 3.3.1 Individual Insurance...........................................................................23 3.3.2 How to get individual insurance? .........................................................23 3.3.3 Group Insurance................................................................................25 3.3.4 Company Paid Groups.........................................................................26 3.3.5 Affinity Groups...................................................................................27 3.3.6 Self Insured Group.............................................................................27 3.3.7 Self-Employed Members......................................................................28 3.3.8 Exercise............................................................................................29 3.4 Member’s enrollment..............................................................................30 3.4.1 What is Enrollment?............................................................................30 3.4.2 How is enrollment carried out?.............................................................30 3.4.3 Output of enrollment process...............................................................31 3.4.4 Enrollment: Overall Picture..................................................................32 3.4.5 Exercise............................................................................................32 3.5 Member’s and Dependent’s eligibility........................................................33 3.5.1 Eligibility...........................................................................................33 3.5.2 Eligibility Process................................................................................33 3.5.3 How a member should approach right provider?.....................................34 3.5.4 Eligibility Data Transfer.......................................................................35 3.5.5 Eligible Dependents............................................................................35 3.5.6 Exercise............................................................................................35 3.6 Member Services....................................................................................37 3.6.1 Means of services...............................................................................37 __________________________________________________________________________________ 65736839.doc Ver. 1.0 Page 1 of 132

Healthcare Market Overview ___________________________________________________________________ 3.6.2 Services provided by the insurer..........................................................37 3.7 Premium Collection.................................................................................39 3.8 Member Group Maintenance....................................................................39 3.8.1 What are Groups?...............................................................................39 3.8.2 Groups Formation...............................................................................40 3.8.3 Groups Maintenance...........................................................................40 3.9 Disability Benefits...................................................................................41 3.9.1 Member’s concern .............................................................................41 3.9.2 Exercise ...........................................................................................41 4 Provider...................................................................................................44 4.1 Provider types.......................................................................................44 4.2 Provider Participation..............................................................................45 4.3 Provider Contract...................................................................................45 4.3.1 Provider Contract Process...................................................................45 4.3.2 Credentialing Criteria.........................................................................45 4.3.3 Verification of Provider Credentialing Information..................................46 4.3.4 Types of Contracts.............................................................................46 4.3.5 Provider Reimbursement....................................................................46 4.4 Exercise................................................................................................47 4.5 Provider Referral....................................................................................47 4.5.1 Referrals processing...........................................................................47 4.5.2 Referral types...................................................................................48 4.6 Provider Network...................................................................................48 4.6.1 Quality Provider Networks..................................................................48 4.6.2 Network Adequacy.............................................................................49 4.6.3 Rental networks................................................................................49 4.6.4 Network Hospital Standards................................................................49 4.7 Provider maintenance.............................................................................49 4.7.1 some common information of Providers ...............................................49 4.8 Exercise................................................................................................50 4.9 Review Questions...................................................................................51 4.10 References..........................................................................................51 5 Sales........................................................................................................53 5.1 Unit Objectives......................................................................................53 5.2 Introduction..........................................................................................53 5.3 Brokers.................................................................................................53 5.3.1 Calculation for Brokers........................................................................53 5.4 Quote Creation......................................................................................54 5.4.1 What is a quote?................................................................................54 5.4.2 The Process Of Quote Creation.............................................................54 5.5 Actuaries...............................................................................................58 5.6 Underwriters..........................................................................................59 5.7 Insurance Payer’s Sales Department.........................................................60 5.7.1 External Agents that deal with Sales Department of Insurance Payers.......61 5.8 Review Questions...................................................................................62 6 Benefits....................................................................................................64 6.1 Unit Objectives .....................................................................................64 6.2 Introduction ........................................................................................64 6.3 Indemnity Plans.....................................................................................64 6.4 Managed Care Plans...............................................................................65 6.4.1 Health Maintenance Organization (HMO)...............................................66 6.4.2 Preferred Provider Organization (PPO) ..................................................68 6.4.3 Point Of Service (POS).......................................................................69 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Healthcare Market Overview ___________________________________________________________________ 6.4.4 Exclusive Provider Organization (EPO)...................................................71 6.5 Which plan is the best?...........................................................................71 6.5.1 Exercise............................................................................................72 6.6 Other Plans...........................................................................................73 6.6.1 Vision Plans.......................................................................................73 6.6.2 Dental Plans......................................................................................73 6.6.3 Pharmacy Plans..................................................................................74 6.6.4 Medicare Plans...................................................................................75 6.6.5 Medigap............................................................................................75 6.6.6 Medicaid............................................................................................76 6.6.7 Long Term Care.................................................................................76 6.6.8 Disability Income Insurance.................................................................76 6.6.9 Catastrophic Coverage Plans................................................................76 6.6.10 Exercise........................................................................................77 6.7 Individual Insurance and Group Insurance.................................................77 6.8 Laws and Legislations.............................................................................78 6.8.1 Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA)...........78 6.8.2 Health Insurance Portability and Accountability Act (HIPAA).....................78 6.9 Review Questions...................................................................................79 6.10 References..........................................................................................79 7 Claims......................................................................................................81 7.1 Claim generation and submission to Providers...........................................81 7.1.1 Claims Intake Process.........................................................................81 7.1.2 Claims Intake : Diagrammatic..............................................................82 7.2 Claim Adjudication Process......................................................................83 7.2.1 Claim Preparation and determining eligibility..........................................83 7.2.2 Determine payment ...........................................................................86 7.2.3 Update Claim.....................................................................................88 7.2.4 Claim adjudication outputs..................................................................88 7.3 Claim Payments.....................................................................................91 7.3.1 Provider Payments..............................................................................91 7.3.2 Member Re-imbursement....................................................................92 7.4 Claim Adjustments.................................................................................92 7.4.1 Refund Adjustment ............................................................................93 7.4.2 Minus Debit Adjustment .....................................................................93 7.4.3 Manual Check Adjustment ..................................................................93 7.4.4 Void Adjustment.................................................................................93 7.4.5 Stop Adjustment................................................................................93 7.5 Government reporting............................................................................94 7.6 Explanation of Benefits (EOB)..................................................................95 7.7 Accumulators.........................................................................................95 7.7.1 7.7.1 What are Accumulators?.............................................................95 7.7.2 7.7.2 Function/Purpose of Accumulators................................................96 7.7.3 What is accumulated?.........................................................................96 7.7.4 Types of Accumulator..........................................................................96 7.8 Overall Claims system diagram :..............................................................97 7.9 Review Questions...................................................................................97 7.10 References..........................................................................................98 8 External Agents......................................................................................100 8.1 Unit Objectives ....................................................................................100 8.2 Introduction .......................................................................................100 8.3 Government Agencies...........................................................................100 8.3.1 Centers for Medicare & Medicaid Services (CMS)...................................100 __________________________________________________________________________________ 65736839.doc Ver. 1.0 Page 3 of 132

.......9..............4..........7 Exercise.................................1 Appendix A: Total E-Business Services Forecast for Healthcare.................................................................................4 Exercise....................................4 Member has filed a claim.........................................................123 9.............................2........4 References....................................103 8...............................106 8............................................4 Government Acts and Regulations................................5 Effect of external agencies.......................................4..........123 9......1 The Beginning: Member wants to purchase insurance....3................5...............128 (Source: Gartner Research..........103 8...........................................128 10................................................1 Unit Objectives .....................................doc Ver................7 Specialized Adjudication Engines/Companies......................................................................................5........................................131 __________________________________________________________________________________ 65736839.........................1 Benefits Of A Clearinghouse................................................ 1.................3 An Enrolled member wants to seek medical services......................116 8........123 9.......................9 Accreditation Agencies....113 8..............................127 10.....................103 8..........................................2 Clearinghouse versus Direct Filing.............105 8......3 Clearinghouse Income......3 Review Questions...................................................................1 HIPAA...............0 Page 4 of 132 ......4.113 8....................................................................................................6 Health Resources and Services Administration (HRSA)................3............3...................113 8...................115 8....2................................................5 National Information Center on Health Services Research and Health Care Technology (NICHSR)....................... Inc)...................................................2 Appendix B: The world Healthcare market and Healthcare IT spending....................3..124 9.8 General Agents...........................................12 References......3 Centers for Disease Control and Prevention (CDC).....................................102 8................102 8.......................................3 Exercise.............................117 8.3 Appendix C: The Cash Flux of the US Healthcare Industry.......2 CORBA...............127 10............................11 Review Questions.5..........................................115 8............2.........................Healthcare Market Overview ___________________________________________________________________ 8...............................5 Clearing Houses.......................................124 9.......................125 9......................................................................2 DEPARTMENT OF HEALTH AND HUMAN SERVICES (DHSS).........................................125 9........................127 10....................................................................101 8...................129 11 Glossary.....3...............................121 8..............................10 Drug Manufacturers....125 10 Appendices..............117 8........................117 8....103 ELECTRONIC HEALTH TRANSACTIONS STANDARDS ...................121 9 Summary.....1 The Accreditation Process...............................................................................5.................................................6 Third Party Administrators.......................................125 9...2 Getting a provider.......................................115 8..3....................................................4 Agency for Health Care Research and Quality (AHRQ) ......................................................................................120 8..............................103 8.....2 Workflow .....................124 9....4 Appendix C: Sample Quote Sheet.............114 8...........................2..................................2..........

Though the primary information system is the OLTP system that runs the daily business. a certain percentage will be paid by the Member and the rest by the Insurance Company (co-insurance).2 What is an HMO? HMO stands for “Health Maintenance Organization”. In case of Indemnity Plans.3 The Industry Outlook The concept of Managed Health Care gained popularity in the last 80s and the early 90s. On the other hand. The “For-profit” companies control 60% of the Managed Health Care __________________________________________________________________________________ 65736839. Members enrolled in an HMO are expected to choose one of the Providers as a PCP (Primary Care Physician). After that. Health Insurance in the United States was through Indemnity Plans.0 Page 5 of 132 . violating this rule will make the member liable for the full amount. Traditionally insurance has been one of the largest users of Information Technology. since these companies are service oriented. The industry has grown quickly and at present about 25% of all health insurance members are in some sort of Managed Health Care program. The Industry is made up of both “For-profit” HMOs and “Non-Profit” HMOs. and Individuals who look for coverage for themselves and their dependents. In these plans. which means the first few hundred or so dollars is fully paid by the Member. there are also support systems like the Data Warehousing System that helps in decision support. To process this high volume of data collected and maintain them for stipulated time. This Industry is highly regulated and captures high volume of data. the Imaging system that scans all incoming documents for storage and retrieval. Historically. the member is free to visit any Provider. Their primary function is to provide Health Insurance to Employer Groups and Individuals. The basic idea behind this is that the HMO ties up with a group of Doctors and Hospitals (Providers of Health Care) and allows the members enrolled to visit one of the Providers within their list. there is a Deductible. Any amount over the Deductible and the Co-insurance will be fully paid by the Insurance Company. he ends up paying a small fixed payment. HMOs typically interact with two types of customers: Employer Groups – These are companies that provide health coverage for their employees and dependents. The concept has gained in popularity mainly from employers who provide health insurance to their employees in the 1990s. The HMO concept has evolved over the last 15 years as a way to provide less expensive health coverage.doc Ver. When a member follows this rule. a high computing power becomes imminent.I 1 Healthcare Market Overview 1. All visits to any Doctor or Hospital have to be authorized by the HMO. The concept has gained acceptance in the 90s and the Industry has grown rapidly and it caters to over 25% of all Insured members in USA. It aims in providing the brief idea of the Industry and it’s the key players. response times become a crucial factor both to reduce cost and improve performance 1. Also state mandated programs like Medicare and Medicaid also allow the recipients to be enrolled in HMOs. 1. for the next few thousand dollars. The member should always visit the chosen PCP and on his referral can visit other doctors.Healthcare Market Overview ___________________________________________________________________ UNIT .1 Introduction This unit provides a brief idea of the Health Care Industry in the United States. Managed Health Care is provided by HMOs (Health Maintenance Organizations). 1. Also.

there has been a tremendous pressure on the bottom line of these companies. Provider Organizations are adopting some Cost Cutting measures. (Refer Appendix B). The past few years has seen a consolidation in the hospital and health sectors. (Refer Appendix C). 1999 . US also leads in the IT development of this market. 70% of the Federal budget of the US.but low activity expected.Healthcare Market Overview ___________________________________________________________________ Industry. The last major merger happened in Feb 1. Proteomics and Bio technology) revolutionize health care. 1. struggling independent facilities in rural markets.doc Ver. due to increasing health care costs. 1. population. which are coming into place. The total health care spending (by private and public in the US) is 1.6 million) represents the largest number of users of long-term healthcare services. reaching $30 billion by 2005. However. This trend has slowed considerably and can be considered to be over for now. which are going to have a major impact in the way healthcare providers operate presently. See Appendix A). At present.a whopping number by any standards. __________________________________________________________________________________ 65736839. Initially small players focused on local markets dominated the Industry. which is a core focus for most governments around the world.when CHRISTUS Health was formed. The last few years have seen smaller provider sub segments face financial challenges. skilled nursing providers were slated to receive $83 billion during 9802. they will now receive $74 billion over the same period. however as a result of the BBA. Before BBA. The trend is still continuing and the growth is expected to continue. The US is the largest player in the Healthcare market and is worth $ 1. In the last few years. it is estimated that about 13% of the overall industry bed capacity are operating in bankruptcy. This has resulted in more government involvement in this industry and there has been lots of debate on how to make this industry more transparent and patient friendly. The US Congress is currently debating on a “Patients bill of rights” that will allow the patient to get better care under this system. a decrease of about 11%. accounting for 43% of the world spending. But the Healthcare market.310 Billion annually (2001) and is growing at 7%. In the last few years there has been an increasing number of acquisitions and the industry is moving into the consolidation phase. and is estimated to grow to a huge USD 4 Trillion by the end of 2003 (Dataquest.3.0 Page 6 of 132 . The last few years have seen a rise in the Assisted Living Centers. will continue to grow as newer technologies and sciences (Genomics.S. Furthermore. These two regulations are:  BBA (Balanced Budget Act) The Balanced Budget Act of 1997 (BBA-1997) is designed to lower Medicare expenditures by about $112 billion over the five-year period 98-02. The world market for Healthcare is USD 3 Trillion presently. Large corporations want see employee health insurance costs to reduce overheads. Industry sources project expenditures for senior living of $18 billion in 2000.3 Trillion. will seek acquisition by larger chains. also the fastest-growing segment of the U. the members participating in these plans feel that the HMOs squeeze the patients to maximize their profit.  HIPAA (Health Insurance Portability and Accountability Act) This act impacts all segments of healthcare industry with focus on standardization. However. Individuals aged 85 and older (3. investment in IT in global Healthcare sector is as low as 3% as compared to an overall average of 6% and 12% for financial services. Furthermore.1 Trends in Healthcare – Provider Space There are two major regulations. US is the largest spender in this market. Also. privacy and security. As a reciprocative step. Cap on spending by government (BBA) is focusing efforts on cost cutting in this space.

Aging Population Poses New Challenge for the Healthcare organizations.000 members in 1999 and another 327.3 million of those are Managed Health Care Members includes 5. Medical costs rose 7. Hartford. Retirement and Investment Services. E.5% in 1999. The largest privately held chain is the Blue Cross/Blue Shield Association. with the top 10 HMO chains accounting for close to 2/3 of total HMO enrollment in the US. 1. And this has resulted in higher costs. among others. These companies cater to small and large Employer Groups. the number continues to climb. The last few years have seen Rising Costs for the MCO (Managed Care Organization). the rapid expansion of the elderly segment of the population is presenting HMOs with a new set of challenges.g. Furthermore Managed Care Consolidation has seen larger companies acquiring smaller. Pharmaceutical costs are rising about 15 %. 1. HMOs cut 400.000 in 2000. Large HMOs are notifying the HCFA of their intent to exit Medicare + Choice market in 2001.5% in 2025. HIPAA is going to have sweeping effect on HMO. and also provide coverage for members participating in government programs like Medicare and Medicare.aetna. which collectively serves 21.4 Key Players At present the Managed Health Care Industry is made of a few large Insurance companies that operate across the country and lots of small HMOs that operate in local markets. Provides both Indemnity and HMO based Health insurance plans 21 million subscribed members in various health plans.Healthcare Market Overview ___________________________________________________________________ labor costs (typically 40 -50 % of hospital operating costs) are steadily rising (specialized skills shortage). Group Insurance etc. on average.cigna. Aging of the baby boom generation (born between 1946-1964). Hartford. undercapitalized players. Property and Casualty.3 members of Prudential Health Care recently acquired.0 Page 7 of 132 .doc Ver.3. CT www. including Aetna (affecting 355. CT www. Individuals. Recent times have seen HMOs exiting Medicare Choice plans.5 Million members enrolled in Medical HMO Plans. 1. 10. Ongoing pressure to reduce healthcare costs will prolong the merger trend in coming years.unitedhealthgroup. Aetna.2 Trends in Healthcare – Payer Space There has been a rise in Regulations & Lawsuits against payers. More than 35 class-action suits have been filed against managed care companies to date. which requires them to re-look at their transactions. resulting in more people covered.com Into Health Care. Cigna.6 million Americans. Prescription drug coverage has increased (95% of all members).000 members). MN www. Numerous companies have exited Medicare Choice markets following implementation of the BBA in 1997.com __________________________________________________________________________________ 65736839.com Leading provider of health and retirement benefit plans. People older than 65 years (currently 14%) are estimated to rise to 18. Plans available across the country United Health Care Minneapolis. Provides both Indemnity and HMO based Health insurance plans 6. Managed Care Market Still Top-Heavy in the sense the managed care sector is fairly concentrated.

aetna.com/ __________________________________________________________________________________ 65736839. 1.gigaweb.gartner.doc Ver.com/ http://www. 1.gartnerg2.jup.Healthcare Market Overview ___________________________________________________________________ Primarily into Managed Health Care.0 Page 8 of 132 .5 References AETNA Intranet http://www.000 Medicaid Members In addition to the above companies there are two large Non-profit Managed Care entities: Blue Cross Blue Shield Kaiser Permanente These operate in various states by having separate HMOs set up in each state.000 Medicare members and 530.com/ http://www.com/ http://www.8 million Fully Insured Managed Care Members.8 million self-insured members (fee basis. 445.com/ http://www. About 5. 1. no risk). operates in many markets.

This plan is considered the earliest example of an independent practice association (IPA) model prepaid health plan. and monitored quality of care. 2. __________________________________________________________________________________ 65736839.1 Unit Objectives This unit will present an overview of the healthcare industry to the reader. However. the Administration was influenced by Dr. 1.Healthcare Overview ___________________________________________________________________ UNIT . In the 1930s. “Provider-oriented” meant that. and it paid the affiliated independent physicians and hospitals according to a relative value-based fee schedule. physicians in private practice almost always billed patients directly on a fee-for-service basis. The foundation heard grievances against physicians. and the Blues would simply pay the bills on a fee-for-service basis. Thus early insurance was restricted to Indemnity insurance. In some locations prepaid group practice plans were quite successful at attracting members. provider-oriented insurance organizations. Oklahoma 1929.doc Ver.0 Page 9 of 132 . hospitals began to suffer from patients’ inability to pay their bills. coverage for the uninsured. When the war ended. During World War II. the Kaiser Permanente health plan had a growing network of hospitals and clinics and a half million people enrolled. politicians and interest groups promoted various proposals for reforming the healthcare system.II 2 Healthcare Overview 2. Michael Shadid started a rural farmers' cooperative health plan in Elk City. who argued that the structural incentives of traditional fee-for-service medicine had to be reversed in order to achieve positive reform. Issues of cost containment. Kaiser believed he could reorganize medical care to provide millions of Americans with prepaid and comprehensive services at prices they could afford. Blue Shield) did not try to tell physicians how to practice medicine. financially stressed hospitals prevailed on state legislatures to legalize the insurance schemes that became known as Blue Cross which were created as non-profit. In 1954. Ten years after the war. Blue Cross (and later. Physicians were free to practice as they saw fit. Over the initial objections of physicians. consumer rights. Shadid rendered care to his patients. The foundation accepted capitation (fixed) payments from subscribers. were all on the agenda. the development of health maintenance organizations (HMOs). These members paid a predetermined fee and Dr. developed peer review procedures. access to services for the poor and minorities. Paul Ellwood of Minneapolis.2 Genesis Of Healthcare Until the early 20th Century. Henry Kaiser whose name became synonymous with prepaid healthcare set up two medical programs on the West Coast to provide comprehensive health services to workers in his shipyards and steel mills. prepaid health care remained a minor phenomenon until the 1970s. In the late 1960s and early 1970s. during the Great Depression. In adopting this policy. In 1971. The HMO Act of 1973 authorized $375 million in federal funds to help develop HMOs. Dr. In 1929 Dr. Ellwood coined the phrase “health maintenance organization” to refer to prepaid health plans that enrolled members and arranged for their care from a designated provider network. Other local physicians became concerned about their own patient base. Kaiser opened his plans to the public. President Nixon’s Administration announced a new national health strategy. the San Joaquin County (California) Medical Society formed the San Joaquin Medical Foundation in response to competition from Kaiser. efficient delivery systems and more.

Overall. thereby dominating the healthcare market. __________________________________________________________________________________ 65736839. (HMO is a subset of managed care) continued to grow throughout the 1970s. This workflow is specific to Aetna-USHC (a leading provider of healthcare services).S. as it came to be called.doc Ver. Employers came to look upon managed care as a less expensive yet comprehensive and high quality form of insurance to offer to their employees. 2. we will be better equipped to understand the workflow as depicted in the following figure. 1. By the end of 20th century. 1980s and 1990s. there were over 600 HMOs in operation. The workflow for this model can be depicted as shown in the following figure.3 How the industry Works? Managed care market dominates the healthcare industry. the figure can be said to portray the actual workflow for any managed care organization.A). State governments turned to managed care to help with the Medicaid program. enrolling about 65 million members (close to a quarter of the population of U. the managed care segment had 181 million members. however. or. what can be said to be the ‘five pillars of healthcare’ are –      Member Provider Benefits Claims Sales In addition ‘External agents’ (agencies not directly involved with providing insurance) also form a major component. the nature of this information being very generic. The major players in this flow.0 Page 10 of 132 . and the federal government implemented Medicare.Healthcare Overview ___________________________________________________________________ Managed care. We will see each of these in greater details in the next section. After the five pillars have been introduced.

1.doc Ver.0 Page 11 of 132 .Healthcare Overview ___________________________________________________________________ Request Quotes Aetna Sales Quotes Customer Policy maint and billing Under writing Provider Admin Policy Entry Claim/Elig Inq Member Help Desk Provider Claim Policy Providers Claim Medical Service Claim Office Benefit/ Provider Inquiry Claim Routing/ Adjudication EOB Claim Reporting ERA EFT Members To Provider Bank Actuaries Figure 1: Managed care workflow __________________________________________________________________________________ 65736839.

They offer a great flexibility to the company in providing insurance of choice to the employees. However. So. and is a very good illustration of the amount of importance that is attached to health insurance in U. The providers get this fee irrespective of the number of encounters (a visit by a member to a provider is known as an encounter) they had in that month. Such groups are known as self-insured groups. A variant of this is the Company Paid Groups. the members have to pay for healthcare coverage). in which the employers pay for the healthcare subscription (in case of normal group insurance. Reduction in this cost to the member is a great advantage with group insurance.Healthcare Overview ___________________________________________________________________ 2. these companies do not have the infrastructure to perform as an insurance company.2 Providers. This is a powerful perk used to retain good staff. they outsource the administrative part to the insurance companies while retaining the money reimbursement part with themselves. 1. A member is a person who purchases insurance from (or enrolls with) an insurance company. or to those who do not have a employee sponsored group insurance scheme. Both individual and group insurance. These monetary benefits are offered in various forms.4. Though self-insured schemes are quite popular.A. but the trend is towards group insurance due to its basic advantage of reduced cost and enhanced services. For insurance company. as the total expenditure remains constant irrespective of the number of members having to seek medical services. group insurance schemes are able to get better deals for their members than in case of individual insurance. The main advantage with group insurance is the freedom of choice for a member. He can purchase this insurance coverage for himself and his family (also called his dependents). Group insurance allows the insurer to spread the risk over a larger number of people. The providers enter into an agreement (contract) with the insurance company. In case of some large corporations like AT&T or IBM the company itself provides insurance to its employees. However. in return they are offered monetary benefits by the insurance company. __________________________________________________________________________________ 65736839. Under this agreement they provide medical care at reduced rates to the members.doc Ver. 2. it also restricts his earnings. a pharmacy or hospitals are all referred to as providers.0 Page 12 of 132 . his employer will pay for his insurance coverage. A Provider is that entity which offers actual medical services to the members.S. So.4 2. they are able to achieve a balance between providing desirable healthcare coverage to their employees without causing administrative overheads. In such a case the employer becomes his plan sponsor and the insurance is known as Group Insurance. while in case of individual insurance the risk is concentrated on a single member and his dependents. from the provider’s point of view it’s a choice between a fixed income and a varying income (which may be more.4.1 Healthcare pillars. capitation helps them to forecast their spending. He is free to choose any of the services offered by the insurance company. One of the most popular of these forms is a fixed monthly fee (capitation fee). A group has much more bargaining power due to the simple fact that group insurance is less risky for the insurer. Due to its bargaining power. This is known as Individual Insurance. have their advantages and disadvantages. they are feasible only in case of very large organizations. or less. While on one hand capitation ensures a fixed monthly income for the provider. A doctor. This way. Members. In most cases. There are other variants of insurance in the market. depending on his popularity with the patients). he has to pay for those services. Individual insurance is restricted to people who need to have specific coverage not offered in their group scheme.

Due to the control over the choice of provider.e. the insurance company contracts with providers and form a network of such providers. The general agreement between the Insurance Company and the member that details the benefits that can be provided to the plan holders While the actual legal document issued by the insurance i. As with self-insured groups. the insurance company may directly employ providers. 1.3 Benefits.4. In case of Indemnity plans. In general. In case of certain large hospitals with a significant patient base. Such a group is called an IPA or an individual practice association. the member is called a Plan. This constitutes the Staff Model of managed care. which contracts with the insurance company. Benefits can be described in two ways 1.0 Page 13 of 132 . they are very expensive. If the claim is found to be valid. the members visit a provider and pay him for his services. This staff model however is feasible only in case of very large insurance companies. whom sets forth the terms and conditions of this agreement is called a Policy. 2. 2. In turn the insurance company is able to offer a range of providers to the members at a single source. the IPA. Formation of an IPA gives the providers more bargaining powers with the insurance company and assures them of an increased patient volume. the insurance company is able to offer healthcare at reduced rates. i. they file a claim (a request to refund the expenses incurred) with the insurance company. In some cases. The members pay a fixed monthly fee and need to choose a provider within the network as their primary care physician or a PCP.The PCP manages their complete healthcare. a group of providers in a designated area are contracted by the insurance company to form a network (a group of contracted providers within a designated area is said to constitute a network) of providers. we can say that a plan is the general range of benefits offered by the insurance company. individual providers form a group. right from providing services to filing claims. The insurance company may provide medical/dental/vision coverage.e. In case of managed care. The reduced cost of a managed care plan is the main reason for members preferring them to indemnity plans. or. These when customized as per the member’s requirements and put down on paper as a legal document forms a policy. After that. they may outsource the administrative functions to an insurance company while keeping the money reimbursement part with themselves. There has been a gradual shift in the choice of members from Indemnity (traditional fee-forservice) plans towards Managed Care (prepaid) plans. Staff model is beneficial from the insurance companies point of view.doc Ver. Thus. as they are in a better position to regulate the expenses. Though they offer great flexibility to members in their choice of providers. The insurance company offers a better deal to its members for using a provider within this network. the insurance company pays a part (usually 80%) of the expenses. the hospital itself may function as the insurer.Healthcare Overview ___________________________________________________________________ Sometimes. company to the member. The major line of coverage provided by the insurance company. Then depending on the choice of coverage the member is said to have medical benefits or dental benefits or vision benefits. The right of a member to receive services from the insurance company as per their mutual agreement. This is one of the most stable models of managed healthcare. The providers themselves have an increased patient volume and hence offer services at reduced rates. __________________________________________________________________________________ 65736839.

it also reduces the necessity for claim examiners. The checks can include. validated for necessary information and then loaded into a database. In addition the claim turn around (time from a claim being filed to the final check being issued) is a major issue for members and providers while choosing an insurer.The claim is received by the insurance company. POS provides the member with the option of having HMO type coverage at a lower fee.4. referrals. The member is also sent a letter called the explanation of benefits (EOB). member receives a check for payment of the expenses. nowadays there is a major emphasis on automated claims adjudication. benefits. The recent trend has been to go for PPO plans. Claim is either filed on paper or sent electronically . 1. Members cannot avail services from a provider not contracted with the insurance company.doc Ver. amongst other things -     Whether the member has satisfied his deductible (a deductible is a fixed dollar amount the member has to pay each year before be can claim benefits) Whether he has satisfied his copay (a fixed dollar amount the member pays every time he visits a provider) Whether he has satisfied his coinsurance (a percentage of the total cost which the member has to pay) Whether he had the necessary referral (or permission from the PCP) to visit the specialist.Healthcare Overview ___________________________________________________________________ The model of managed care as described above is known as a HMO or a health maintenance organization. policy etc. Apart from speeding up the process. members may be enrolled with multiple carriers (insurance companies). providers. This is known as coordination of benefits (COB). As explained earlier. is a recent addition to the stable of managed care plans. also know as Claim Examiners. It has a major disadvantage that it limits the choice of providers to a network. while having the option of Indemnity type coverage at a higher fee. The claim is then adjudicated (or tested for authenticity) as per the company’s business rules and policies. Complex or ambiguous claims.EPO or exclusive provider organization. On completion of claims adjudication. a hybrid of HMO and POS plans. In such cases the claim is first processed by the primary payer (there are standard rules to determine which insurer is the primary payer) and then sent to the secondary payer. Hence. also claims with any missing information are resolved manually by Adjudication experts.4 Claims. a Claim is a request filed by the member (or his PCP) for the refund of medical expense incurred by him. Members who wish to have a greater flexibility in the choice of providers have the option of going for other managed care plans POS or point of service plans and PPO or preferred provider organization plans. __________________________________________________________________________________ 65736839. thereby making the process more cost effective. EOB gives the details of the services rendered to him by the providers and the amount of expenses to be borne by the member for the services he has used.0 Page 14 of 132 . Sometimes. as it offers the best of both Indemnity and Managed care plans. Claims adjudication is a very complex process and requires information of almost all the entities associated with health care such as members. It also gives the amounts applicable to him. 2. PPO is also similar to POS with the added advantage that in the HMO type coverage the member is not needed to have a PCP.

and logistical content errors.4. Center for Disease Control and Prevention (CDC). All the services and management activities cannot be carried by the insurance company itself on it's own. the process of adjudication may be outsourced to another organization that has the necessary rule engine in place. The role of the actuary is to decide the rates for the various services offered by the insurance company. as there is stiff competition in the market. syntax. This helps reduce the cycle time for claims adjudication. it is forwarded to the insurance company responsible for payment. Following are some examples of such agencies. laws such as Health Insurance Portability & Accountability Act of 1996 (HIPAA) and Consolidated Omnibus Budget Reconciliation Act of 1986(COBRA) ensure the protection of consumer interests. It requires some help from some external sources or agencies. 1. there are agencies that aid the insurance company on various other fronts.5 Sales. So in case of very specific claims (such as processing of vision claims).S. Agency for Health Care Research and Quality (AHRQ). Apart from these regulating agencies. In return for their services the brokers are paid a commission (broker commission) User groups called actuaries and underwriters play key roles in deciding the policy rates and thus in selling the products even though they do not interact directly with customers. claims which require very specific processing are sent to these specialized adjudication companies.6 External Agents. __________________________________________________________________________________ 65736839. Usually. Sales and Marketing form an important activity in the health insurance industry. An insurance company has its own marketing workforce and also a pool of agents (brokers). 2. If a claim is determined to be free of typographical.doc Ver.4. it’s not possible for an insurance company to have a rule engine (or a software that adjudicates a claim) for all types of claims. the nature of claims processing being highly situation specific.In addition. Clearinghouses perform auditing services on insurance claims. 2. After that come the Specialized Adjudication Engines/Companies who offer help on adjudication of claims. Government agencies such as Department Of Health And Human Services (DHSS). it is not possible for an insurance company to have a rule engine for adjudication of every type of claim. Based on these rates the marketing department creates a Quote (or a draft outlining the services to be offered to the members and the rates for those services). Health Care Financing Administration (HCFA) along with others are responsible for regulating the healthcare industry. it is returned to the Provider/Member along with an explanation of what was wrong.0 Page 15 of 132 . These rates are based on a variety of factors and involve statistical and mathematical computations. Together they use various methods and strategies to sell the plans to as many customers as possible. Since claim adjudication is a complex process. Meanwhile. Health care is a highly regulated area in U. These organizations are known as specialized adjudication companies (Magellan and ADESSO are two such organizations). If errors are detected. Center for Medicare & Medicaid Services (CMS).Healthcare Overview ___________________________________________________________________ Also.A. the underwriter’s function is to approve/ validate the group specific factors added to rates by marketing people and apply mark-up or discount based on their judgment.

The insurer then collects data like number of members. and primary and secondary MC organization and submits it to the insurance company. enroll.doc Ver. we are in a better position to understand the managed care workflow. Provider access: A member seeking medical service contacts the organization to get the list of providers in the geographical area of the member. The quotes are based on the health industry statistics. Health insurance companies also enter into contracts with drug manufacturers to provide preferred services to their members. average age etc for preparing a quote. dependents. All these external agents help the correct regulation and effective functioning of the Healthcare industry. PCP address and contact info. Typically. adding beneficiary to the policy. Referring back to Figure 1. The schedule for premium payments is also defined at this stage. The claims are either sent by mail (paper claims) or electronically. the drug manufacturer provides discounts to the members. Accreditation agencies are responsible for providing accreditation to organizations. which then prescribe the same to the members. 1. ID cards are issued to the members that display the policy number. They are especially useful in case of small insurance companies who may not have the necessary infrastructure to take care of claim payments. location of members. census data or demographic details Underwriting: After the acceptance of quotes by the plan sponsor the underwriting department underwrites the actual policies in terms of plan coverage and commercial agreements. OP explains the rating calculation done for the benefits selected by the Plan sponsor and also the terms and conditions under which the group is accepted for coverage. which permits them to sell their healthcare services in the market. Claim processing: The insurance company validates the member and provider information in the claim and makes payment to the provider for the services that are      __________________________________________________________________________________ 65736839. Once the underwriting is done an OP (Offer presentation) is generated and sent to the quote requester. the major steps in this flow are -  Quotes creation: The plan sponsor contacts the insurance company and expresses a need to buy health insurance. Claim filing: The provider prepares a claim that describes the services rendered to the member. 2. purchase. Providers in the insurer’s network are given a list of preferred drugs. General agents provide end-to-end connectivity that allows brokers and their clients to shop.0 Page 16 of 132 . The member sets up an appointment with the provider and receives the medical service on a pre-defined basis described in the policy agreement. Now that we have a fair idea of major players involved in the business. the members pay either a deductible or copay. adding beneficiary dependents to the policy etc. Policy creation: After underwriting. The member also specifies the primary and secondary MC organizations to the provider. In return. The insurance company promotes the drug manufacturer’s drugs amongst its members. serve and renew policies.5 Healthcare workflow. the policy department of the insurer creates a policy by assigning group policy number. cost of the service.Healthcare Overview ___________________________________________________________________ Third Party Administrators are responsible for making payments on behalf of a group health plan. They are the people who work behind the scenes to reduce administrative hassles and resolve complex service issues. claim posting address etc.

In the end the reader was given a brief overview of the managed care workflow.0 Page 17 of 132 .6 Summary. Analysis of claims from a particular geographic location may reveal an increase in claims in that region due to reasons related to environment. new products introduction etc 2.Healthcare Overview ___________________________________________________________________ covered under the policy. Actuarial decides the factor to be applied to renewal rates of benefits offered in that region.S. This unit gave a brief overview of the healthcare industry to the reader. __________________________________________________________________________________ 65736839.  Actuarial: This involves analyzing the trends.g. It’s the area responsible for setting rating algorithm and the pricing factors to be used in rate calculation. The more accurate and detailed representation of the workflow of the healthcare industry is given the following figure.doc Ver. 1. after a detailed description of all pillars has been given. In case of multiple MC (primary and secondary) the primary MC coordinates the benefits between the two MC and sends a COB (Coordination of benefits) to the member. E. The details about the pillars and the other topics mentioned in this unit will be presented in the subsequent units. It started with the genesis of healthcare in the U. The workflow shown in figure 1 represented the workflow of a managed care organization. arranging for reinsurance. future liabilities. An Explanation of benefits (EOB) is sent to the member describing the payments made and indicates the share that the member has to pay. We shall analyze this figure at the end.A and then introduced the five pillars of healthcare. contingency matters and prior details to come up with factors to alleviate risks.

insurance.7 1.      www. “Future of managed care” by Tufts managed care institute.edu/ “History of managed care” by Tufts managed care institute.human. 2.cornell. 3.yourdoctorinthefamily.doc Ver.0 Page 18 of 132 .com http://trochim. 2.Healthcare Overview ___________________________________________________________________ Figure 2: Detailed Workflow 2. Give a brief account of the development of the health insurance industry? What are the five pillars of healthcare industry? Explain the terms  Member  Provider  Benefits  Claims Explain in brief the workflow of a managed care organization. __________________________________________________________________________________ 65736839. 1.com www. Review Questions.8 References. 4.

1.Healthcare Overview ___________________________________________________________________  “Managed care overview” by Amit Shukla __________________________________________________________________________________ 65736839.doc Ver.0 Page 19 of 132 .

1.Healthcare Overview ___________________________________________________________________ __________________________________________________________________________________ 65736839.doc Ver.0 Page 20 of 132 .

__________________________________________________________________________________ 65736839.2. The provider/ member then will file a claim to insurance company. 1. A person purchasing plans can cover himself as a member (commonly referred to as "Subscriber") and his/her family members as dependent members (commonly referred to as "Dependent"). Provider will check the eligibility of the member for that service.0 Page 21 of 132 . doctor) to avail the service. These will be used to show the validity of the policy taken. Claim will be validated and the insurer will reimburse the amount to the provider/member. an insurer provides ID cards to its members.1 Insurance Business: An Overview. Member's data Asks for Service Providers Check Eligibility Files Claims Claim's Adjudicatio n Files Claims Member's Enrollment Payment Insurer Payment Fig 1: Member Overview 3. Some employers sponsor healthcare plans to its employees and its dependents.doc Ver.III 3 Members 3. 3. Once enrolled. The pictorial view of the process is as shown in figure 1.2 Introduction Member is a person who is the actual beneficiary of the healthcare plan.Members ___________________________________________________________________ UNIT . Member can go to a service provider (hospital.1 Unit Objective This unit will acquaint the reader with the role played by the member in the Healthcare Industry.

0 Page 22 of 132 . Insurance: An Overall Picture. 1. __________________________________________________________________________________ 65736839.Members ___________________________________________________________________ For the pictorial representation of insurance business and the member's interaction with other systems please refer to figure 2.doc Ver. Fig 2.

__________________________________________________________________________________ 65736839. Individual insurance is somewhat more risky for insurers than group insurance. Disadvantages of individual coverage Often. With individual insurance.3. the insurer will want to know everything about his/her personal health history. however. he/she may find it difficult to obtain coverage. In a group insurance situation.Members ___________________________________________________________________ 3. Advantages of individual coverage If available. just to make sure that he/she is getting the best coverage for his/her money. a member is responsible for 100% of the cost. 1. However.doc Ver. It is unwise to try to hide a pre-existing condition from the insurer. The risk potential will determine whether person qualifies for insurance and how much the insurance will cost. he/she is evaluated in terms of how much risk he/she present to the insurance company. Individual insurance often doesn't provide as much coverage as group insurance policies in the same price range.3 3. Although someone may think he/she can do without health insurance. a person may still be able to get a policy with an exclusion rider. He/She can negotiate to have certain provisions included or excluded. he/she is taking a major risk by choosing not to get coverage. individual coverage is infinitely better than being uninsured in the event of illness or injury. He/She will probably want to get quotes from several insurance companies before choosing one. since it is usually more comprehensive and less expensive than individual insurance. since many insurers use information from the Medical Information Bureau to determine whether an applicant is insurable. An unexpected illness or serious injury can put him/her and his/her family in financial peril. Individual insurance coverage is. Deductible and co-payment affect the premium. In case of individual insurance. much easier to come by when someone is healthy. individual insurance is generally more difficult to obtain and more costly than group insurance. the employer or association pays at least part of the cost of group insurance. because group insurance allows the insurer to spread the risk over a larger number of people.2 How to get individual insurance? To get individual insurance. This is generally done through a series of medical questions and/or a physical exam. Before issuing an individual insurance policy.3. and can often choose his/her deductible amount and co-payment percentage.1 Individual and Group Insurance in detail Individual Insurance Individual members are those who purchase insurance directly from an insurance company. by contrast. a person can either contact the insurer directly. Moreover. is usually available without taking a medical examination or answering health questions. or get in touch with the insurance agent. If the insurer doesn't want to cover a particular health condition. 3. ironically. But. if it is later discovered that he/she withheld information from the insurer. a person is directly in control of his/her policy. For this reason. the provisions of the policy are negotiated between the insurer and master policy owner (usually an employer or association). When an individual apply for insurance. If he/she is already sick or have a history of health problems. individual insurance is often more expensive to make up for the insurer's increased risk exposure. his/her coverage could be canceled altogether. Group insurance. group insurance is generally a better option.0 Page 23 of 132 .

It does no good to have guaranteed renewable insurance if the insurance company goes belly-up. However. tests. he/she shouldn't have to worry about medical costs getting out of hand. anesthesia. here are some things he/she should look for:  Financial stability An insurer with an "A" or "A+" rating from A. Many policies do cover outpatient treatment. Major medical coverage Major medical coverage (which covers all hospital costs including rooms. and if someone might never have to worry about his/her out-of-pocket costs unless he/she becomes seriously ill. __________________________________________________________________________________ 65736839.M. but he/she pays dearly for this protection. emergency-room care. The provision can be very important if the person is unable to work for an extended period of time. Coverage of pre-existing conditions Many insurance companies impose a waiting period before covering preexisting conditions. or Standard & Poor's. By agreeing to a higher deductible and/or co-payment. The shorter this period is better. As long as he/she continues paying premiums. he/she can cut his/her insurance premiums dramatically.0 Page 24 of 132 . some states require HMOs to offer coverage to individuals during a special open enrollment period each year. and drugs) is preferable to hospital-surgical coverage (which covers only hospital and surgical services).Members ___________________________________________________________________ What to look for in an individual policy? If someone can find one that offers individual insurance. Anything less than $1 million may be insufficient to cover you in the event of a catastrophic illness. an HMO. but they will rise for all policies in the class (not just individual’s). The premiums may go up over the years.doc Ver. Waiver-of-premium provision This allows a member to skip the premium payments if he/she becomes seriously ill. although cosmetic and other truly "elective" surgeries are rarely covered. However. The highest deductible and co-payment someone can reasonably afford Lower deductibles and co-payments mean the costs will be lower if someone actually ever gets sick. Lower out-of-pocket maximums can mean substantially higher premiums. Moody's. Out-of-pocket maximum Also called a "stop-loss. his/her insurance coverage continues. "Guaranteed renewable" provision This means the insurer can't cancel the coverage if someone becomes ill." this limits out-of-pocket costs. Anything over a year is extremely undesirable. Three months to one year is standard. PPO. Best. 1. High benefit ceiling Policies with unlimited payouts are rare in this day and age. Some managed healthcare systems provide coverage on an individual basis as well. since it really depends on how much someone can afford to pay. x-rays. And as long as he/she retains a reasonable out-of-pocket maximum. if someone is getting individual insurance from a traditional insurer. someone will want to find a policy with the highest lifetime payout possible. Choosing an out-of-pocket maximum is a personal matter. or POS plan can often give the most cost-effective insurance coverage. In fact.        Providers who will offer individual insurance Most people purchase individual health insurance coverage through traditional insurers.

The purpose of the eligibility period is to reduce insurance costs by preventing people from waiting until after they discover a health problem to sign up for coverage. all eligible people can be covered by a group policy. the initial cost of establishing group coverage is lower than the cost of issuing a separate policy to each person. modify his/her existing coverage. For employer-sponsored health insurance. It shows the benefits provided under the group contract issued to the employer or other insured. and special-interest groups. Clearly. a single policy covers the medical expenses of many different people. during which one may sign up for coverage. Cost Effective Because only one policy is issued for the entire group. Other groups that may offer insurance coverage include churches. this is often the first 30 days of his/her employment. and go through a physical examination. chambers of commerce. or add dependents to his/her coverage. group __________________________________________________________________________________ 65736839. this is better for those with chronic health conditions. If a person fails to enroll during this period.doc Ver. instead of covering just one person. Both employers and associations may also have an open enrollment period each year. How to get group health insurance? Find out the eligibility Many employers offer group health insurance as part of their employee benefits package. 1. regardless of age or physical condition. Apply for coverage although one’s individual health is generally not evaluated when he/she apply for group health insurance. Also. the only real disadvantage of group insurance is limited or no freedom to customize the policy to individual needs. The specific policy provisions are all determined in advance.0 Page 25 of 132 . regardless of current physical condition or health history. such as average age and degree of occupational hazard. The policy is typically negotiated between the insurer and the "master" policy owner (employer or association) with no input from the member. the insurance company has the right to treat him/her as though he/she was applying for individual insurance. who might be unable to get individual insurance. The insurance company can then decide whether or not to insure him/her. as are deductible amount and copayment percentage. he/she must apply during the specified eligibility period. trade associations. The premium for group insurance is calculated based on the characteristics of the group as a whole.3 Group Insurance Group insurance is coverage of a number of individuals under single contract. clubs. With group health insurance. Advantages of group coverage Easy to obtain Under a group health insurance arrangement. this may be the first 30 days of his/her membership in the group. In general. Employers pay healthcare subscriptions for some or all of their staff. For associational insurance. the insurance company agrees to insure all members of the group. or the first 30 days following his/her initial probationary period. where each person's risk potential is evaluated to determine insurability. The only condition is that the group members must apply for insurance within the specified eligibility period. This means he/she will probably have to answer extensive health questions. The most common "group" is employees of the same employer.Members ___________________________________________________________________ 3. Unlike individual insurance.3. Each member of the group provided a group certificate.

In the increasingly tight labor market conditions prevailing in Ireland at the moment. A waiver-of-premium provision This allows one to skip the premium payments if he/she becomes ill. Choosing an out-of-pocket maximum is a personal matter. Disadvantages of group insurance One can't customize the policy. Within a fairly large group. Anything less than $1 million may be insufficient to cover in the event of a catastrophic illness. In some situations. In a group insurance situation. however. Advantage of company-paid groups Deduction Schemes A salary-deduction scheme comes into effect when a company or group organizes deductions from each employee’s salary and forwards them to Healthcare. A "stop-loss" provision This limits the out-of-pocket costs.3. This scheme makes things easier for the employees and encourages employee loyalty. or Standard & Poor's. one shouldn't have to worry about medical costs getting out of hand.Members ___________________________________________________________________ insurance is somewhat less risky for insurers than individual insurance. Company Paid Groups     3. High lifetime payout Find a policy with the highest lifetime payout possible. 1. it is almost certain that the good insurance risks will equal or exceed the bad insurance risks. An increasingly powerful "perk" useful for both attracting and keeping good staff. Moody's. and his/her deductible amount and co-payment percentage are determined in advance. By agreeing to a higher deductible and/or co-payment. The highest deductible and co-payment one can afford Lower deductibles and co-payments mean the costs will be lower if one actually ever get sick. it generally costs less to purchase. __________________________________________________________________________________ 65736839. the provisions of the policy are negotiated between the insurer and master policy owner (usually an employer or association).0 Page 26 of 132 . the employer or association will pick up some or the entire group insurance premium. he/she may be able to choose between two or more insurance plans.doc Ver. company-paid schemes are the fastest-growing segment of the market at present. employers pay Healthcare subscriptions for some or all of their staff. he/she can cut his/her insurance premiums dramatically. the companypaid group healthcare scheme offers benefits for employer and employee alike. And as long as he/she retains a reasonable out-of-pocket maximum. since the risk is spread out among a larger number of people. This can make group insurance even more affordable. The provision can be very important if he/she is unable to work for an extended period of time. Lower out-of-pocket maximums can mean substantially higher premiums. Best.4 In these groups. Since group insurance costs less for the insurance companies to establish and administer.M. An individual member does not have the freedom to have provisions included or excluded. but he/she pays dearly for this protection. Break on premiums In many cases. What to look for in a group policy?  Financial stability Look for an insurer with an "A" or "A+" rating from A.

) 3.3.  Their Work will be given higher priority by the insurance company. half-yearly. they are entitled to claim tax relief on the full premium. a payment can be made directly on a yearly. thereby reducing their effective rate of BIK to the standard rate of income tax. professional bodies. The financial risk is borne by the Plan Sponsor. Alternatively.  They will be given more priority for processing of their claims then others get.doc Ver. Self-Insured People are Profited by:  Getting more benefits for the same plan which an insurance company will not provide for others at low cost. Plan Sponsor is profited by:  They get the Health Insurance plan at a cheaper rate. one can provide his/her company with significant benefits in terms of employee recruitment. Benefit in the premium amount Some group schemes qualify reduction in the premium amount. as it is helpful in growing their relationship. Tax Relief for employees Employees are liable for Benefit-in-Kind (BIK) taxation on the paid Healthcare premium at their top rate of tax.6 Self Insured Group Plan Sponsors / Companies who pay the Claims' amount of their employees themselves are called SI (Self Insured) Groups. retention and goodwill. the Credit Unions and the Small Firms Association. (Examples are the Irish Farmers’ Association. the company can claim healthcare payments under the Corporation Tax shelter. SI Groups pay "Service Charges" to insurer for administration / management of medical insurance (adjudicating claims etc.5 Affinity Groups An Affinity scheme is appropriate for members of business organizations. __________________________________________________________________________________ 65736839.3.) for their employees. leading to less stress for them and their employees. Benefits to the company Introducing a Healthcare group scheme for employees. Flexible cover options Once employer chooses a particular level of cover. Insurance Company is profited by:  Getting a fixed sum of money for adjudication of claims. quarterly or monthly basis. sports clubs and interest groups.Members ___________________________________________________________________ Fast access to the best in modern healthcare Members can choose admission dates to fit in with work and family commitments.0 Page 27 of 132 . The SI group also has to maintain certain bank balance at all times to ensure the continuance of medical benefits to their employees. staff members can select a higher plan and simply have the balance deducted from their salary. 1. In a company-paid scheme. Ease of Payment Payments can be made by direct debit through company bank account.  Risk is moved to the Insurance Company. 3. But these figures are much lower than paying premium to cover all the employees.

his/her spouse. Most people get their health insurance through their employers. if the spouse of a self employed person. Un-reimbursed medical expenses include premiums paid for major medical.e. These deductions aren't limited to amounts over 7. his/her options may be limited to:  Individual health insurance coverage purchased directly from a provider  Group coverage purchased through a professional association or civic group (i.. were eligible for an employer-sponsored health plan for any part of the tax year. funds in an Archer MSA are used to cover healthcare expenses. instead of saving for retirement. surgical. This option is not available to self-employed. and physician's expense insurance.doc Ver. then health insurance costs paid during that time cannot be used to calculate this deduction. self-employed individuals can deduct a percentage of their health insurance premiums as business expenses.7 Self-Employed Members Health insurance need of a self-insured person is probably greater than the average person. trade group. The definition of self-employed individuals includes partners and 2 percent S corporation shareholders. 1. However. hospital. Special rules for the self-employed In addition to the general rule of deducting premiums as medical expenses. because an extended illness or hospitalization could easily deplete his/her personal assets and endanger his/her business.5 percent of AGI as are medical expense deductions.0 Page 28 of 132 . he/she may deduct the amount by which his/her un-reimbursed medical expenses exceed this 7.5 percent threshold. chamber of commerce) Deductibility of un-reimbursed medical expenses In general If someone itemizes deductions and his/her un-reimbursed medical expenses exceed 7. he/she can deduct the following percentages of premiums for insuring himself/herself. Also. and his/her dependents: First Year Second Year Third Year and thereafter 60% 70% 100% This deduction is limited to amounts less than the earned income. Archer MSA--a way to save for health-care expenses Archer MSAs (previously called medical savings accounts) are tax-advantaged individual savings accounts that work much like an IRA. and amounts paid out of his/her pocket for treatment not covered by his/her health insurance.5 percent of his/her adjusted gross income (AGI) in any tax year. __________________________________________________________________________________ 65736839. If someone meets the definition of a self-employed individual.Members ___________________________________________________________________ 3. In terms of health insurance.3.

Many insurance companies are still developing qualified high-deductible insurance plans and products with a savings component. Administrative /Management of medical insurance 5. is not eligible to open an MSA. and The annual out-of-pocket expenses do not exceed $3. In fact. Enlist advantages and disadvantages of individual and group insurance. 5.0 Page 29 of 132 .Members ___________________________________________________________________ A self-employed individual (or the spouse of a self-employed individual) may be eligible to open an Archer MSA if he/she currently has a high-deductible health insurance plan. A highdeductible plan is defined as one in which:  The deductible is between $1.600 and $2.850 for families). are those who purchase insurance directly from an insurance company in case of an individual insurance. 2. 1. Plan sponsors/ Employers 4. However. are those who purchase insurance in an employer sponsored insurance. in some states.400 for individuals ($3. there are exceptions to this rule. Employers 3.200 to $4. Answers: 1. This includes Medicare coverage. insurers are running into problems with state laws that prohibit such high-deductible plans. 3. Individual Members 2.doc Ver. 3. Many financial institutions are also still in the development stage with their Archer MSA account products.8 Exercise 1.200 for individuals ($5.3. The biggest challenge in setting up an Archer MSA may be finding a company that offers them. are those who pay the Claims' amount of their employees are Self Insured Groups. 4. __________________________________________________________________________________ 65736839. For Self-insured groups insurance company may provide the services. having additional coverage under a health plan that is not a high deductible.800 for families).  Someone.

Web-based applications For an individual web based application will facilitate online registration/ enrollment to get enrolled. Employees are allowed to select the benefits they wanted to opt for. benefit information that he/she has opted for. Employer then validates and sends the information to the insurance companies electronically. Membership letters and other details will be sent to the member once the process is over. Data entry operators will make you enroll online.Members ___________________________________________________________________ 3. This is most commonly used methodology for large employers having more than 300 employees.4 3. Required data will be captured and sent to the insurance company electronically. and claim adjudication. a member can start filling up the claims.doc Ver. Member can fill up the forms and send it to the respective postal addresses.1 Member’s enrollment What is Enrollment? The enrollment process comprises of collecting. verifying. billing. For an employer ID numbers and passwords for its employees will be provided. Collecting and updating the systems with the data completes the enrollment process.2  How is enrollment carried out? Traditional Paper Enrollment Enrollment forms would be available on the web sites or situated office outlets of the company. Once the enrollment is over. 3. The data will be received and formatted fed to the systems. The enrollment process will then be automated. Enrollment in the office outlets of the insurance company There will be city-based office outlets set up by the company.4. Member will provide all necessary data to the insurance company that will include personal information. 1. There will be online systems set up there. Member has to approach the office. product issuance. This is the most commonly used approach. Member will receive membership letter once the enrollment is over. and making available all necessary eligibility information for enrollee membership.4.0 Page 30 of 132 . Enrollment through the employer based systems Employers do have employees data maintenance systems.    __________________________________________________________________________________ 65736839.

membership number and other details. Member has to show his/her identity card when he/she approaches a service provider (doctor. pharmacist). Employer Report A report will be sent to the employer giving the details of its employees enrolled and their details.0 Page 31 of 132 . 1.Members ___________________________________________________________________ Enrollment Data Flow is shown in figure 3.4. membership letters will be sent explaining the benefits he/she has opted. eligibility information. ID card would have details about the member's SSN.3  Output of enrollment process ID Cards A person insured under an insurance company is given an identity card. Provider Report Providers are made aware of the new members enrolled under his/her name.    __________________________________________________________________________________ 65736839. hospital. Membership letters Once the enrollment process is complete. Name.doc Ver. Member Member Member Employer Associations Insurance Company Fig 3: Enrollment Data Flow 3.

Enlist the means of enrollment.doc Ver. 3. 3.0 Page 32 of 132 .5 Exercise 1.4 Enrollment: Overall Picture Please refer to figure 4 for the pictorial view of enrollment process. 2. 2. Direct enrollment in the field offices c. Means of enrollment are a. Employers having own member's database provide data to the insurer via _________. ID card __________________________________________________________________________________ 65736839. 1.4. Answers 1.4. Fig. Web-based applications. Member needs to show _______ as a token of its membership in the insurance company.Members ___________________________________________________________________ 3. Electronic data transfer. Traditional Paper transfer b. Electronic data transfer from employers d. 4 Enrollment Process 3.

Provider will also provide employer's data if the plan is sponsored by member's employer.  Service related information.  Policy Dates. These validations are also carried away when the eligibility is validated. Identification number etc.5 3. The data will be sent from the insurer that will contain duration for which the policy will hold true for a member is defined in the contract. So every time a service is given a provider asks the system if member is eligible to get that service or not. So the policy effective date. Member when purchases a policy selects the services that we would want to be covered.5. Depending on that various terms like rates. Social Security Number) along with service he/she is asking for.5. If member is eligible. In case of prescription drugs there is a cap held on the quantity drug to be consumed by the member in a period of time. 3. Provider gives basic information about the member (Member's identification number. the service will be provided and provider will file the claim for the payment of the service. Every employer when signs a contract with the insurer are given identification number. Taking insurance business into consideration. premium will be decided. member number (Identification number given by insurer). Employer Name. The system will run eligibility checks and returns the data to the provider. Not all could be applicable for a member. 1.  Employers Information. This data will be validated with the database of the insurer to make sure that the person is a valid member.2 Eligibility Process Provider will query on a member for getting a particular service. Every service-provider is bound to check the eligibility when a member asks for any kind of service except for indemnity plans. Again this will be validated against the insurer's database to make sure that the subscriber is a valid member. If the member is not eligible to avail the service the service provided will not be insured.doc Ver. Provider will send subscriber's information only if the member is a dependent.0 Page 33 of 132 .  Subscriber's information. Subscriber's name. termination date will be sent back to the provider. will be given to the system. The system will crosscheck the eligibility for the service and inform the provider back. Insurers will set-up systems by which eligibility information will be available to the provider.Members ___________________________________________________________________ 3.1 Member’s and Dependent’s eligibility Eligibility Eligibility is the ability of a person to use any kind of service. __________________________________________________________________________________ 65736839. Provider need not do any eligibility checks when member is having indemnity plans. There are different services that could be covered by the insurer. ID number is validated with the insurer's database. Last name will be fed to the online system as input. Data sent to and from the provider to validate the eligibility:  Member's information: The provider will send the identification information as SSN (Social Security Number). a member’s eligibility for a service will be decided upon the benefits that he/she has opted for.

Members ___________________________________________________________________ A member is also allowed to monitor its own/ dependent's eligibility status. 3. The Member Member may be interested in looking for their benefit data. The Employer Eligibility information will be maintained and accessed by the employers. By permitting healthcare providers to access this information directly. Some employers provide an online eligibility status inquiry similar to that given for employers.0 Page 34 of 132 . providers and their administrative staff to quickly and easily get detailed information regarding submitted claim status and eligibility status of employees and their family members.  Member having HMO plan __________________________________________________________________________________ 65736839. Insurance companies set online systems through which providers can query for the eligibility data for the member approached to him. Every time a member visits a provider.3 How a member should approach right provider? Eligibility also talks about the member getting service from a particular provider is valid or not. The Provider Healthcare providers need vital information related to member eligibility and claim status. the deductible and all other information. Eligibility data flows as shown in the figure 5. Insurer Member's Policy information Member's Policy information Member's Policy information Employer Member Provider Fig 5: Eligibility Data Flow The Insurer Insurance companies provide member eligibility information to the service providers.5. Employer groups normally use online administrative system that will provide eligibility status of a member. the information needs to be validated before giving any kind of service. provider will give service to the member.doc Ver. employers and to its members. After getting confirmation from the insurer. 1. Even an employer is given access to this data so that it can monitor eligibility status of its employees.

foster children.6 Answers __________________________________________________________________________________ 65736839.  Member having POS plan Member is free to go to any provider.5  Eligible Dependents Eligible dependents are member’s spouse and/or unmarried children under age 23 who live with member in a regular parent-child relationship. (Y/N) Daughter July aging 26 passing through a phase of mental illness is treated as a valid dependent. 1. (Y/N)    3. or turns age 23. Affidavits of Dependency and legal documentation are required with enrollment forms for these cases. These are generally unattended. If goes to in-network provider the co-pay will be less. Coverage for an enrolled child will end when the child marries. and children in a guardian-ward relationship are also eligible provided they live with member and are substantially dependent upon member for support and maintenance. If member is divorced.5. Provider need not do any eligibility checks for member’s eligibility. mental retardation. legally adopted children. coverage may be continued.0 Page 35 of 132 . This includes children who are away at school as well as divorced children living at home and dependent upon member for support.5.5. Exercise 1.4 Eligibility Data Transfer Most of the insurance companies transfer the eligibility data electronically. This methodology eliminates the need to submit paper forms or produce and send cumbersome tapes. But there is no restriction on the choice of the provider.doc Ver. which can get lost or damaged. The service will be provided only if the person is eligible for the same. or a physical disability. 2. children who do not live with the member are eligible if member is legally required to support those children. 3. 3. Stepchildren. moves out of the household. Coverage for children age 23 ends on December 31 of the year in which they turn age 23 If a child is not capable of self-support when (s) he reaches age 23 due to mental illness. 4. cartridges and diskettes.  Member having PPO plan A member will fall under a network and can get service from any provider falling in that network. (Y/N) Son Bill of age 21 got married and moved out will be a valid dependent of Joe.  Member having indemnity plan Member is free to go to any provider. So eligibility checks would be carried away but will not hold back the member from getting the service.Members ___________________________________________________________________ Every member has associated Primary Care Physician (PCP) for medical services and Primary Care Dentist (PCD). (Y/N) Providing member's eligibility data to the providers is a responsibility of the insurer. automated transmissions that include security features like encryption technology and unique IDs and passwords for user verification and system access. 3. Provider validates the eligibility of the member for the service asked. Providers need not validate the member eligibility before catering any kind of service.

1. 2.doc Ver. 4. N Y N Y __________________________________________________________________________________ 65736839.0 Page 36 of 132 . 3.Members ___________________________________________________________________ 1.

2  Services provided by the insurer View information/ Inquiry only Insurance companies do provide a facility via which a member can view his/her benefit information and the status of his/her eligibility. __________________________________________________________________________________ 65736839. There are several ways this service is provided most common is through phone calls.1 Means of services  Phone call Designed/Toll free numbers for member services. 3.  E-mail Member services e-mail address to which a member can send a mail and ask for the service. Provider inquiry etc.0 Page 37 of 132 . Web-based application is the most common of all of above modes.doc Ver. There will be webbased application where a member can login and avail the service or can login the service request. Review coverage status for medical and/or dental care. where a member can enter personally to login a service request. contact numbers and other details. claim eligibility. like the status of his/her claims.  Web based applications. o Personal Details This includes the name. general description of your medical benefits and includes member cost-sharing information.  Postal mail Paper driven approach in which member has to fill up a service request form and send to the member service station where the requested service application will be taken care of. web-based applications.6.6 Member Services Insurance companies provide plenty of services to make information available to its members. address. Members can make various inquiries. he can keep track on what is the status of the claim. o Claim Status When a member has filed a claim. o Benefits Snapshot Review primary care physician or primary care dentist selections for the member and the covered dependents. Essential security features are incorporated in the applications to prevent the data loss and data disclosure. such as co-payment or coinsurance requirements.  Walk in Situated are member service offices. There could be menu driven recorded message that will provide you information you want. o Benefits summary Talks about a partial.Members ___________________________________________________________________ 3.  FAX Paper driven approach in which member has to fill up a service request form and send to the member service station where the requested service application will be taken care of.6. Member has to register his/her name in the application and the data would be shared. 3. 1.

o Password change facility If there were a web-based application that caters all these facilities there would be a facility to change the password set up by the member. booklets:  __________________________________________________________________________________ 65736839.  Update information These services are catered through phone calls. Internet also helps out by providing enough data on the site. Log issues and complaints: o Logging provider complaint Member is free to log in any complaint about the service or the provider. o Add or delete family members at open enrollment. or adoption of a child of the employee  The termination or commencement of employment of the employee's spouse  The switching from part-time to full-time employment status or from full-time to part-time status by the employee or employee's spouse  The taking of an unpaid leave of absence of the employee or employee's spouse  The significant change in health coverage of employee or spouse attributable to spouse's employment  Other services o Providing forms Forms like medical claim submit form/ dependent care reimbursement form. are made available on the web-sites/applications that might be needed by the member.  Distribution of ID cards. These forms could be submitted via postal mail to the claims offices (the address is generally specified on the ID cards). proposed adoption.doc Ver. There will be company's officials sitting in the offices assisting the member in doing that plus there are designated mail-Ids a member can send a mail to. o Provider change facility Member may wish to change the primary care physician or primary care dentist he/she has a facility to do so. 1.Members ___________________________________________________________________ o Provider directory Provider directory is that enlists the providers those are in the network of the insurer/in contract with the insurer. o Clarification about the benefits Member can get the doubts about the benefits at any point of time. o Updating personal information Member may wish to update the personal information such as address or contact number etc. can walk in the offices set up by the insurer and do the changes.0 Page 38 of 132 . Some of the cases are:    A marriage or divorce of the employee The death of the employee's spouse or a dependent The birth. web-based applications or the walk in offices situated. Some times the employers update the insurer about these changes.

fills in the detail (name. The member has to fill a form for the ID card issuance. __________________________________________________________________________________ 65736839. moth. The premium statement is sent to the member along with an envelope.7 Premium Collection A member can pay premium to the insurer by following means:  Transferring fund from member’s account to insurer’s account: The member authorizes the insurer to get money transferred to insurer’s account. accounting and reporting of data to the plan sponsors (employers/ associations). Can be zoomed in for larger print and easier reading and can be printed on virtually any inkjet or laser printer to get perfect copies.Members ___________________________________________________________________ o Issue ID Card Member may need to issue a new ID card if misplaced/lost.  Updating member with new products.8. cheque number. 3.doc Ver. Monthly statements are emailed to the member portable document format (. recording. facilities: There are many upcoming services/ benefits newly provided by the insurance company. Member is kept updated with the information by weekly/ monthly reports or news on the websites. The facility to replace the ID card would be provided. The member receives the acknowledgement letter from insurer giving detail about the premium received.0 Page 39 of 132 . 1.   3. Once the money is transferred to insurer’s account. The member tears of the lower part of invoice. Payment by cheque If the member is willing to make a payment through cheque. The acknowledgement letter contains the detail about the payment such as premium amount.pdf) attachment. Sending statements through email has many advantages. policy number etc. an acknowledgement letter is sent to the member stating that so and so amount of money is transferred from member’s account to insurer’s account as an insurance premium for a particular month.8 3. A new card will be sent to the address we have on file for you.   Some insurance companies also send the premium statements through email. he/she receives a premium statement through post.1 Member Group Maintenance What are Groups? Groups are the frameworks used to organize billing. Address of the insurer is preprinted on the envelope. o o o New benefits information. policy number etc. New facilities information About products and programs that are available in the state. Can be stored electronically on computer for easy retrieval. claim payments.) and sends it along with the cheque in the envelope received with the invoice. statements:   Can be viewed on computer. Charging to the member’s credit card Some times member authorizes the insurer to charge the premium to his/her credit card. Can print as many copies as needed.

Employment Change. groups are created and entered into the systems first then the enrollment for the individual members would be done. __________________________________________________________________________________ 65736839. Family Effective Date Change.0 Page 40 of 132 . Membership details (Effective Date Change. 1. Office Effective Date Change. Payroll Change. Suspended). Being a parent entity some data is defined at a group level that will be inherited by the members following under that group. membership Termination date changes. Third Party Phone Number Change. Provider Office Change. the breakdown of the employee into groups will be done. Mass Id-Card Request. Employment Change.doc Ver. Mass Id-Card Request (Co-pay Change). Member Name Change. Payroll Change. Other maintenance performed on the member data is … Members Maintenance includes       Member's personal information changes (Address Change. The CONTRACT IS RENEWED for a group and the members are REINSTATED. Most Groups' renew their Plans every year in January. Membership Termination. Contact Address Changes) Third Party Address Change.3 Groups Maintenance Member and Groups' maintenance is performed annually.Members ___________________________________________________________________ 3. Group Maintenance includes               Office Details changes (Contact Number. Family Group to Group Change. Change Membership Termination Date. Reinstatement. The decision of the group structure will be based on Profit centers Unions Benefits Class of employee Locations Other categories specific to the plan sponsor For a group insurance. Membership Effective Date Change. Office Termination Change. Third Party Address Maintenance. Recalculate Family Contract.8. 3.2 Groups Formation When a plan sponsor enrolls its employees.8. ID-Card Request. Comment. Provider Office Change. This data would generally contain Employer information Plan Effective Date Plan Termination Date Benefits Covered Network Information Co-pay rates Claim offices The members could override some of the features.

3. Opting for the guaranteed renewable provision may save as much as 30 percent of the premium cost.0 Page 41 of 132 . Guaranteed renewable means that the policy can't be canceled as long as member pays premiums. pay attention to whether the contract is non-cancelable or guaranteed renewable. The funds paid are not specified for medical expenses .Members ___________________________________________________________________ 3. 3. Guaranteed renewable. Often. Non-cancelable. they must have the permission of state's insurance department.they can be used in any way the member wishes them to use.2 Exercise Questions 1.doc Ver. but the premium can be raised under certain circumstances (the state insurance department must approve the change. which would apply to all individuals in the same insurance classification). noncancelable policies are offered only to low-risk occupational groups at a high premium. Enlist the services offered for group maintenance.9 Disability Benefits Disability income insurance provides members with an income if they become sick or injured and are unable to work. Non-cancelable means that the policy can't be canceled and the premium can't be raised for the life of the policy as long as member continues to pay premiums.9. so may be premium will be raised only every few years. __________________________________________________________________________________ 65736839. When the groups are formed in case of a group insurance? 3. Answers: 4. A non-cancelable contract is preferable to a guaranteed renewable contract. Disability benefits contracts in which policy cannot be canceled and premium cannot be raised are _________. 1.9. Employers can provide coverage for employees too. 5. Disability benefits contracts in which policy cannot be canceled but premiums can be raised are _________. 4.1 Member’s concern When a member buys an individual disability insurance policy. What types of services does the insurer provide? 2. 5. For a guaranteed renewable contract company cannot raise your premium on an individual basis.

Members ___________________________________________________________________ __________________________________________________________________________________ 65736839.0 Page 42 of 132 .doc Ver. 1.

doc Ver.Members ___________________________________________________________________ __________________________________________________________________________________ 65736839.0 Page 43 of 132 . 1.

IPA or PORG: (Independent Practice Association or Provider ORGANIZATION) It is the legal entity that provides administrative and contract related services for providers. Group Or Entity: These are group of people who provide services under a common name e. As the name suggests it is the PCP who is in constant touch with the members directly. organization or institution that provide services to those enrolled into the system i. COMMUNITY PROVIDER: These providers do not have a contract at all with Healthcare organization.  NON-PAR: These are those non-participating providers whose contract with Healthcare organization is terminated. 1.IV 4 Provider 4.  Other way of classifying them based on the type of contract is as follows:  PCP: Primary care physician.1 Provider types Providers are those people.Providers ___________________________________________________________________ UNIT . PREFERRED PROVIDER: These are those providers who work on contract basis by negotiating the compensation they charge. Hospital etc.e. physicians etc.   Depending on contract the Providers can be classified as:  PAR: Such a provider is a participating provider and has a valid contract with Healthcare organization.0 Page 44 of 132 . Provider types can be classified broadly in the following ways:  Individual providers: These are those person who are not part of any group or association e.g. Dentists. NON-PREFERRED PROVIDER: These are those providers who are not contracted to furnish services or supplies within ‘PREFERRED’ network. the members. Every member is supposed to approach the PCP first before going to anyone else.   SPECIALIST: A specialist is one who has one or more areas of specialization in medical field. There can be numerous classifications of providers depending upon the facilities provided by them.doc Ver.g. BACKUP-PROVIDER:   __________________________________________________________________________________ 65736839.

3.g. which share knowledge and intellectual property via the Internet. Health insurance companies usually consider:  Licensure and/or certification  Drug Enforcement Agency (DEA) registration (for Medical Doctors and Doctors of Osteopathy)  Professional liability history  Medical education and training  Specialty board certifications  Mental and physical health __________________________________________________________________________________ 65736839. Health insurance companies sometimes delegate credentialing to some physician groups. or an appropriately delegated credentialing process.2 Credentialing Criteria The process requires providers to present documentation of training.3.2 FACILTIES: These are those providers who provide facilities such as wards. individual practice associations (IPAs). E. SUPPLIERS: These are those providers who provide medicines and surgical instruments.. 1.1 Provider Contract Process Providers who wish to participate in one of the networks must complete an application and the corporate credentialing process.0 Page 45 of 132 . Provider Participation HCO (Healthcare organizations) usually elicit provider participation (into their network) using some standard marketing strategies. so as to assure a minimum amount of revenue by way of claims.g. Based on nature of service.3 Provider Contract Contract is an agreement between the provider or group of providers and the insurance company about the services the provider(s) will provide and the payment that the insurance company will make to the provider for the services rendered.PHO(s). which involves clearing provider claims within a fortnight (subject to the provider electronically filing the claim in a prescribe format). 4. 4. Some HCO(s) have pioneered the E-Pay/E-Cash option. Pharmacies. Maternity Home etc. Hospital. providers can be classified as following:    4. 4. e.doc Ver. • Minimum number of member visits Some HCO(s) guarantee providers. a minimum number of member (or dependent) visits.Providers ___________________________________________________________________ A provider can specify another provider as his/her backup. and physician hospital organizations . there will be routine visits to the provider's office and a re-credentialing process every two years. education and other relevant information. Some of these are as follows: • Quick settling of claims Most HCO(s) attract specialist providers into their network by promising them quick turnaround of their claims. large HCO(s) provider e-learning options to enrolled providers via virtual communities on the Internet. Backup provider provides medical services to the patients of the provider when he is not available. ICU’s. • E Learning Virtual Communities As some of the fringe benefits. Once a provider is accepted as a participating provider. path labs etc. These are specialist networks of providers. EQUIPMENTS: These are those providers who provide medical equipment for executing medical tests such as X-ray labs.

professional organizations. 1. Specialist contracts and Hospital contracts. Some of the different types of provider contracts include PCP contracts. For example.3. the system uses a three-part quality factor to adjust the physician’s capitation payments. DEA registration. Under capitation. some primary care physicians and other providers in the network are paid in the following ways:  Per individual service (fee-for-service at contracted rates)  Per hospital day  Under other capitation methods (a certain amount per member. membership/privileges. hospitals. In most areas. 4.Providers ___________________________________________________________________     Disciplinary history (including licensure. This means the physician is paid a fixed amount twice a month for every member who selected that physician to be his/her primary care physician.  Quality-Based Physician Compensation  Quality Care Compensation System Quality-Based Physician Compensation Participating providers in the network have agreed to be compensated in various ways. physician hospital organizations. independent practice associations (IPAs). Quality Review considers: __________________________________________________________________________________ 65736839. Additionally.3.5 Provider Reimbursement Most health insurance companies incorporate the following payment methods to reimburse providers for services.doc Ver. a physician receives payment for a patient whether the physician sees the patient that month or not. mental health companies and similar provider organizations that are compensated by us on a capitated basis or other basis Quality Care Compensation System Under the Quality Care Compensation System.3 Verification of Provider Credentialing Information Health insurance companies verify the information about providers through a variety of sources:  State medical boards  National Technical Information Service tape  American Medical Association master file  American Osteopathic Association directories  American Boards of Medical Specialties  National Practitioners Data Bank  Malpractice carrier  Court records  Office of Inspector General reports  Hospital providers 4. per month)  By integrated delivery systems. physicians are paid by capitation. specialists. many participating primary care physicians are compensated in accordance with the Quality Care Compensation System* (QCCS) described below. Medicare/Medicaid) Work history Malpractice insurance coverage history Clinical privileges at a hospital hospital 4.0 Page 46 of 132 .3.4 Types of Contracts All major health insurance companies have several different types of provider contracts based on the type of servicing provider.

which is generally fixed and can be 30 to 90 days and to utilize the referral the initial visit must be within that validity period. True. A PCP or an authorized provider provides it when special care is required. Encounter date. IPA.   __________________________________________________________________________________ 65736839. A provider is called as ________ provider if he has a valid contract with the company. 4. details of the provider for whom referral given. 2. A PCP can issue themselves referrals for non-routine services. Referral inquiry by member or referral number – Once the entry is made then at any time one can inquire about the details of any referral.5. A referral once issued has a validity period. Suppliers 4. flu shots and cholesterol screenings) members get from their physicians  Number of our members who change their primary care physicians How well the physician provides access to care and manages the care of patients with chronic illnesses like asthma.g. PORG etc) 2. details of the provider who is referring. Insurance Company 4. (E. It depends on the plan taken by the member. 3. Exercise The legal entity that provides administrative and contract related services for providers are also a type of provider – True or False. Referral is not always required to visit outside PCP.1 Referrals processing  Referral entry – All the referral should be entered in the referral database so that it can be used if required.Providers ___________________________________________________________________ Results of member surveys Review of the care (like childhood immunization rates. PAR or Participating 3. 1. diabetes and heart failure   4. referral validity ‘From’ and ‘To’ date and service code (it specifies the king of service/treatment). Some plan has flexibility to visit any provider without any prior authorization in that case referral doesn’t come into picture. 4. If some referral has to be cancelled then we can do that through this process.0 Page 47 of 132 .5 Provider Referral A referral is a form of authorization given to a member to access services performed outside the Primary Care Physician’s (PCP) office. Contract is an agreement between the provider or group of providers and the _________________.4 1. Providers who provide medicines and surgical instruments are known as ___________. The information which needs to be entered are Member number. Referral maintenance – through this process one can modify the existing referral entry.doc Ver. Answers: 1. Referral entry can be done through batch or online processing however inquiry and maintenance is done through online screens. The inquiry can be done either on the basis of member number or referral number which ever is known.

1. the referral will not be purged.1 Quality Provider Networks AUSHC believes members benefit from quality provider networks in the following ways:  Comprehensive: Several providers participate with AUSHC including.5.) who have agreed to treat AUSHC members at negotiated rates and have agreed to abide by patient and quality management programs.2 Referral types There are two types of referrals:  Paper referrals – In case the provider is not connected to company’s network he can enter the referral details on a paper which can later be scanned to a microfilm or manually entered by a processor to the database of the insurer. If the referral meets the purge criteria below. and the referral has been logically deleted. in particular. 58560).6 Provider Network A network is a group of contracted providers (doctors. All referrals over 18 months old are purged.doc Ver. A Job will scan all referrals within the referral database. it will be written to two output files. 4. one of the toughest participation requirements in the country. laboratories. primary care physicians. 58550.g. AUSHC then reimburses that organization for allowing our customers to use the network. etc. with the following exceptions: o If the date of the referral entry is less than 18 months from the current date.  Specialized Care: National Medical Excellence Program helps members needing highly specialized medically necessary treatment such as transplants or cancer at national recognized institutions when the required procedure is not available locally. specialists. o If the referral is 18 months or older. o If the procedure/service code indicates that it is an infertility referral (e. All providers’ performance in monitored regularly.0 Page 48 of 132 . Factors such as population. 4.6. and acute care hospitals. This information will be written to a yearly archive file that is used to recall purged referrals. the referral will not be purged. and a visit has been taken within the last 6 months. 58552. 58555.Providers ___________________________________________________________________  Referral purging – This can be done in batch mode. local practices.  Tough Standards: All providers must meet our comprehensive credentialing standards. the referral will not be purged.  Electronic referrals – Direct online entry by provider. This is possible if the provider is connected to the company’s network directly or through a third party.  Extensive Monitoring: Participating Primary Care Physicians are re-credentialed approximately every two years based on a number of criteria including chart audits and the results of member surveys. Primary care physicians. must meet more than two-dozen criteria for admission into our networks. Our objective is to establish networks large enough to satisfactorily serve the targeted population to whom they will be available. The first will be a detailed dump of the referral that will be written to a purge file. and a visit has been taken within the last 30 months. availability of health care services. The second is a file that is used by another job. hospitals. which will do the actual erase of the referral. 4. 58551. __________________________________________________________________________________ 65736839. A rental network is an arrangement in which another organization (besides AUSHC) contracts with a group of providers. and travel time are taken into consideration when contracting with local providers to join the networks.

The local Network Management staff has the ongoing responsibility of ensuring that each network has the proper composition of providers.6. Labs etc.   __________________________________________________________________________________ 65736839.6. network staff target providers to be recruited and contracted. 4. The criteria used to select participating providers reflect minimum network composition standards.Providers ___________________________________________________________________ 4. All facilities are also required by contract to notify us of any change in coverage. The status can be retired. but may vary to accommodate local supply and regulatory requirements. and will remain during the term of the contract. 4. which includes hospitals. After developing a list of providers by type needed to meet customer needs. All the inquiry or maintenance of providers is done based on provider number. A PPO network must be complete enough to provide members’ access to a participating provider for a core of essential medical/dental services. Almost all the system uses this database to get any information about any provider. licensure or accreditation status. deceased etc.0 Page 49 of 132 .doc Ver.4 Network Hospital Standards Our current hospital contracts require network hospitals to represent and warrant that they are. appropriately licensed and accredited by either the American Osteopathic Association (AOA) or the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). A provider who is providing healthcare services on current date is an active provider.1 some common information of Providers Some of the common information that needs to be captured for a provider is given below:  Provider number – this is a unique number which is system generated. Provider status – Shows current status of the provider. Provider name – it is the name of the provider if he is an individual provider. Provider maintenance should be done everyday in order to keep the provider database up to date all the time.2 Network Adequacy Network adequacy refers to both the availability of a participating provider within geographic perimeters and the availability of essential services from a participating provider. Aetna reimburses the rental network organization for allowing our members to use the network. They compare the existing network with adequacy guidelines for the specific service area and identify whether there is a need for new providers. given to each provider to identify the provider easily.6.3 Rental networks A rental network is an arrangement in which another organization (e. If it is any group or hospital then name of that should be stored.g. In other words. and provide evidence of such insurance upon request. 4. 4. 1. They must also maintain adequate malpractice and general liability insurance or self-insurance. networks are adequate when there are enough providers available for the member population in a geographic area. closed.. Doctors.7. In the healthcare organization. Instead of engaging in direct contracting arrangement with individual providers. one the major database is Provider database. Pro Net) contracts with the providers.7 Provider maintenance This process involves collecting information on all type of Health Care Providers. and when members have access to the various types of medical services they may need.

4. d) None of the above. c) Both of the above. one of their addresses is identified as principle billing address. he can specify level 14 billing address for payment of capitation and level 15 billing address for payment of claims. only then the payment is made to the principle service address.Providers ___________________________________________________________________ Provider type – Provider type is categorization of the providers depending on the type of healthcare services they provide. but the company needs to put their details as well. 3. Midwife. There would be providers in the database. 2. to process their claims. is ____________. Both claims and capitation payments go to this address only if provider has not specified level 14 and level 15 addresses. Radiology center. b) Members have access to the various types of medical services they may need. Clinical Social worker. Effective and termination date . 14 or 15 billing address. Dentist. Nutritionist.doc Ver. The addresses of rest of the nine SLs are stored as 01. If a provider wishes to have a billing address.09 Service addresses. There are some plans available in which the member can visit any provider irrespective to his contract with the company. Nurse Practitioner.0 Page 50 of 132 . bi-weekly or monthly. Provider network is adequate when: a) There are enough providers available for the member population in a geographic area.The area in which a provider specializes is called his SPEC or specialty. Contract info – this information tell whether the provider is in contract with the company or not. Provider can have maximum of ten Service Locations (SLs). A unique number given to each provider.  4. o This is CAP and Claims billing address. – Physician. If a provider has more than one service locations. 14 & 15 – If a provider wishes to have separate addresses for capitation and claims payment. which are not in contract with the company.8 1.The address at which the payment of claims is made to a provider is called the billing address.    o   Claims payment schedule – It is the interval of claim payment to the provider.g. ____________________ is the interval of claim payment to the provider. 02…. __________________________________________________________________________________ 65736839. Providers will participate with an organization for a certain period and may discontinue. which is different from all his SL addresses. A provider can have more than one billing addresses. If the code for billing address is o It’s the principle service address. Provider Specialty . transportation etc. Billing Address . If there are no levels 10. It can be weekly.All information maintained are time sensitive. he specifies a level 10 billing address. which ease in maintenance of that provider record. Exercise Referral is mandatory to visit a specialist irrespective of insurance plan/policy – True or False. Psychologist. 1. E.

edu __________________________________________________________________________________ 65736839.g.doctorquality. False. 4.10 References AETNA Intranet http://www. In Indemnity plan referral is not mandatory) 2. C.doctorandpatient.com/ http://www.ucla.com/healthcareproviderinfo.masslegalnurse.Providers ___________________________________________________________________ Answers: 1.org/ http://www.com/www/provider.doc Ver.0 Page 51 of 132 . 4. 3. 2.asp/ http://www. (E. Provider number 3. 4.com/ http://www.healthinsurance. Claims payment schedule 4. 1.9 1.healthaffairs.healtheon.com/ http://www.htm/ http://healthcare. Review Questions What are the various criteria for the provider type classification? What are the credentialing Criteria considered by the Insurance Company before making an agreement with the provider? Explain various stages in Provider referral processing? What is the difference between Provider Type and Specialty? What payment methods do insurance companies use to reimburse providers? 5.

0 Page 52 of 132 .doc Ver.Providers ___________________________________________________________________ __________________________________________________________________________________ 65736839. 1.

2 Introduction Sales and Marketing form an important activity in the health insurance industry. Brokers are also called Producers in this context. An insurance company has its own marketing workforce and also a pool of external agents (brokers). 5. Users within the company need to maintain particulars of brokers and information regarding broker-customer relationship. Medicare Promotion Compensation – Some companies pay bonus to brokers for bringing in new Medicare Applications. In such cases the Customer and Cash receipts information is maintained and broker commission is calculated from that.1 Unit Objectives This unit aims to familiarize the reader with some aspects of insurance sales and quote creation. as there is stiff competition in the market. A substantial percentage from customer groups’ payments result in distributing some percentage as commission to brokers. 5.00a Page 53 of 150 .000 per Customer group per calendar year. 5. As in every other business. This bonus is in addition to commission a producer receives on premium paid by Customer Groups.3. Together they use various methods and strategies to sell the plans to as many customers as possible. here buyers being the customer group buying a plan and sellers being the insurance company. This bonus is one time payment for new application and it depends on number of new application submitted.3 Brokers An insurance company generally has a pool of brokers.Sales ___________________________________________________________________ UNIT . The various entities involved like Brokers and Underwriters are also discussed. in health insurance too brokers bring together buyers and sellers against a commission. The bonus distribution could be something like this: Net Subscribers Produced Override % of Premium 150-750 1% 750-2500 2% 2501+ 3% Cap of $60.doc Ver 0. User groups called actuaries and underwriters play key roles in deciding the rates and thus in selling the products even though they do not interact directly with customers. Key Producer Compensation – Sometimes the company identifies key producers and gives them bonus if they get more than a fixed number of new subscribers.V 5 Sales 5.1 Calculation for Brokers Broker Commission calculation can be divided into following main sub topics  Product-wise compensation: Sometimes a broker group deals with only a particular kind of product. Each Customer group should submit a stipulated minimum number of applications for corresponding broker to qualify for commission. Producer Data is frozen at the end of a year. The banding of the medicare promotion award could be something like this: Program To Date Application Level Payoff per Application   65736839.

But they do not apply these factors. Actuaries come up with rates for each product. benefits and new locations where plans will be offered for sale. Hence Book Rates are same for any customer group availing a particular plan in the same area and hence the name Community Rates. Rates (the premium due per member.  The effective date . Admin users usually do product setup.00a Page 54 of 150 .  The location / service area of the customer group . These rates are called Community rates or Book Rates or Base Rates and they depend only on:  The plan chosen . 5. Service Area – Area in which the members will be based 3. 6. If not renewed by that time. Some standard information – like applicable conditions.the benefits included in a plan are basis of the cost of the plan. (It is to be noted here that an insurance company needs an approval from the government in order to sell a plan in an area at any time.Government regulations often mandate certain kinds of coverage. State regulations affect prices. They enter data about new/updated plans.000 per Customer group per calendar year. They group and combine benefits into plans and maintain data about product-offerings in different service-areas i.4 5. In context of health insurance.Sales ___________________________________________________________________ 1-250 $100 250-500 $125 500-1000 $150 1000-2000 $175 2000+ $200 Cap of $60.) 65736839. the policy becomes void) 1.rates are revised from time to time and hence the dae of commencement of coverage affects the rates. benefits and conditions of a chosen plan. However. Details of coverage (benefits like pcp visit. make certain products saleable in certain area and withdraw some products from some areas as and when required.) These are all mainly data-entry operations.4. Name of Plan 4. It contains information about: 1.6 we will study in details how Actuarials arrive at these rates. A highly specialized and trained user group called Actuarials does rate Setup.1 Quote Creation What is a quote? A quote is a statement of rates of a particular product. On the basis of statistical considerations and mathematical calculations and with the aid of rating applications. Name of the firm buying the policy 2. given by a seller to prospective buyers.4.2 The Process Of Quote Creation For the process of Quote Creation to begin Product-Benefit Setup and Rate Setup need to be completed as part of pre-sales activities. do not take account of any factors specific to any customer-group. These rates need to be approved by the concerned department in some states.doc Ver 0. Effective Date & Renewal Date (date from which the policy will take effect and date when the policy will be due for renewal.e. inpatient hospitalization etc) 5. (In section 5. tax structures etc. Actuaries also calculate the values of group-specific factors for different locations at different times. a quote is a statement of cost. for the member(s). All these affect the cost of the plan. statutory information etc 5. In case of a group insurance policy the rates may be banded on basis of age/ gender/ family status). possibly after relevant customizations.

Sales ___________________________________________________________________ Figure 1 below depicts the setup workflow. and then apply special rates or group specific factors depending on the profile of the group and their specific needs. Through a few iterations customers see some generic rate sheets (like Copay sheets. while some others can be used by marketing assistants also but need a validation / approval from Underwriters. product comparison reports etc) which give them a rough idea of the costs of the short listed plans. Prospective customers include new prospects and existing customers whose policies are approaching renewal dates. reduced rates due to prior history of low number of claims and so on. At this point the representatives approach the assistants to get the quotes for these plans. in order to let the customers know of the exact price (premium. The assistants first pull out the book rates. and narrow their selection to a few plans. 65736839. Customers give their details and preferences. Generally marketing people are given privilege to create only very straightforward quotes. Some special rates can be used only by underwriters. Marketing personnel are broadly of two types .00a Page 55 of 150 . marketing activities begin. They suggest some suitable plans to these customer groups. Initially representatives approach prospective customers. A few examples of special rates could be increased rates due to industry specific risks. Figure 1: Workflow for Quote Creation Once set up is complete. copay & coinsurance) of the chosen plan(s). requirement of extended coverage. For most special rates they need to fall back for on another user group called Underwriters.Representatives who interact with customers and Assistants who have some (generally limited) access to applications generating quotes.doc Ver 0.

00a Page 56 of 150 . Once they approve the quotes the marketing people present them to the customers. Fig2 below is a pictorial depiction of this workflow: Fig 2 To support these various activities a health insurance company typically has a suite of applications as shown in fig 2: 65736839.doc Ver 0.7). (We will discuss activities of underwriters and special rates in detail in section 5.Sales ___________________________________________________________________ Underwriters have the final say on the rates. They can make adjustments according to their discretion. If rates are acceptable to the customer group they sign on the quote sheet. thus entering into a legally binding contract and members are enrolled for the accepted policy.

which would act as a single interface or gateway for all marketing. The final say on the rates is with (a) marketing people (b)actuaries (c) underwriters (d)underwriters 3.same 4. Product Setup is done by (a) admin users (b)marketing people (c)actuaries 2.2. 4. managerial and underwriter users to the suitable application. Renewal Applications pick up contracts that will be shortly due for renewal. If two customer-groups in the same service area are buying the same policy at the same time would necessarily have ______________(same /different) Book Rates. Actuaries to calculate the Base Rates of Products use rating applications. Admin applications are used by Admin Users for Product Setup. Group-specific 65736839.0 Here we see that central to the system are the Admin and the Rating Applications. The difference between Book Rate and final rate would be due to ______________factors. Quoting Engines generate quotes with customer specific rates. Underwriters and Marketing assistants use both of these. a . 3.00a Page 57 of 150 . and are also used for renewing contracts. Answers: 1.Sales ___________________________________________________________________ Marketing assistants Fig 3. An optional layer above these would be a web-based front end .c .doc Ver 0. Exercises: 1. Quoting Engines and Renewal Applications use the data generated by these applications.Intranet for use of all internal users and Internet for use by customers to get data online. Enveloping all these there may or may not be a Quote front end .

00a Page 58 of 150 . the time between the occurrence of the illness and filing of claims.doc Ver 0. 65736839.g. some show a long term trend III.number of claims arising from a specified block within any given time . taxation laws. and the technician of the continually changing field of financial security systems. Actuarial conservatism means the use of any actuarial technique (usually but not always the choice of one or more assumptions) that leads to a higher price for a set of benefits. So.g. if Copay for a specialist consultation increases a member may go in for specialist consultation less frequently. by degree of security risk. the problem solver. This is also called the pure insurance cost for a unit of coverage for each benefit or the PMPM (per member per month) for the benefit. Interest rates vary in many dimensions. Conservatism would lead to higher prices. But too much of conservatism would make prices uncompetitive. conservatism & adjustments: last but not least. II. from place to place. the time between filing of a claim and the actual settlement etc. than Y days down the line. In the field of health insurance actuaries use statistical methods and some judgment to arrive at Book Rates for plans and the values for group-specific factors. On this. prices etc. from time to time. the risk estimator.measures length of time that some well-defined status exists e. The PMPMs of all the benefits in a plan are added to get the PMPM of the entire plan.Sales ___________________________________________________________________ 5. the adapter. This is where the judgment factor comes in. Each plan is a collection of benefits. the rate of investment return). the probability of occurrence of each risk and the severity of the impact of the risk Time value of money: this variable is based on the concept that X amount of money can yield more value today. Examples of random variables: I. if income is expected to increase in future.some coverages show a seasonal variation. a high percentage of all actuarial calculations is based on one or more assumptions. Random variables: actuaries use statistics and probability to estimate what they call "the certainty of uncertainty".The total dollar amount of claims arising from a particular block over a particular time period Rate of interest: (or more generally. Some of the factors that are considered for this calculation are:       Statutes and regulations: state and federal laws mandate certain coverage in certain areas. the innovator. and by time to maturity and thus affect any financial assessment.5 Actuaries The role of the Actuary is said to be that of the designer. the estimated duration of hospitalization for a particular coverage. Number of claims . in order to calculate Book Rates. or a higher value of a liability. Evaluation of benefits and estimation of costs is done along these lines. Total Claims . then this future income can be brought into the present e. when one takes a mortgage. Actuaries apply i) Cost and utilization factor: This estimates how a change in the price of a benefit affects the members’ usage of that benefit and in turn the company’s income e.g. In all these the actuaries must exercise utmost caution and judgment. Assumptions. Further. Sometimes adjustments also need to be made in view of unusual circumstances. Actuaries first estimate the cost the insurer has to incur in terms of payments towards doctors / hospitals/ equipment etc. Time until termination . Risks: the risks associated with providing the benefit. to provide that benefit to one member in a certain period of time.

they get a discount and vice versa. and suitable factors are applied to account for these. couple. PMPM of a plan is the same as Book Rate. Tabular Rating is a rating methodology wherein multiple tier rates are exploded into age/gender bands. parent child and family) and members pay according to the kind of coverage they want.false Underwriters form a very important user group in any insurance industry. Profits are included in the rates by applying _______________ factor. Q2. Thus.g.  Mutualized : Some customer groups may have outlets/ offices in various locations across the country.Normal profits are hereby built into the rates Thus the actuaries arrive at the Book Rates or the Community Rates for the plans. Sometimes underwriters have exclusive access to some special factors. Prior experience: Underwriters need to analyze the customer-group’s prior history of claims.6 Underwriters 3. Class rating is a rating methodology where rates are banded into tiers (single.    Dependant age: A firm may want employees’ dependents to be covered to a higher / lower age than the default coverage. This would affect the probable usage of relevant benefits. PMPM of a plan identifies the income of the company per member per month for that plan. while the latter may be more prone to a heart attack. an unmarried males in age group 20-30 would be assumed to be more prone to accidents than a married male in age group 40-50. Rates need to be raised or lowered accordingly. The probable frequency of members availing this benefit varies accordingly. For example people working in S/w industry are likely to go for routine eye check-ups more frequently.Sales ___________________________________________________________________ ii) iii) Trend factor: This takes care of market trends and possible changes in rates over subsequent quarters.00a Page 59 of 150 . thus generating a table or matrix. Class Rate/ Tabular Rate: Sometimes firms requests and sometimes state regulations mandate that the demographic composition of the group needs to be considered. Retention 5. For estimating the values of group specific factors also they use similar considerations. Here each member pays more accurately for the risk he/she adds. they have the final say on the rates. Retention factor. Some group specific factors that underwriters need to consider are:  Industry factor: Some industries expose employees to or protect them from some job specific risks. Their main function is to approve/ validate the group specific factors added to Book Rates by marketing people and apply mark-up or discount based on their judgement. (True/ False) Answers 1. Depending on the geographical factors and state regulations even the 65736839. Accordingly underwriters apply factors specific to the industry to adjust the rates. false 2. If number of claims for a plan is low.doc Ver 0. Exercises Q1. (True/ False) Q2. E.

In such cases the group may request a blended. some national calamity. recommend acceptance or denial of the risk. what age group of prospect should be targeted for a particular product. dime or quarter. The group underwriter also needs to analyze the overall composition of the group to assure that the total risk is not excessive. true Answers: 1. The sales manager decides the strategy for marketing like which service areas should be targeted. establish appropriate premium rates and write policies those cover these risks. This can make much difference when a large number of members are involved. 3.7 Insurance Payer’s Sales Department The marketing of a healthcare product is done predominantly in three ways: a) Advertising – Putting up advertisements in various media. 65736839. sudden spread of a disease. This calls for extreme caution and accurate estimation skills. c) Mailing – Sending product information to prospects through postal mails. underwriters should take into account previous dealings with the same customer group. (True/ False) 3. and accordingly adjust the final rates in the current cycle. b) Telemarketing – Calling up prospective customers and giving them information about the products. Depending upon the strategy. Unusual: Underwriters need to consider various unusual factors to adjust final rates. These may be as varied as unforeseen fluctuations in the economy. Underwriters cannot exercise any discretionary power. false 2. 2. how many prospects should be targeted in various region. Undewriters need to take care of this.  Misquote: In case of repeat business underwriters need to analyze in retrospect whether some erroneous rates had been quoted in the previous cycle.doc Ver 0. underwriters need to identify and calculate the risk of loss from policyholders. Exercises 1. Underwriter Judgement: Underwriters reserve rights to adjust rates based on their discretion.Sales ___________________________________________________________________ book rates could vary from place to place. (True/ False) Underwriters should always estimate risks very conservatively for the company to profit ( True/Fasle) While determining final rates for a cycle. uniform rate across the organization. target prospects are picked up from the database. or it may have to pay excessive claims if the underwriting actions are too liberal.00a Page 60 of 150 . Their judgement must be shrewd because an insurance company may lose business to competitors if the underwriters appraise risks too conservatively. Rounding: Underwriters may decide to round off rates to penny. false 5. some expected change in the customer group’s business and so on.    To sum up. should phone follow-up be done after sending mails etc.

b) Meeting mailing: Informing the new prospects about seminars or meetings conducted by Aetna and requesting them to attend the same. • • • The various ways of obtaining the information about new prospects are External vendors Telemarketing Responders External vendors supply the list of new prospects every year. who voluntarily contact healthcare company to get information on it’s products.Sales ___________________________________________________________________ The mails to prospects are processed through Code1 Plus software which validates addresses and gives CASS certification. History of mailing is maintained for each prospect and each product to ensure that one product is not marketed to the same prospect twice. Meeting mailing informs prospects about meetings and seminars. The responders names do not expire from database. To ensure if the mails are delivered. Exercises True or False 1. Responders are customers. 4. After sending mails. Marketing by mailing involves sending e-mails to prospects.1 External Agents that deal with Sales Department of Insurance Payers External agents that deal with sales department of Insurance Payers are : a) Vendors who supply data of new prospects. False 5. 65736839. b) Vendors who supply data of all the deaths in a given service area. Answers : 1. seeds are implanted in each batch of mails dispatched. Seeds are sales department employees and if the mail reaches the seed.00a Page 61 of 150 . These names stay on the database for one year from the date the names were received from the vendor. US Postal Department gives discount on CASS certified mails.doc Ver 0. False 2. 2. These prospective customers are entered into the database by Tel Marketing department. Their expiry date is one year from the date on which it was entered. Telemarketing department gets new prospective customers by calling people. c) Member mailing: Involves mailing to existing customers of Aetna. it’s a fair assumption that all the prospects addressed in that batch of mails must have received the mails too. Tele marketing department retrieves the names from Dialer box for phone follow-ups. True 3. True 4. Mailstream system is used to pre-sort the mails to obtain further discounts from postal department. Postal mails sent by sales department fall in three categories: a) Regional mailing: Mailing is restricted to selected regions or states. 3. It also helps to ensure that same set of prospects are not getting selected for marketing too often. Responders expire from the database after one year. new prospects with phone numbers are loaded to the Dialers. c) Vendors who supply data of prospects who do not want telemarketing ie they do not want to be called and informed about new products. Code1 plus software validates addresses. d) Vendors who maintain latest information like addresses of all prospects and update our data files by matching it with theirs.7.

Sales ___________________________________________________________________

5.8 1. 2. 3. 4. 5. 6. 7.

Review Questions Summarize the workflow involved in quote creation. Summarize the build up of the final rates in a quote(pmpm-book rate-final rate) How do actuaries arrive at Book Rates for a plan? Summarize some group-specific factors underwriters consider during quote creation. Define prospects. Who are responders? What is CASS certification? What is the role of external agents in sales department?

8.

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Sales ___________________________________________________________________

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Benefits ___________________________________________________________________
UNIT - VI

6

Benefits

6.1

Unit Objectives

This unit will acquaint the reader with different types of healthcare plans and the benefits they offer. 6.2 Introduction

Healthcare is very expensive in the U.S.A and it is essential for people to have some kind of health insurance. Insurance is available from various organizations in various forms. Each insurance company has its own, customized way of providing insurance, called a ‘Plan’. Plans can be broadly classified as – 1. 2. 3. 6.3 Indemnity plans also known as ‘Fee-For-Service’ plans. Managed Care plans. Other Plans. Indemnity Plans

Indemnity plans are the traditional fee-for-service kind of plans. The member is eligible to visit any provider of his choice. He has to pay the provider for services availed and then file a claim for reimbursement of the same. The amount of reimbursement will depend on whether, or not, the member has satisfied his deductible. In case the deductible has been satisfied the insurance company will pay its share. In case the deductible has not been satisfied, the reimbursement amount will be lesser. Advantages  Members do not have to choose a ‘Primary Care Physician’ (PCP, as he is known, is an entity associated with managed care plans, and will be explained later in the unit). No need of a referral (prior permission from the insurance company) to visit a specialist doctor. In case of managed care plans (as will be explained later in the unit) members are required to choose a provider from a network (or a group) to get higher level of benefits. In case of Indemnity plans, there is no concept of network and members can avail the services of any provider. Thus, Indemnity plans offer maximum freedom of choice to a member in choosing a healthcare provider. This is the primary reason why people may prefer to be in an Indemnity plan.

Disadvantages    Members have to pay high premiums. Members need to meet a deductible before they can start claiming benefits. Preventive care is not covered. This means that for a routine check-up, the member cannot file a claim.

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this amount is $600. Managed care plans originated in the early 1970s.Benefits ___________________________________________________________________  Filing of claims is the responsibility of the member. insurer will provide 100% reimbursement of costs.e. Managed Care Plans   6. They prefer to use managed care plans. provide great flexibility to members in choosing a provider. The coinsurance limit is $1000.this means that. The insurer will reimburse only 80% of the costs. which are more cost effective. the maximum amount.00a Page 65 of 150 .doc Ver 0. There is no coverage for any preventive care.00 80% if true emergency. A typical Indemnity plan will look like this - Plan Feature Calendar Year Deductible Family Limit Deductible Co-payment Coinsurance Coinsurance Limit Emergency Room Hospital Physicians Preventive care Other Covered Expenses  Benefit $200 3 * Deductible None 80%/20% $ 1000. But. Reduced benefits if not a true emergency 80%/20% 80%/20% No coverage 80% The member has to pay a deductible of $200 every year before he can start Table 1: A sample Indemnity plan claiming the benefits. For people who cannot afford to spend large amounts on their healthcare. a routine checkup is not covered. as explained earlier. which the member may have to pay is $1000. 65736839.Above this. this freedom comes at a very high cost. Members have to pay heavy premiums and need to meet deductibles before they can start claiming benefits. Indemnity insurance is not a good option. It involves a lot of paperwork and is time consuming.4 Indemnity plans.   For the entire family to be covered. rest the member will have to pay out of his pocket. i.

This paved the way for the formation of ‘Managed Care Organizations’ (MCO). he would still receive his full monthly fee). Members of a HMO receive benefits by utilizing the insurer's HMO network.Benefits ___________________________________________________________________ In 1970s healthcare costs had sky rocketed. from office visits to hospitalization and surgery. This fee paid is also called the ‘Capitation Fee’ and hence the plan is sometimes known as a ‘Capitated Plan’.  Each provider is a given a fixed monthly fee according to the number of patients on his schedule. He refers members to a specialist for medical care when necessary. as 65736839. right from providing treatment to filing claims on his behalf. a “PCP”. MCOs’ are a collection of interdependent systems (the insurance company. Members do not have a choice in deciding which doctor they want to get treatment from. the insurer tries to increase their patient volume by offering greater benefits to its members when they use this network. All the care they receive is provided by. members are not eligible to claim benefits for services availed from a specialist doctor. While. Without the PCP’s referral.00a Page 66 of 150 .doc Ver 0. which means that HMO members pay a fixed monthly fee. Thus. the PCP will refer the members to a specialist. There are two types of HMOs  Staff Model HMO: In this form of HMO. doctors. by increasing the patient volumes and regulating the use of providers. there is a group of providers contracted by the insurer who form a network. These providers agree to provide basic healthcare services to members of the insurer’s plans. Members are required to choose a contracted doctor as their Primary Care Physician. For services outside the scope of his expertise. This network consists of contracted doctors and hospitals that provide treatment to members of the insurer's HMO plans. This fee is not related to the number of patients actually serviced (this means.4. a HMO contracts with individual doctors who have a private practice of their own. hospitals) that integrate the financing and delivery of health care services. to make insurance more affordable to the common people. In return for this fee. the “PCP” The PCP takes care of the member’s medical needs that fall under his expertise. regardless of how much medical care is needed in a given month. in 1973 the US congress passed the ‘Health Maintenance Act’ and set standards for the industry. Members are also required to get permission (called a referral) from the insurer before availing services of outof-network providers. most HMOs provide a wide variety of medical services. Without this permission the member is not eligible to receive any benefits. The PCP will take care of all needs of the member. Following are the common managed care options: 6. or under the direction of. even if not a single member went to this provider. insurance companies are able to provide coverage at reduced levels of cost. Individual Practice Association (IPA): In this form.1 Health Maintenance Organization (HMO) A HMO is a managed care organization. To recap. the doctors are employees of the HMO itself and the HMO can be seen as a central medical facility. They involve an agreement between an insurance company and a group of providers (also known as network of providers). pharmacies. HMOs provide medical treatment on a prepaid basis. Hence. A member has to choose any one of the doctors in this network as his PCP.

the total amount of money he can claim during his lifetime) . This screening process helps to reduce costs both for the HMO and the members. HMOs often have nominal copayments. Additionally. HMOs generally do not place a limit on the member’s lifetime benefits (i. HMO members are required to obtain all treatment from HMO providers. regardless of how much medical care is needed in a given month.e. tight controls can make it more difficult to get specialized care. HMOs encourage members to seek medical treatment early.00 copay 100 % 65736839.00a Page 67 of 150 . Additionally. there may be a strict definition of what constitutes an emergency. Hence. Except for emergencies occurring outside the HMO's treatment area.The HMO will continue to cover his treatment as long as he is a member.   Disadvantages:  An HMO member must choose a primary care physician (PCP). Besides reducing out-of-pocket costs and paperwork.e. but it can also lead to complications if the PCP doesn't provide the referral needed by the member i. The PCP provides general medical care and must be consulted before members seek care from another physician or specialist.e. This leads to ‘Low out of pocket costs’. before health problems become severe.00 100% None $35. a provider not contracted by the insurer) without prior permission of the insurer. the focus is on wellness and preventative care. members are responsible for paying a percentage of the bill every time they receive medical care.  A typical HMO plan will look like this - Plan Feature Calendar Year Deductible Family Limit Deductible Co-payment Coinsurance Coinsurance Limit Emergency Room Hospital Benefit None None $10. Instead of deductibles. In contrast.doc Ver 0. HMO members pay a fixed monthly fee. Advantages  With most types of insurance (other than HMO). The HMO will not pay for non-emergency care provided by a non-HMO provider. there may be a deductible that must be met before the insurer starts picking up the tab. many HMOs offer health education classes and discounted health club memberships. Members cannot use services of any out-of–network provider (i.Benefits ___________________________________________________________________ the PCP and the insurer manage their complete healthcare. Additionally.

However. However.  Every time he avails the service of a provider he has to pay $10 irrespective of the kind of services availed. the sponsor(s) attempts to increase patient volume by creating an incentive for employees or policyholders to use the physicians and facilities within the PPO network. known as ‘Non-Preferred Benefits’. a preferred provider organization (PPO) is a managed healthcare system.Benefits ___________________________________________________________________ Physicians Preventive care Other Covered Expenses Table 2: A sample HMO plan  A member who enrolls under this plan does not have any deductible to meet before he can claim benefits. When members receive care from a non-participating provider they receive benefits. or by some other type of organization. known as ‘Preferred Benefits’.00 copay $10. 6. A PPO is actually a group of doctors and/or hospitals that provide medical services only to a specific group or association. The insurer then pays the covered amount directly to the healthcare provider. When a member receives care from a participating provider they receive benefits. For example. the insurance company will pay 100% of the providers charges  If compared with the Indemnity plan provided in the earlier section. PPO physicians provide medical services at discounted rates and may set up utilization control programs to help reduce the cost of medical care. usually 100% payment rate. as PPO members are not required to seek care from PPO physicians. In order to avoid 65736839. The PPO may be sponsored by a particular insurance company.2 Preferred Provider Organization (PPO) Like an HMO. The PPO sponsor (employer or insurance company) generally reimburses the member for the cost of the treatment minus any co-payment. The healthcare providers and the PPO sponsor(s) negotiate the price for each type of service in advance. it becomes clear that the cost for the member is much less. members may receive 90% reimbursement for care obtained from innetwork physicians but only 60% for out-of-network treatment.4. by one or more employers. he will have to pay $35 as $10. In case he has to use the emergency room facilities.doc Ver 0. In some cases.  copay.00a Page 68 of 150 . the provider may submit the bill directly to the insurance company for payment.00 copay 100%  For all kinds of treatment. PPO members usually pay for services as they are rendered. there is a strong financial incentive to do so. there are several important differences between HMOs and PPOs. In return. which are at the lower level of benefit coverage. usually 80% payment rate. which are at the higher level of benefit coverage. Advantages  Free choice of healthcare provider. and the member pays his or her co-payment amount.

the POS plan mirrors an HMO. When a member uses the in-network benefits.4. the member pays no deductible and usually only a minimal co-payment when he uses an in- 65736839. Like an HMO. A PPO member has to file claims on his own.doc Ver 0. For example.00 office visit 100% None 100% after $10. Disadvantages  As mentioned previously.00 3x deductible None 80% / 20% $1000. he may choose to continue seeing him. One side is for in-network services and the other side is for out-of-network services. 80% / 20% 80% / 20% Preferred option closely mirrors the HMO option while the non-preferred option approaches the Indemnity option. Thus. if a member’s longtime family doctor is outside of the PPO network. The benefits are reduced in case of non-preferred option.Benefits ___________________________________________________________________ paying an additional 30% out of their own pockets. members may receive 90% reimbursement for care obtained from in-network providers but only 60% for treatment provided by out-of-network providers.00 $200. most PPO members choose to receive their healthcare within the PPO network.00a Page 69 of 150 . else none.00 80%/20% Same as preferred if true emergency. the expenses and paperwork are higher as compared to HMOs. Hence. but it will cost more.  6.  A typical PPO plan will look like this – Plan Feature Calendar Year Deductible Per Confinement deductible Family Limit Deductible Copay Coinsurance Coinsurance Limit Physicians Emergency room Hospital Other Covered Services Table 3: A sample PPO plan  Preferred Benefit None None None $10. Additionally. there is a strong financial incentive to use PPO network physicians. most PPOs have larger copayment amounts than HMOs. The plan can be visualized as having 2 sides. and members may be required to meet a deductible.00 copay $25.3 Point Of Service (POS) POS plans give two benefit levels.00 100% 100% Non-preferred Benefit $200.

while the member himself receives his healthcare from in-network providers. while there is no PCP for out-ofnetwork services. The member will likely be subject to a deductible and co-payment. As with HMO coverage. Like a PPO.00 $200. members pay only a nominal amount for in-network care. members always retain the right to seek care outside the network at a lower level of coverage. Advantages  POS coverage allows a member to increase his freedom of choice. No deductible is required for in-network services. But.   Disadvantages  There are substantial co-payments and deductibles for out-of-network care. Unlike HMO coverage.  A typical POS plan will look like this – Plan Feature Calendar Year Deductible Per Confinement Deductible Family Limit Deductible Copay Coinsurance Coinsurance Limit Physicians Emergency room Hospital Other Covered Services Table 4: A sample POS plan In-Network None None None $10. In most cases. 80% / 20% 80% / 20% 65736839.00 copay $25. he also must choose a primary care physician who is responsible for all referrals within the POS network. members must have paid a specified deductible before coverage begins on out-of-network care. the POS plan is an indemnity plan. Usually. as with HMO coverage. else none.Benefits ___________________________________________________________________ network healthcare provider. When he uses the out-of-network benefits.doc Ver 0. members must choose a primary care physician (PCP) and hence there is a tight control to get specialized care within the network. As in an HMO. POS plan encourages members to use innetwork providers but does not make it mandatory.00 100% 100% Out-of-network $200.00 3x deductible None 80% / 20% $1000. the member’s child could continue to see his pediatrician who is not in the network.00a Page 70 of 150 . co-payment is around $10 per treatment or office visit. For example.00 80%/20% Same as preferred if true emergency.00 100% None 100% after $10. he can mix the types of care he receives.

This provides members with the ease and low cost of the HMO.Benefits ___________________________________________________________________  The POS plan is very similar to a PPO plan.00a Page 71 of 150 .4.doc Ver 0. the PPO plan gives more flexibility for choice of provider. in general. The choice of providers is greater than the typical HMO. The variation in the various plans can be understood more effectively by referring to the following table.5 Which plan is the best? The first thing to note is that. and the price is somewhat higher.4 In order to fulfill the diverse needs of participants. there is no such thing as ‘the best plan’. These plans offer members great flexibility at the lowest price by combining various plans. with maximum benefits within network and reduced benefits out-of-network. as there are no deductibles and very less copays. EPO Plans—a hybrid of POS plans were developed. In contrast. All the plans outlined till now are generic plans. which can be customized according to the members needs. For example. give more freedom than managed care plans in terms of using the healthcare provider of choice. 6. 65736839. Exclusive Provider Organization (EPO)  6. The major difference between them is in the in-network option. managed care plans are better suited for the average individual because they end up being more cost effective in the long run. providers. this leads to less flexibility in choice of provider. Indemnity plans with more out-of-pocket charges (in the form of deductibles and co-payments) often limit the maximum amount of benefits that members may receive over their lifetime. Indemnity plans. however. also. Disadvantages  Members need to choose from the HMO and EPO networks. and employers. Here. some insurers will offer an EPO/HMO plan. as compared to the POS plan. Advantages  Limited out-of-pocket expenses. while providing them with the option to make appointments directly with a larger group of providers (instead of just their primary care provider). A PPO may also make an EPO option available to members. However.

Available Not available Required Available Available Not available Required Not required Not required Required 5 5 1 1 4 4 3 3 2 2 Table 5: Comparison of various plans So. Considering the cost for a member. 6. 2. 3.1 Exercise Plan offers the maximum freedom of choice for a member. 4. 3. 4. if his goal is maximum flexibility and cost is not a major factor. the choice ultimately depends on the member’s personal circumstances and preferences. 1. Plot a graph of ‘cost to member’ (x axis) versus ‘freedom of choice’ (y axis) and place the various plans on it. 5. If the goal is to minimize costs. 5. which plan is most effective? POS plans do not offer out-of-network coverage (Y/N).00a Page 72 of 150 . PPO plan members do not have to choose a PCP (Y/N). indemnity plans should be preferred. he is probably better off with a managed care plan. 65736839.5.doc Ver 0. 2. On the other hand.Benefits ___________________________________________________________________ Constraint PCP Deductible Indemnity Not required Required HMO Required Not required PPO Not required (In-network) not required (Out-of-network) required POS Required Same PPO as EPO Required Not required Out Of Network Coverage Referral for specialist visit Cost (1-5) 5 is max Freedom (15) 5 is max. Answers Indemnity HMO N Y Indemnity Freedom EPO HMO PPO POS 1.

Most of these plans in some or other will belong to the two main categories listed above. 65736839. and then file a claim for reimbursement.6. It depends on the specific plan. while others may limit coverage to reasonable and customary charges incurred during routine eye exams. Depending on the specific plan. With some employer-sponsored vision plans. It typically covers services delivered by an optometrist or ophthalmologist.6 Other Plans In addition to the common Indemnity and Managed care plans listed above. This keeps the cost of dental care much lower than medical care. Reasonable and customary charges generally don't include the cost of glasses and contact lenses. insurers offer a wide variety of specific plans. Dental plans are of three types based on the mode of treatment and payment. The plans discussed till now were medical plans and did not cover:        Work related injuries Treatment provided by relatives Cosmetic surgery Government health services Vision benefits Dental benefits Over the counter medicines and non-prescription drugs To cover these. 6. Regular dental checkups and cleaning will be sufficient to maintain dental health. Or the member may be required to cover the charges out-of-pocket at the time of service.Benefits ___________________________________________________________________ Cost Figure 3: Variation of Freedom with Cost 6.6. The regular dental visits allow problems to be diagnosed early and corrected without involved diagnostic testing or treatment.00a Page 73 of 150 .doc Ver 0.1 Vision Plans Vision insurance provides coverage for services relating to the care and treatment of eyes. The basic difference between a Medical and Dental disease is that a medical disease can be unpredictable and catastrophic while most dental diseases are preventable. some or all of the following services may be covered:     Yearly eye exams Glasses (with an annual limit) Contact lenses and fitting (with an annual limit) Glaucoma screening Some vision plans may provide more extensive coverage (such as certain eye surgeries). coverage may be even more narrowly limited to the medical treatment of certain eye conditions Vision care insurance may provide direct payment to the eye care provider for the services. insurers provide the following plans: 6.2 Dental Plans Dental insurance provides coverage for services relating to the care and treatment of teeth and gums.

drugs with same chemical  Most health plans have three or four pharmacy benefit tiers.which are Non-patented compositions and are relatively cheaper. The dentist is paid on a per capita (per head) basis rather than for actual treatment provided. 2. Participating dentists receive a fixed monthly fee based on the number of patients assigned to the office. but often places no limit on services provided. Non-Formulary drugs . the member pays the remaining. Direct Reimbursement Plans: Under this self-funded plan. Brand-name drugs that are usually in the top tier are most expensive. an employer or company sponsor pays for dental care with its own funds. Most pharmacy plans that pay for prescription drug benefits have benefit tiers that group certain medications together for pricing purposes. Members can select a dentist of their choice and.which are the cheapest. which offers drugs to plan holders at reduced rates.6. The plan may limit the amount of dollars a member can spend on dental care within a given year. but some have as many as seven. A Dental Health Maintenance Organization (DHMO similar to a medical HMO) is a common example of a capitation plan. in conjunction with the dentist. rather than paying premiums to an insurance company. The typical three tiers of a pharmacy plans are 1. while generic medications are in the lower tier and are least expensive . once furnished with a receipt showing payment and services received. patient copays may be required for each visit. Generic Drugs . Single tier plans  Fixed copay for all types of drugs mentioned in the plan. which directly reimburses the dentist for the services provided. Insurance companies usually pay between 50 percent and 80 percent of the dentist's fee for covered services.The types of drugs can be classified as   Branded drugs – which are patented drugs (10 yrs patent) and hence costly. Capitation Plans: This type of plan provides comprehensive dental care to enrolled patients through designated provider dentists. Two tier plans  Lower copay for Generic drugs  Higher copay for Branded drugs 65736839. can play an active role in planning a treatment that is most appropriate and affordable. the employer reimburses the employee a fixed percentage of the dental care costs.3 Pharmacy plans enable the members to buy prescription drugs from participating or nonparticipating pharmacists at lower rates against a premium amount paid for the Plans. In addition to premiums.00a Page 74 of 150 . Indemnity plans also can limit the amount of services covered within a given year and pay the dentist based on a variety of fee schedules. They usually involve a ‘Managed Pharmacy Benefit Network’ (network of pharmacists which contracts with the Insurer). A monthly premium is paid by the member.doc Ver 0. Pharmacy Plans    6. The member pays the dentist directly and.Benefits ___________________________________________________________________ Indemnity Plans: This type of plan pays the dentist on a traditional fee-for-service basis.

Three tier plans  Lowest copay for Generic drugs  Medium copay for branded drugs  Highest copay for Non formulary drugs 6. physical therapy or rehabilitation services. they are standardized and regulated by federal and state law. 65736839.Benefits ___________________________________________________________________ 3.S. a division of the U. Medicare coinsurance amounts.e.6. skilled nursing facility. at a doctor's office. Medicare coverage consists of two main parts .. such as charges for the hospital room. regardless of their medical condition. They are in addition to the fee-for-service options available under Medicare Parts A and B. Also covered are laboratory tests. A third part.  Part C expands the kinds of private health-care plans that may offer Medicare benefits to include managed care plans. medical savings accounts. if not all. In addition. the costs associated with an overnight stay in a hospital.  Part B covers other medical care. Part A also covers hospice care and home health care. people may be eligible if they are disabled or have endstage terminal disease. There is no variation in the types of medigap policies provided by various insurance companies.00a Page 75 of 150 .Medicare Part A (hospital insurance) and Medicare Part B (medical insurance). Department of Health and Human Services. Most people become eligible for Medicare upon reaching age 65. or psychiatric hospital. 6. Only ten standardized plans can be offered as Medigap plans.5 Medigap Medicare does not cover all health-care costs during retirement. and private fee-forservice plans.6. or as an outpatient at a hospital or other health-care facility. The Health Care Financing Administration (HCFA). All ten must cover certain services. Medicare Part C (Medicare+Choice) is a program that allows members to choose from several types of health-care plans:  Part A covers services associated with inpatient hospital care (i. Physician care. and nursing service s). However. has overall responsibility for administering the Medicare program. the HCFA sets standards and policies. Medigap policies pay most. meals.4 Medicare Plans Medicare is a government-sponsored program that provides health insurance to retired individuals.doc Ver 0. whether it was received while member was an inpatient at a hospital. and ambulance service. Although the Social Security Administration processes Medicare applications and claims. Medigap policies are sold through private insurance companies. Some also provide coverage for deductibles and services that are not covered by Medicare such as prescription drugs and preventive care. Members may purchase a supplemental medical insurance policy called Medigap. Medigap is specifically designed to fill some of the gaps in Medicare coverage.

and long-term nursing home care. Medicaid pays for a number of medical costs. However the maximum lifetime limit of benefits is high enough to cover the cost of catastrophic illness. and are reestablishing a customer or client base. (2) prescribes the amount. medical transportation. disabled. a disability buy-out policy disburses funds for one partner or business entity to buy a disabled partner's share of the company. This may be used to help the aged. The funds paid are not specified for medical expenses .7 Long Term Care Most of plans discussed till now are the kind. physician services. Each state administers its own Medicaid programs based on broad federal guidelines and regulations.6. dependent children) who cannot afford the necessary medical care. which pay for hospital bills and doctor visits. members pay a set premium that offsets the risk of a much larger out-of-pocket expense. States may elect to provide other services for which federal matching funds are available. 6.6 Medicaid Medicaid is a health insurance program for people with low income. As with other insurance policies. For jointly owned businesses. Recovery benefits that pay after members return to work full-time. or blind individuals (or to needy. 6. however. and (4) oversees its own program.6. and types of services.6. home health care. each state (1) determines its own eligibility requirements. and speech therapy. which is usually very high. (3) chooses the rate of reimbursement for services. services for the mentally retarded in intermediate care facilities.9 Catastrophic Coverage Plans Catastrophic coverage is not a separate entity by itself but forms a part of an existing plan. offers the assistance people need if they have a chronic illness or disability that leaves them unable to care for themselves.they can be used in any way the member wishes them to use. Long-term care. duration. Within these guidelines. They pay hospital and medical expenses above a certain deductible.00a Page 76 of 150 . adult day care. 65736839. 6. prosthetic devices. assisted living and nursing home living. prescribed drugs. Some policies include special features like:    Key-person insurance to protect a firm against the loss of income resulting from the disability of a key employee.doc Ver 0.6. including hospital bills. It is a joint federalstate program to provide medical assistance to aged. The treatments covered by long term care insurance usually include four general types of care: in home care. Employers can provide coverage for employees too. Some of the most frequently covered optional services are clinic services. Most of the plans seen till now can be customized to include coverage for catastrophic illnesses.8 Disability Income Insurance Disability income insurance provides members with an income if they become sick or injured and are unable to work. occupational therapy. as well as young and middle-aged people who have been injured or have suffered a debilitating illness. optometrist services and eyeglasses.Benefits ___________________________________________________________________ 6.

This is generally done through a series of medical questions and/or a physical exam. Member’s risk potential will determine whether he qualifies for insurance and how much the insurance will cost. 2. The premium for group insurance is calculated based on characteristics of the group as a whole.10 Exercise Pharmacy plans usually have tiers of benefits. such as average age and degree of occupational hazard. a single policy covers the medical expenses of many different people (a group) instead of covering just one person. members purchase individual insurance directly from an insurance company. Is used to protect a firm against the loss of income resulting from the disability of a key employee. the only real disadvantage of group insurance is limited or no freedom to customize the policy to member’s individual needs. When they apply for individual insurance. In case of Dental insurance. where each person's risk potential is evaluated and used to determine insurability. 6. Unlike group insurance. with the sponsoring employer or association paying all or part of the premium. Answers 1. they are evaluated in terms of how much risk they present to the insurance company. 3 (hospital. Long Term care covers nursing home care? (Y/N) Who all are eligible for Medicaid benefits? 1. medical. medicare+choice) 3. For this reason. Y 7. All people who cannot afford medical care. individual insurance is generally more difficult to obtain and more costly than group insurance.6.7 Individual Insurance and Group Insurance.doc Ver 0. because group insurance allows the insurer to spread the risk over a larger number of people. Because only one policy is issued for the entire group. Unlike individual insurance. Capitation 6. plans are similar to HMO plans The federal government regulates Medicare benefits? (Y/N). all eligible people can be covered by a group policy regardless of age or physical condition. 6. 3 2. 4. Y 8. Medicare has parts. Individual insurance is somewhat more risky for insurers than group insurance. Individual health insurance is a type of policy that covers the medical expenses of only one person.Benefits ___________________________________________________________________ The most common example is the Medicare plans which include a clause for catastrophic coverage. 6. The policy is typically negotiated between the insurer and the "master" policy owner (employer or association) without any inputs from 65736839. Others include disability income insurance. 7. In general. 3. 8. the initial cost of establishing group coverage is lower than the cost of issuing a separate policy to each person. Policy extends the Medicare policy by offering additional benefits. 5. With group health insurance.00a Page 77 of 150 . catastrophic PPO and catastrophic EPO coverage. Medigap 4. Employer-sponsored plans and associations are among the most common sources of group health insurance. Key person insurance 5.

6. or in certain other situations.  Increase the tax deductibility of medical insurance premiums for the selfemployed.A count on their employer for health insurance coverage.A.  Require health insurance plans to provide inpatient coverage for a mother and newborn infant for at least 48 hours after a normal birth or 96 hours after a cesarean section. These events can occur when least expected. COBRA entitles him to continue coverage under circumstances that would otherwise cause him to lose this benefit.2 Health Insurance Portability and Accountability Act (HIPAA) HIPAA is an extensive law that is intended to be the first major step toward healthcare reforms in the U. A person can continue his health insurance for 18 months under COBRA. But what will happen to their health insurance if they stop working or no longer qualify for benefits? Their company might begin downsizing. the person will have to pay the premium for COBRA coverage. if his employment has been terminated or if his work hours have been reduced. So the federal government has provided certain laws to help people cope with the situations mentioned above. as are the deductible amount and co-payment percentage. They could suffer a serious injury and become disabled.S. If a person is entitled to COBRA coverage for other qualifying reasons. death.  Require health insurance companies that serve small groups (2-50 employees) to accept every small employer that applies for coverage.8. The two most important of these are – 6. he can continue the coverage for 36 months. In addition. his dependents may be eligible for COBRA benefits if they are no longer entitled to employer-sponsored benefits due to divorce. he is entitled to COBRA coverage only if his employment has been terminated or downsized. 65736839. Most employers are required to offer COBRA coverage. The major provisions of HIPAA do the following:  Allow workers to move from one employer to another without fear of losing group health insurance.doc Ver 0.Benefits ___________________________________________________________________ the member. In 1996.8 Laws and Legislations Most people in U. the Health Insurance Portability and Accountability Act (HIPAA) expanded on COBRA. 6.1 Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) If a person and his dependents are covered by an employer-sponsored health insurance plan.S. leaving them without health benefits. The specific policy provisions are all determined in advance.8.00a Page 78 of 150 . his employer is not required to pay any part of it. As an employee. However.

the other partner is no longer able to perform his duties. 3. 6.  In case of a joint business venture.com http://www. What is the difference between Managed care and Indemnity Plans? What are the various type of Managed care Plans? What is the main difference between POS and PPO plans? What are the various types of Dental and Vision Plans? In case of managed care plans. “Managed Care – An Overview ” – By Amit Shukla.9 1. 4.doc Ver 0.yourhealthplans. in case. 5.   Medicaid policy is the most expensive type of Indemnity plan.insurance. http://www. Long-term care is covered under Medicare. 2. Copay is what the member pays to the insurance company for treatment.com 3. each partner can take out an insurance policy to cover the expenses.  Coinsurance is the insurance provided by two insurance companies to one individual. 65736839.  Review Questions.00a Page 79 of 150 . 2. Abhishek Virginkar and Saurabh Kulkarni.Benefits ___________________________________________________________________ 6.10 References 1. 6. 4.   Deductible is usually zero for most HMO plans. “A to Z of Health Insurance” – By Prashant Burse. which plan is most cost effective and why? State whether true of false – Private insurance companies provide Medicare plans.

Benefits ___________________________________________________________________ 65736839.doc Ver 0.00a Page 80 of 150 .

Claims that fail the edits are routed back to the provider for corrections. Receipts system performs basic edits on these claims and loads it to the Claims database. This PCP files a claim with Insurance Company for non-capitated or specialist services he might have provided to the member.doc Ver 0. The UCK is passed along with each transaction to the appropriate adjudication engine. The Receipts system is required to receive a transaction in CCFMQ format. Each visit that a member makes to a provider is called an encounter. Generally these visits by member are made to PCPs. The referral acts as an authorization for the member to visit a specialist. Feedback is sent to Claims system again which is used to store the completed claims history in Claims database/files. The claims are received by the Integrated Receipt system. hospital or pharmacy to receive healthcare. Paper claims are received on standard forms. The claims will be in a Common Claim Format (CCF) as opposed to the UB92 & NSF format that Receipts system used to receive. This means that they get a fixed fee on a monthly or bi-monthly basis. The claim may be filed either on a standard paper form or electronically. Edits within the pre-receipts system are enhanced to include HMO claims. The users have the ability to modify the claims online. This pre-receipts system will identify each claim with a Universal Claim Key (UCK).Claims ___________________________________________________________________ UNIT . also claims with any missing information. These claims are then adjudicated using Insurance Company’s business rules and policies. Complex or ambiguous claims. If the primary physician deems fit he may refer the member to a specialist. This specific combination depends on plan to which the member has subscribed. specialist. All HMO electronic claims from the Envoy submitter will be directed to a system (pre-receipts) before sending them to core Receipts System. as well as for catering to general claims enquiries. They are scanned to capture image copies that are then translated to electronic form. The HMO Reformat will be responsible for reading a CCFMQ record 65736839. to decide the payment to be made to providers or denials if any. Manual intervention is required for further processing such claims. who are Primary Care Physicians and are Capitated Providers.1 Claim generation and submission to Providers Members enrolled in Insurance Company’s healthcare programs visit health services providers such as a primary physician. for a combination of fixed number of visits and fixed duration.1 Claims Intake Process Claims are received from health services providers either as paper documents or in electronic form. are put in a ‘PEND’ status. Electronic forms are routed through a third party (Envoy). They do not bill Insurance Company for services provided. Claims Online/Pend systems are used for this purpose.00a Page 81 of 150 .1. validated for basic information necessary and then loaded into the Claims database. A record of this referral is maintained in the system.VII 7 Claims 7. On completion of claims adjudication. desired cheques are cut by AP (Accounts Payable). this process is known as HMO REFORMAT. 7.

These claim forms are captured on microfilm. The Reformat will also be responsible for passing the UCK along to the HMO system on each transaction. The newly reformatted claims will follow the existing Receipts system path for electronic claims. Receipts system Conversion.2 ENVOY Claims Intake : DiagrammaticIKFI Paper Claim EDI Referral Prereceipts REFERRAL SYSTEM Receipts Verification 65736839. modifications are made to establish the UCK segment number. The response for claims that have been rejected also represents a final response. subject to existing Receipts system edits. The Conversion process handles Hospital and Specialist claims differently. in order to determine if a claim will be Accepted or Rejected. The modifications consist of inquiring on the UCK database table or file and generation of the event response for pre-Receipts system.Claims ___________________________________________________________________ as input and produce a UB92 Hospital transaction format or a NSF1500 Specialist transaction format as output. claims that have more than a specific number of detail lines after the grouping and rollup logic will be split in segments consisting of that specific number of detail lines.1. claims will flow into the Generate Response process.doc Check Information CLAIMS SYSTEM Ver 0. This process will evaluate each edit flag. Each benefit code represents a detail line. Due to limitations of the HMO Adjudication. The Load is responsible for passing the UCK to the HMO Adjudication system. Users enter these claims online. Some paper claims cannot be loaded into Receipt System usually due to non-standard formats. directly into the Claims Online Adjudication system.00a DENIALS Page 82 of 150 ACCOUNTS PAYABLE Check to Provider/ Member . At the completion of all Receipts system edits. The last process within the Receipt System is the Load to the HMO database. If a claim is split in the Conversion. When Hospital claims are processed Revenue codes are grouped and rolled and then translated into Benefit codes. Encounter PROVIDER MEMBER EDI Claim 7. This response status serves as the initial response for all HMO claims. The generation of a status response is required to be sent back to Pre-receipts system at this point.

DOS > suspense or term date).e if the provider is hospital type or a specialist etc. Determine if the claim is timely filed    65736839. o Date of Service of the Claim is compared with the current date.2 Claim Adjudication Process Claim adjudication is a process in which the actual data on the Claim is compared with the data in the system and based on the business rules or policies the payment of the Claim is decided. The provider information is validated. Determination of whether the claim is too old.1  Claim Preparation and determining eligibility The member information is validated. o Determination of whether this claim is a fraudulent specific member claim.Capitation of the Provider is validated . o Provider type is evaluated i. o Provider no is validated.2.doc Ver 0. o Provider Specialty is validated . o Provider name and address is validated. o Par status of Provider is validated .Claims ___________________________________________________________________ 7. o Determination of whether member is suspended or terminated ( i.00a Page 83 of 150 . o Check is done for whether Provider is suspended. o Member no is validated.e. The paid amount need not be equal to the billed amount Claim adjudication process can be divided into three processes as below which can be further subdivided 7.

The difference of the dates is compared with the timely filing limits which is predecided based on different types of Provider. o Here a determination is made whether the member has to be directly reimbursed ( like in Indemnity Claims) or the provider ahs to be paid ( like an HMO plan).  Check stacked benefits o This involves checking of existing accumulators that are under the indemnity component and then under either the rider or base medical component. provider specialty . it is determined if the member is eligible to receive the particular benefit for which claim has been filed.    Product benefit eligibility is checked  Here. Product exception o In this.  Direct access ( i. Provider no .  Claim emergency or non emergency. it is determined if the member is eligible for the benefit of the product under which the member is covered.  Presence/Absence of referral. Also a 65736839. AND PRODUCT which for which the Claim has has been filed Benefit eligibility is checked o Here depending on the Provider type.types of benefits provided.   Determination of whether this is a member reimbursement or provider is already reimbursed. o Determination of whether the member is covered under the GROUP. Place of service and the benefit code of the claim .doc Ver 0.00a Page 84 of 150 . depending on the member region.Place of service is checked with a history claim for determining duplicity. if the claim has not been file within the proper timeframe it is denied . CONTRACT.member category etc . Group/plan eligibility is checked.e for which no authorization needed).Area . any exception override is checked on various factors like service start and end dates . and presence of any rider . based service. proc code . o Here the Date of service of the claim. PLAN. diagnosis code.  Provider network.  Check for Product component eligibility  Here it is decided if the claim should be processed as in network or indemnity depending on  Product component of the Claim.  Par status of provider. procedure code . Group.Claims ___________________________________________________________________ o Date of service of the Claim is compared with the received date of the Claim. Place of Provider network.  Determination of whether the claim is duplicate ( by comparing with history).This process will dictate what component leg a claim is adjudicated against based on the following scenarios:  No accumulator is maxed out on either indemnity or hmo legs Result: Claim will process as normal  Accumulator maxed out on indemnity but not hmo leg Result: claim will be processed as hmo  Accumulator maxed out on hmo leg Result: claim will be processed as indemnity. etc it is determined if there is to the benefits payable for the product for which claim is filed. member no .

Claims ___________________________________________________________________
this involves a check to see if provider has already been reimbursed for the services e.g – capitated providers  Verify Referral o Is member no on referral same as on claim ? o Is this Direct access referral ? o Is referral OON ? o Is referral denied ? o Validate provider no on referral and provider speciality. o Validate referral dates o Validate referral visit o Validate referral diagnosis o Validate referral procedure Verify precertification : Precertification is the process of collecting information prior to inpatient admissions and performance of selected ambulatory procedures, and services. The process permits advance eligibility verification, determination of coverage, and communication with the physician and/or member. It also allows the health care service company to coordinate the patient’s transition from the inpatient setting to the next level of care (discharge planning), or to register patients for specialized programs like disease management, case management, or our prenatal program. A pre-cert penalty will be applied to the claim when: o The claim is non-referred, and o The service requires pre-certification, and o A "PS" pre-cert referral or authorization is not found All three conditions must be met before the pre-cert penalty can be charged. This applies to both par and non-par providers. The percentage pre-cert penalty is assessed on the payable benefit, after any deductible and co-insurance have been taken. Pre system is not applied generally for the following types of services: o Cardiac Rehab o Chemotherapy o Radiation Therapy o Respiratory Therapy Who precertifies medical services? o admitting physicians o primary care physicians (PCP) o specialists o hospitals o Members on plans that allow out-of-network benefits must precertify certain services themselves and failure to do so will result in a reduction of the benefit paid. Where precert and referral are not required, only refers to participating providers. Any non-par usage requires authorization by patient management on order to obtain HMO benefits.

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Claims ___________________________________________________________________
 Diagnosis code of the claim is verified i.e whether the diagnosis is effective for DOS of the claim. Drug code (drg) is validated Procedure/service code is validated . It also involves verification of service code for sensitivity ( i.e sex restriction for a particular procedure) Claimcheck Any claims system needs to do have the following checks either through interface to the HBOC/GMIS Claim Check software package or by other means which performs the following edits: o Unbundling-the use of two or more CPT procedure codes to describe a procedure performed in a single session when one comprehensive code exists. o Incidental Procedures-one or more procedures performed concurrently with a primary procedure, but which require little additional physician resources and/or is clinically integral to the performance of the primary procedure. o Mutually Exclusive Procedures-two or more procedures that by medical practice standards should not be billed on the same patient on the same date of service. o Age/Sex discrepancies and cosmetic and duplicate procedures. Determine payment

 

7.2.2

Following are the processes that affect the amount and extent of payment of a Claim.  Prorated maternity o Determine maternity pct i.e for a female member joining during pregnancy,the system will automatically prorate the claim as follows based on her effective date with the health care company e.g . Date of Delivery 1-30 days after member became effective 31-61 days after member became effective 62-91 days after member became effective 92 days or more after member became effective  % of Reimbursement 70% 80% 90% 100%

Contract interface o Contract is an agreement between the provider or group of providers and the insurance company about the services the provider(s) will provide and the payment that the insurance company will make to the provider for the services rendered. o Providers are generally contracted to provide services for specific benefit codes, Diagnosis codes, Procedure codes.The Payment method used in for paying of Contracted provider is based on Flat rate,Per unit rate , Rating system. Balance bill processing o Balance billing occurs when a doctor or other health care provider charges the patient more than the maximum allowable charge (the amount paid by the healthcare company for the health care services provided by the provider.) o Providers who balance bill can charge approx upto 15% over the maximum allowable charge and this must be paid in addition to the Prime copayment, or extra and Standard deductible and cost-share. o Balance billing fees can only be charged by non-participating providers. Facility fee processing if applicable

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Claims ___________________________________________________________________
o This fee is applicable if the member receives the health care in a facility . It checks for place of service , start and end of the service and presence of any contract of the Facility with the Healthcare company in determining the facility fee .

Product exception override o If it is determined that there is a product exception overide then then various overrides and their values are determined like Copay ,deductible, counsurance , precert penalty etc which are applicable to the claim. Copay processing interface o Copay is the amount payable by the member i.e. it is the member’s responsibility. It is some fixed part of the claimed amount that the member has to pay for the diagnosis or treatment he has undergone. o There are different types of copays like per stay, per day, per visit etc. o In the member’s contract there is also mentioned about the maximum amount of copay for the member and the family for the particular procedure code that is to be paid. o Copay based on no. of days is also dependent on the number of days of stay. It is in ranges. For Ex : Copay has one value for first five days, another for next fifteen days & another for the rest. o Copay can also be zero. Accumulators o Claim that have been denied or contain a benefit that is not covered or that do not have an accumulator are deemed exempt from the accumulator processing. The possible product components are checked. If the indemnity component has been valued, the process will use this component first .All the accumulators that have been defined under the product benefit are retrieved. Once an accumulator is retrieved, the following are checked:  The accumulator must be effective.  There are age requirements set up within this accumulator. The members age is checked against these parameteres. o Accumulators are used to track Individual member out of pocket payments as well as family amounts. o There are various types of accumulators which are used for tracking Copay, Deductible, Coinsurance, Precertification amounts, visits, etc of the member. o The accumulator year to date amounts are compared with the pre-decided limits of these amounts and the payment amount of the claim is adjusted accordingly. Indemnity processing if applicable o Indemnity processing comes into picture if the claim is not a emergency or does not have a referral . Here the claim is processed as fee-for-service or out of network claim.It calculates various payements pertaining to indemnity claims like deductible,coinsurance,precert penalty,out of pocket payments etc . It determines the various amounts that can be applied according to the member and the family limits ( referring to amounts already taken in previous claims) . Coordination of Benefits o Coordination of benefits (COB) allows insurance carriers to offset payments when a claimant carries insurance with multiple carriers. For example, a claimant may have dental insurance with AUSHC and with Blue Cross/Blue Shield. The dental claim is submitted first to the primary payor (in this example, AUSHC), which pays as the plan allows. The claim is then submitted to the secondary payor (Blue

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Claims database updates o Processed Claims stored for maintaining History. a. This provision prevents double or over-payment by the carriers.   7.2. Reporting o A host of reports to provide summary and detail information and statistics Claims History o Claims history records generated and used for future Claims adjudication and used for reporting and financial reconciliation of Self-Insured groups. Referral updates o Referrals are updated for no of visits after the claim has been processed properly.4  Claim adjudication outputs Check extract o Adjudicated claims that are passed to Accounts payable for check printing.3  Update Claim Accumulator updates o This involves updating of Various accumulators for Copay .00a Page 88 of 150 . o o 7. o Denial letters are sent if :  other insurance paid in full  experimental procedure not covered  Cosmetic surgery not covered    65736839.  Inform the provider that he/she can return their previous payment or elect to have them debit his/her account after 60 days.Penalties etc that a Healthcare company liable to pay in certain cases  Any Other Information required . thereby giving him/her an opportunity to seek reimbursement from the member’s primary insurer. Letters o Letters are sent to the member and/or provider giving information as to why :  A claim was denied  A claim is delayed  Is still Under review  Waiting for Additional information  Extra Payment done .Claims ___________________________________________________________________ Cross/Blue Shield). If. The insurance industry has established standard rules to determine which insurer is primary payor.2. the process followed is .doc Ver 0. coinsurance etc depending upon the processing of the claim. Healthcare company discovers that another insurer is the primary carrier.  Provide the name and address of the primary carrier and the patient’s name and address and any other pertinent information. they will:  Notify the provider that they have discovered that another insurer is the primary carrier. after a provider has been paid.  Inform the provider that he/she can write or call the person signing the notification if there is additional information that would alter the proposed process. deductible .

Claims ___________________________________________________________________   Decision re-reviewed.00a Page 89 of 150 . no change Explanation of benefits – (covered in other section) 65736839.doc Ver 0.

Claims ___________________________________________________________________ ADJUDICATION CLAIM PREPARATION AND ELIGIBILITY DETERMINE PAYMENT CLAIM UPDATION CLAIM OUTPUTS Validate member no Validate provider no Maternity percent Contracts Referral updates Accumulator updates Check extract Reports Is Claim too Old ? Is Claim timely filed ? Indemnity processing Product exception override Facility fee Claim history Letters Is Claim duplicate ? Group/Plan eligibilty Product component eligibilty Product exception override Copay processing Benefit eligibility Product bebefit eligibility Check Stacked benefits Memb reimburseme nt /Prov reimburseme nt ? Verify precert Coordination of benefits Accumulator processing Verify referral Veryify Diagnosis code Verify Proc code Figure 2 : Claim adjudication process Validate drug code Claim check 65736839.00a Page 90 of 150 .doc Ver 0.

7. which should be covering the visit and specific services for the member.1.2 Provider as Specialist If a provider is giving services to member as a Specialist. 7.3. Procedures are in place which detect such duplicate claims and avoid the repayments. these providers will file claim for the services rendered to the member. Principle categories for this payment are as follow:  Quality of Care It measures the quality of care based on physician and member surveys. When members have encounters with provider. Once the service is provided to a member.1 Claim Payments Provider Payments Inputs for any provider payment.3 Copay Adjustments If the claim filed required member to pay some copay amount.1.1. This incentive to be paid is decided as fixed % of the contractual amount between Insurance company and the provider. Hospitals send the survey results to Insurance company. the higher will be the incentive. Higher these points. then provider receives payment from primary and secondary insurance companies.1. 7.00a Page 91 of 150 . assign points / marks. He has to file claims with all the involved insurance companies.  Efficiency of Care 65736839. Over a specific period of time.doc Ver 0. 7.3.1. then claim gets adjudicated against Insurance Company’s business policies and rules as imposed by federal/state laws.3. which means he gets a fixed fee by Insurance Company on monthly basis irrespective of actual services provided by the provider during the period under consideration. If the provider is non-capitated. It becomes mandatory to identify all the types of services that will become eligible for consideration under quality incentive.1 Capitated Provider If provider is a Capitated Provider. would come in the form of claims filed by the providers. 7. This data is then passed through ‘United States Quality Algorithms (USQA)’ routines.Claims ___________________________________________________________________ 7. These claims then are taken through claim adjudication process to decide how much amount should be paid to the member or the claim should get denied. especially the big providers like Hospitals. 7.3.6 Provision for Advance Payment Some insurance companys also have a facility to pay the providers some lumpsum amount in advance.3. are paid extra for the quality of services they provide. based on some algorithms.5 Duplicate Claims In case of late payments by insurance company. administration in the hospital etc. provider has tendency to file the same claim again. Mostly all the In-patient type of services and none of the Out-patient type of services are eligible for this incentive.1. then all his claims are bound to get denied if filed for services covered under capitation. in most of the general scenarios.1.7 Provision for Advance Payment Some providers. Otherwise claims without proper referral get denied. then the insurance company will pay the provider adjudicated amount less the copay amount as described by member’s plan.3. the physicians fill in the data such as quality of operating rooms. In the physician surveys.3. then the claims filed would require specific referral already in place.3.4 COB Adjustments If Coordination of benefit applies for any member. These routines (which are black box to the insurance company’s system). 7. both with a few exception. these amounts are then adjusted during adjudication against the claims filed by provider.3 7. a survey is conducted where in the member fills in a form to comment about the quality of service provided by the hospital.

Higher the points. If the member has not reached the Deductible limit. For this category: higher the points. higher will be the payments.00a Page 92 of 150 . the lesser will be the incentives paid.3. the provider is informed by the Insurance Company regarding the reasons and split of payments. lower will be the payments.1 Copay Limit Reached If member has already reached the copay limit mentioned on his plan and in the next encounter he still pays the copay. adverse events and C-section rates. longer the stay.  Commitment to Managed Care Principles The negotiators have the providers fill in a questionnaire that contains the questions such as: o if the provider sends the data to Insurance Company electronically o if there exists long term contract between hospital and Insurance Company o if nurses from the hospital participate in training programs conducted by Insurance Company The provider has to fill in either Yes or No to each of these questions. 7.doc Ver 0. 7. If a member spends more time in hospital for a service. For each of these measures. So. as defined in the plan adopted by member.2 Member Re-imbursement Following are various scenarios when member is eligible for re-imbursement by The Insurance Company. then the insurance company will reimburse all the amount paid towards copay back to member. medicine and OB/GYN. When provider’s claim is adjudicated.3.2. the payment is made.2. lower will be the payments as it is hospital’s responsibility to see that fewer adverse events arise. 7. In this case insurance company pays directly to member. through USQA routines. Also.1.Claims ___________________________________________________________________ It measures the efficiency of the care based on length of stay for surgery.3. 7. a fixed % of adjudicated claim amount is paid back to the member.2. part or full payment made by him to provider. Based on the answers.4 Co-insurance Applies In this case.2.8 Payment to Insurance Company It may happen that provider claims are incorrectly adjudicated and provider is overpaid.3. Under such circumstances.3. insurance company intimates provider of the extra payment made and provider is required to repay to the company accordingly.3 Deductible Applies Member pays to the provider Out-of-Network and files a claim with the Insurance company. whether denied or paid. 65736839.3. system assigns points. 7.4 Claim Adjustments These are the various types of adjustments that can be made to the claim. points are assigned and based on the points. then higher will be the costs that hospital incurs and hence the claim amount. higher the adverse conditions. 7. then Insurance Company will then deny such a claim. 7.2 Member goes Out-Of-Network If member visits a provider out of network then he has to file a claim for the benefits provided under his plan.

7. It is completed and stored. In the process.4. 7. a letter is sent to the provider notifying of over-payment.doc Ver 0. The manual check request paperwork is then sent to Claims system. Claim gets completed without adjudication.5 Stop Adjustment The Claim is completed but the check is still open (check information has been sent to the bank but not been encashed yet). Original completed claim remains unchanged. This is to account for the payment being made using the manual check. the original claims remain untouched.4. Deduction may be split across multiple claims.4.Claims ___________________________________________________________________ 7.3 Manual Check Adjustment Sometimes a check is required to be created manually if there is a need to adjust amount of payment. i. 7. The claim does not undergo adjudication. Further claims of the provider are not paid till the all the amount on the negative claim has been recovered.e. When provider agrees and refunds over-payment (provider will cut check and send in). Only in this scenario a stop can be issued on the check.2 Minus Debit Adjustment In case of overpayment to providers. A new set of claims are generated which have amount equal to negative of the amounts of the original claims. Such a check is created by entering data into the system manually. The original claims are overridden with new payment codes. A connection is established between the manual check and the claim entered.1 Refund Adjustment This type of adjustment takes place when a Health Services Provider overpays the provider.4 Void Adjustment The Claim is completed but the check is still in open status (Check information has still not been sent to the bank) only in this scenario a void can be issued on the check. The check status is also changed from open (blank) to Void (V).00a Page 93 of 150 . On receipt of the manual check paperwork a Manual claim is entered. 7. Provider over-payment letter is generated one claim per letter.4. If provider does not agree to cut and send check to refund over-payment. 65736839. New negative claims created with negative dollar amount. The check status is changed from open (blank) to Stopped (S). there has to be a claim for which a check is created. minus debit option is used to create an equal amount negative check. cash date for check is recorded and necessary deductions are applied to claim. When void is done then a new set of claims are generated which are associated with the same check with negative amounts as the original claims. when stop payment is done.4. Once the whole dollar amount is adjusted the process stops and all the claims get completed and letter is sent to the provider stating why payment has not been made to him.

S. meaning that all the claims belonging to this category that Health care company sends to the government would mean an additional revenue to Health care company from the government. Meaning that now the government would also consider the health of the member when it makes a payment for that member to the health care company. and people who are eligible to receive federally assisted income maintenance payments. Hence now it was important for the health care company to report each and every claim that it received. the risk adjustment model emerged. it needs to report all of its encounters (visit of a member to the provider or health care) to the government. and/or disabled. The scores for AIDS/Chemotherapy are the highest. earlier the government used to pay the health care companies a flat rate per member. which covers 37 million U. It covers approximately 36 million individuals including children. Government reporting is needed in a Healthcare industry especially for those plans that are funded by the government. It means that no matter a person visited a hospital or not. If a Health care company has Medicare and Medicaid as the two sponsored programs. the aged.00a Page 94 of 150 . Medicare provides health insurance to people aged 65 and over and those who have permanent kidney failure and people with certain disabilities. Citizens. Although the risk adjustment model has come up. the Federal government sponsors Medicare while the Medicaid plans are specific to the particular state. This is where Encounter data reporting started coming into picture. Thus. Since the number of encounters and the particular diagnosis that was performed had very less significance in the payments that were made. Medicaid . The score calculation and the payments are made on an annual basis. Federal-State health insurance program for certain low-income and needy people. then government assigns a score of 04 (which is the least PIP SCORE) to this member and Health Care Company would be paid at a flat rate for this member.Medicaid is a jointly funded. Depending on the diagnosis that has been performed on a particular claim. the healthcare company would still get paid for that member. This is the reason why government reporting is important for a Healthcare industry. If a person has not visited a hospital during the entire year. a government body administers Medicare. blind.5 Government reporting There are two types of government-sponsored plans in U. to the government.Claims ___________________________________________________________________ 7. it still doesn’t form a significant portion in the payment model. it would still get the same flat rate from the government. the government assigns a severity code (PIP SCORE) to the particular member. But sometime around the end of 2000.          65736839. Health care company reports the claims that have been filed by the providers to the government. the nation's largest health Insurance program. And similarly no matter how much money the health care company spends on a person who was a frequent visitor to the hospital. But there’s a gradual increase in its share.S  Medicare Health Care Financing Administration (HCFA).doc Ver 0. With this model there is not a very stringent need for the healthcare company to report all of its encounters correctly to the government. For Medicare encounters.

It also gives the cap amounts applicable to him. When requesting payment from a secondary payer it is extremely important that the EOB/remittance information be provided from the primary payer.      The The The The The charges for which the provider has billed the Health Insurance company charges whcih are for services covered by Group Benefits charges that the member must pay to meet his/her deductible amount the Healthcare Insurance company paid amount that the member owes The EOB for the National Advantage Program lists:  billed charges  allowable amount  non-covered amount Some health insurance companies may prefer to generate EOB only for certain type of services e. While the Medicaid submissions go directly to the state.1 What are Accumulators? Accumulators are generally database records.7.g.7.doc Ver 0.00a Page 95 of 150 . It gives the member a detailed explanation of these amounts. After the submission the intermediary is supposed to send an acknowledgement back to the health care company which gives details of o o o 7. It is not a bill but an explanation of the benefits. The encounters have to be submitted in a fixed format called the Uniform Billing Code1992 form.Claims ___________________________________________________________________  Balanced Budget Act of 1997 mandates all healthcare organizations to electronically transmit Medicare hospital inpatient encounters to Healthcare Financing Administration through a fiscal intermediary.  Explanation of Benefits (EOB) EOB is the letter sent to a member by the Insurance company giving the details of the services rendered to him by the providers and the amount to be borne by the member for the services he has taken. 65736839.6 Claims accepted. which acts as an intermediary between Health Care Company and the Federal government. for indemnity or fee for service claim where deductible. 7. In case of multiple MC (primary and secondary) the primary MC coordinates the benefits between the two MC and sends a COB (Coordination of benefits) to the member. Claims rejected and reasons for the same. The list of claims in the wait status for more information.1 Accumulators 7.7 7. The Explanation of Benefits provides members a statement of claim payments. Medicare submissions are sent to CMS (Center for Medicare and Medicaid services). coinsurance. etc are applicable and not for all type of claims. dedicated to accumulating specific type of data over a specific period.

7.7. It comes into picture when deductible limit is met. o Members pays remaining deductible (part or full.4 Visits – for member Visits of the member to provider are accumulated. member no more pays copay to provider.7. accumulators for the next period will get updated for the deductibles paid.2 7.7.3. Some plans provide for facility of carry over deductible.7. member + family These accumulators include combined figures of co-insurance and deductibles.doc Ver 0. member + family Co-insurance is also accumulated separately for member as well as member and all his/her dependents.Claims ___________________________________________________________________ 7.4. 7. o Plan provision says Carry over deductible is applicable for last 30 days of the plan year.3. 2001 will go on accumulating the data till end of Nov-2001.3 What is accumulated? 7. say partial/full/some percentage of billed. (Details will come down the line in the document) 7. 7.2 Co-insurance – for member.4 Types of Accumulator  7.1 Copay – for member. the corresponding accumulators are updated with those amounts for the latest instance under consideration. o Member’s deductible limit is say $ 500. 7. Say.1 Periodic Accumulators These accumulators will cover up the amounts for period as mentioned in the effective plan for the member.2 Function/Purpose of Accumulators The main use of accumulators is during the claims adjudication process. during predefined period.member. depending upon how many visits covered for a specific service to same provider.3. deductible paid by member in a specific later portion of the effective year.7. When the same has been decided. the amount of money that is going to be paid to/from a member is decided based on the accumulator amounts. 7. it accumulates $ 350.7. 7. member + family Copay is accumulated separately for member as well as member and all his/her dependents.7.for member. Once the maximum limit set by plan is met. Accumulators records are updated accordingly in such cases.6 Out of Pocket .7. So.7. say $100) during the last 30 days of plan year.3 Deductible .3. In a general scenario. 65736839. This reduces burden on member and acts as incentive for member to continue with the co-insurance company. this figure may be used to decide the method of payment.3. The accumulator amounts are checked to find if they are exceeding the limit for a particular member (which is decided when a member enrolls to a PLAN). will be considered as deductible paid towards next year. in case member chooses to continue. Example: o If a member XYZ has plan year 01-Jan-2001 to 31-Dec-2001.3. member + family Co-insurance is also accumulated separately for member as well as member and all his/her dependents. o Accumulator for yr. Carry over Deductible Updates Some plans provide for the provision that. In this case.5 Family Dollars Insurance company’s disbursement to member or the provider.7. 7.00a Page 96 of 150 .

he now needs to pay $100 less towards deductible in the next plan year. If member chooses to continue.7.2 Lifetime Accumulators These accumulators will sum up the amounts for the life time for a member. $100 will get updated in these accumulators.8 Overall Claims system diagram : Figure 3: Claims overview 7. 4. 7. 3.9 1.4. Review Questions.Claims ___________________________________________________________________ o o Then new accumulators will be generated as if paid for the next year 2002. because of this facility.00a Page 97 of 150 . 7. Why are letters required? What are different types of letters? What are the various types of Claim adjustments? What does Government reporting consist of? What are the various criteria for deciding the payment of a claim? What is the significance of maintaining Claims history? 65736839. 5.doc Ver 0. 2.

 Pre-certification penalty is in excess of any deductible and/or coinsurance applicable to the claim. Claim adjustments can be done before Claim adjudication.00a Page 98 of 150 .   Member encounters have to be submitted to the government in a fixed format.Claims ___________________________________________________________________ 6. Copay is not the member’s responsibility.ehealthinsurance.    State whether true of false – COB deals with claim payment.doc Ver 0.10 References http://www.DOC (System appreciation document for Claims maintainance project) SA_AETEDR2. Accumulators are updated for denied claims.CLDJABDJ.DRIVER) SA_AETHMOM2. EOB is letter sent after adjudication.DOC (System appreciation document) and other docs from Encounter data reporting project 65736839. 7.com/ Aetna Batch driver file (CLPRD.

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CMS also performs a number of quality-focused activities. CMS maintains oversight of the survey and certification of nursing homes and continuing care providers (including home health agencies.1 Unit Objectives This unit will acquaint the reader with the role played by the external agents in the Healthcare Industry. a program that is expected to cover many of the approximately 10 million uninsured children in the United States. CMS runs the State Children's Health Insurance Program (SCHIP). and financing. CMS also regulates all laboratory testing (except research) performed on humans in the United States.00a Page 100 of 150 . 8. treatment. Department of Health and Human Services.000 laboratory entities fall within CMS's regulatory responsibility. providers. It requires some help from some external sources or agencies. helps millions of Americans and a small company get and keep health insurance coverage.2 Introduction In Heath Care Industry. And CMS. This unit deals with the various different agencies in a Health Care Industry and the role played by them.  conducts research on the effectiveness of various methods of health care management.two national health care programs that benefit about 75 million Americans. researchers and State surveyors information about these activities and nursing home quality. And with the Health Resources and Services Administration. Approximately 158. with the Departments of Labor and Treasury. including regulation of laboratory testing (CLIA). and  assesses the quality of health care facilities and services and taking enforcement actions as appropriate. and helps eliminate discrimination based on health status for people buying health insurance.S.3 8. development of coverage policies. and makes available to beneficiaries. and quality-of-care improvement. intermediate care facilities for the mentally retarded. Medicare and SCHIP programs are properly run by its contractors and state agencies. CMS:  assures that the Medicaid.  establishes policies for paying health care providers.doc Ver 0. CMS runs the Medicare and Medicaid programs .VIII 8 External Agents 8.1 Government Agencies Centers for Medicare & Medicaid Services (CMS) The Centers for Medicare & Medicaid Services (CMS) is a federal agency within the U. 65736839. Medicaid and SCHIP. 8.External Agents ___________________________________________________________________ UNIT . CMS spends over $360 billion a year buying health care services for beneficiaries of Medicare. and hospitals). all the services and management activities cannot be carried by the insurance payer itself on it's own.3.

External Agents ___________________________________________________________________

Figure 1 below describes the interaction of CMS and State Government with a Healthcare Industry.

Claims Claim info

Enrollment Member Info

Provider Provider Info

Provider Network Area

Provider Validations

Claims

State Government Rules Medicaid Data State Governments

Encounters

Pharmacy Aetna Internal
Systems

Business Raw Data

Business Criteria + Refined Data

Errors from State I.T. Enrollment Info Reformatted relevant data Medicare Data CMS Federal Government

External sources of data Make Corrections

Federal Rules

Errors from Federal Gov. Members

Users

Letter Generator Letters

Members Make Corrections Corrected Errors Error Correction System Errors

Government Programs

Figure 1 : CMS - Center for Medicare and Medicaid Services

8.3.2

DEPARTMENT OF HEALTH AND HUMAN SERVICES (DHSS)

The DEPARTMENT OF HEALTH AND HUMAN SERVICES is the United States government's principal agency for protecting the health of all Americans and providing essential human services, especially for those who are least able to help themselves. The Department Include more than 300 Programs, covering a wide spectrum of activities. Some highlights include:            Medical and social science research Preventing outbreak of infectious disease, including immunization services Assuring food and drug safety Medicare (health insurance for elderly and disabled Americans) and Medicaid (health insurance for low-income people) Financial assistance and services for low-income families Improving maternal and infant health Head Start (pre-school education and services) Preventing child abuse and domestic violence Substance abuse treatment and prevention Services for older Americans, including home-delivered meals Comprehensive health services for Native Americans

HHS is the largest GRANT-MAKING AGENCY in the federal government, providing some 60,000 grants per year. HHS' Medicare program is the nation's largest health insurer, handling more than 900 million claims per year.

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External Agents ___________________________________________________________________
HHS works closely with STATE, LOCAL AND TRIBAL Governments and many HHS-funded services are provided at the local level by state, county or tribal agencies, or through private sector grantees. 11 HHS operating divisions, including eight agencies in the U.S. Pubic Health Service and three human service agencies administer the Department's programs. In addition to the services they deliver, the HHS programs provide for equitable treatment of beneficiaries nationwide, and they enable the collection of national health and other data.

8.3.3

Centers for Disease Control and Prevention (CDC)

The Centers for Disease Control and Prevention (CDC) is recognized as the lead federal agency for protecting the health and safety of people - at home and abroad, providing credible information to enhance health decisions, and promoting health through strong partnerships. CDC serves as the national focus for developing and applying disease prevention and control, environmental health, and health promotion and education activities designed to improve the health of the people of the United States. CDC, located in Atlanta, Georgia, USA, is an agency of the Department of Health and Human Services. Infectious diseases, such as HIV/AIDS and tuberculosis, have the ability to destroy lives, strain community resources, and even threaten nations. In today's global environment, new diseases have the potential to spread across the world in a matter of days, or even hours, making early detection and action more important than ever. CDC plays a critical role in controlling these diseases, traveling at a moment's notice to investigate outbreaks abroad or at home.

8.3.4

Agency for Health Care Research and Quality (AHRQ)

The Agency for Healthcare Research and Quality (AHRQ) research provides evidencebased information on health care outcomes; quality; and cost, use, and access. Information from AHRQ’s research helps people make more informed decisions and improve the quality of health care services. AHRQ was formerly known as the Agency for Health Care Policy and Research. AHRQ's strategic goals reflect the needs of its customers. These goals are to

Support improvements in health outcomes. The field of health outcome research examines the end results of the structure and processes of health care on the health and well being of patients and populations. A unique characteristic of this research is the incorporation of the patient's perspective in the assessment of effectiveness. Public and private-sector policymakers are also concerned with the end results of their investments in health care, whether at the individual, community, or population level. Strengthen quality measurement and improvement. Achieving this goal requires developing and testing quality measures and investigating the best ways to collect, compare, and communicate these data so they are useful to decision-makers. AHRQ's research will also emphasize studies of the most effective ways to implement these measures and strategies in order to improve patient safety and health care quality. Identify strategies that improve access, foster appropriate use, and reduce unnecessary expenditures. Adequate access and appropriate use of health care services continues to be a challenge for many Americans, particularly the poor, the uninsured, members of minority groups, rural and inner city residents, and other priority populations. The Agency will support studies of access, health care utilization, and expenditures to identify whether particular approaches to health care delivery and payment alter behaviors in ways that promote access and/or economize on health care resource use.

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External Agents ___________________________________________________________________
8.3.5 National Information Center Care Technology (NICHSR) on Health Services Research and Health

The 1993 NIH Revitalization Act created a National Information Center on Health Services Research and Health Care Technology (NICHSR) at the National Library of Medicine to improve "the collection, storage, analysis, retrieval, and dissemination of information on health services research, clinical practice guidelines, and on health care technology, including the assessment of such technology." The Center works closely with the Agency for Healthcare Research and Quality (AHRQ), formerly the Agency for Health Care Policy and Research (AHCPR), to improve the dissemination of the results of health services research, with special emphasis on the growing body of evidence reports and technology assessments which provide organizations with comprehensive, science-based information on common, costly medical conditions and new health care technologies. The overall goals of the NICHSR are:  to make the results of health services research, including practice guidelines and technology assessments, readily available to health practitioners, health care administrators, health policy makers, payers, and the information professionals who serve these groups  to improve access to data and information needed by the creators of health services research  to contribute to the information infrastructure needed to foster patient record systems that can produce useful health services research data as a by-product of providing health care.

8.3.6

Health Resources and Services Administration (HRSA)

The Health Resources and Services Administration's mission is to improve and expand access to quality health care for all. HRSA assures the availability of quality health care to low income, uninsured, isolated, vulnerable and special needs populations and meets their unique health care needs.

8.3.7 5. 6. 7.

Exercise ___ is the Federal Agency that runs the Medicare and Medicaid programs. Information from ______'s research helps people make more informed decisions and improve the quality of health care services. The ____ is the United States government's principal agency for protecting the health of all Americans.

Answers: 5. CMS 6. AHRQ 7. DHSS

8.4 8.4.1

Government Acts and Regulations HIPAA

The Health Insurance Portability & Accountability Act of 1996 (August 21), Public Law 104-191, which amends the Internal Revenue Service Code of 1986. Also known as the Kennedy-Kassebaum Act.

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This includes all health care providers. but due to minor glitch didn't become effective until April 14. HOW WILL WE BE AFFECTED? Broadly and deeply. or adapting. Effective compliance will require organization-wide implementation. each of which have generated a variety of "rules" and "standards. administrative and financial data Unique health identifiers for individuals. More specifically. information systems Developing new internal communications Training and enforcement Now. HIPAA calls for:    Standardization of electronic patient health. the effective date is 60 days after a rule is published. health plans. life insurers. including: -.External Agents ___________________________________________________________________   Improved efficiency in healthcare delivery by standardizing electronic data interchange. 2000. Let's try to make "Administrative Simplification" simple! HIPAA's "Administrative Simplification" provision is composed of four parts.00a Page 104 of 150 . including Developing new policies.doc Ver 0. and procedures Building "chain of trust" agreements with service organization Redesigning a compliant technical information infrastructure Purchasing new." "role-based. So the compliance date for that rule is October 16. service organizations. even 1-physician offices. clearinghouses. Steps will include:            Building initial organizational awareness of HIPAA Comprehensive assessing of the organization's information security systems. Normally." Many of the rules and standards are still 65736839." and/or "context-based" access . an organization with a computer network will be required to implement one or more security authentication access mechanisms . for many of us." past. 2002. 2000. and universities. policies and procedures Developing an action plan with deadlines and timetables Developing a technical and management infrastructure to implement the plan Implementing a comprehensive action plan.depending on its network environment. information systems vendors. we'll explore the next level of HIPAA . employers. health plans and health care providers Security standards protecting the confidentiality and integrity of "individually identifiable health information. and Protection of confidentiality and security of health data through setting and enforcing standards. Required compliance responses aren't standard. present or future. public health authorities. billing agencies. 2001. 2003. WHO IS AFFECTED? All healthcare organizations. because organizations aren't. employers."user-based. cause more confusion than clarity.fines up to $250K and/or imprisonment up to 10 years for knowing misuse of individually identifiable health information COMPLIANCE DEADLINES? Most entities have 24 months from the effective date of the final rules to achieve compliance. The Transactions Rule was published on August 17. Compliance is required for the Privacy Rule on April 14.fines up to $25K for multiple violations of the same standard in a calendar year -. ARE THERE PENALTIES? HIPAA calls for severe civil and criminal penalties for noncompliance.specifics that. For example. processes. The Privacy Rule was published on December 28.

65736839. EMPLOYERS. when final. clearinghouses and providers. Today.00a Page 105 of 150 . the rules. It is expected that standard identifiers will reduce these problems. the Electronic Signature standard applies only to the transactions adopted under HIPAA. Health organizations also must adopt STANDARD CODE SETS to be used in all health transactions. and other health problems. although if they don't. most are expected to become "final" rules within the year 2000. Even more confusing. organizations that use Electronic Signatures will have to meet a standard ensuring message integrity. as well as their causes. UNIQUE IDENTIFIERS FOR PROVIDERS. thereby "simplifying" and improving transaction efficiency nationwide. Virtually all health plans will have to adopt these standards. the American National Standards Institute. even if a transaction is on paper or by phone or FAX. and access to individual health information. The proposed rule requires use of specific electronic formats developed by ANSI. duplication of effort and costs. Again. user authentication. For example. and non-repudiation. the code sets proposed as HIPAA standards are already used by much health plans. which should ease the transition. will often have different compliance deadlines. All parties to any transaction will have to use and accept the same coding. in the long run. health plan eligibility. payments for care and health plan premiums. but to all individual health information that is maintained or transmitted. The four parts of Administrative Simplification are:  ELECTRONIC HEALTH TRANSACTIONS STANDARDS  UNIQUE IDENTIFIERS  SECURITY & ELECTRONIC SIGNATURE STANDARDS  PRIVACY & CONFIDENTIALITY STANDARDS ELECTRONIC HEALTH TRANSACTIONS STANDARDS The term "Electronic Health Transactions" includes health claims. coordination of benefits. first injury reports. for most transactions except claims attachments and first reports of injury. they will have to contract with a clearinghouse to provide translation services.doc Ver 0. SECURITY OF HEALTH INFORMATION & ELECTRONIC SIGNATURE STANDARDS The new Security Standard will provide a uniform level of protection of all health information that is  housed or transmitted electronically and that  Pertains to an individual. Proposed regulations for these exceptions are not yet out. health providers and plans use many different electronic formats.External Agents ___________________________________________________________________ in the "proposed" (by DHHS) stage. It applies not only to the transactions adopted under HIPAA. this is intended to reduce mistakes. transmission. enrollment and disenrollment. Providers using non-electronic transactions are not required to adopt the standards. In addition. HEALTH PLANS and PATIENTS The current system allows us to have multiple ID numbers when dealing with each other. and related transactions. conducive to error and costly. injuries. symptoms and actions taken must become uniform. coding systems that describe diseases. Implementing a national standard will mean we will all use one format. however. The Security standard mandates safeguards for physical storage and maintenance. However. which HIPAA sees as confusing. Fortunately. claim status.

on December 28.  restrict most disclosure of health information to the minimum needed for the intended purpose. 2001. What Is the Continuation Health Law? 65736839. pushing the effective date of the rule until April 14. 2001. you may be required to pay for the coverage. In general.  Accountability: Under HIPAA. That changed in 1986 with the passage of health benefit provisions in the Consolidated Omnibus Budget Reconciliation Act (COBRA). 2003 for most covered entities. Once COBRA coverage is chosen. and fighting health care fraud and abuse.4. These programs can be one of the most important benefits provided by an employer. The new regulation reflects the five basic principles outlined at that time:  Consumer Control: The regulation provides consumers with critical new rights to control the release of their medical information  Boundaries: With few exceptions. solutions will vary from business to business. 8. an individual's health care information should be used for health purposes only.  establish new criminal and civil sanctions for improper use or disclosure. The rule covers all individually identifiable health information in the hands of covered entities.00a Page 106 of 150 . no transactions adopted under HIPAA currently require an electronic signature. Now.External Agents ___________________________________________________________________ The Security Standard does not require specific technologies to be used. depending on the needs and technologies in place. A paperwork glitch delayed notification of Congress.2 CORBA Health insurance programs allow workers and their families to take care of essential medical needs. regardless of whether the information is or has been in electronic form.  give patients new rights to access their medical records and to know who else has accessed them.  establish new requirements for access to records by researchers and others. your health plan must give you a notice stating your right to choose to continue benefits provided by the plan. DHHS received over 11. Also.doc Ver 0. so the Congressional Review period didn't begin until February. You have 60 days to accept coverage or lose all rights to benefits. There was a time when group health coverage may have been terminated when a worker lost his job or changed employment.000 comments and plans to issue guidelines and clarification of the final rule in response. terminated employees or those who lose coverage because of reduced work hours may be able to buy group coverage for themselves and their families for limited periods of time. there will be specific federal penalties if a patient's right to privacy is violated.  Security: It is the responsibility of organizations that are entrusted with health information to protect it against deliberate or inadvertent misuse or disclosure. including treatment and payment. privacy is about whom has the right to access personally identifiable health information.  Public Responsibility: The new standards reflect the need to balance privacy protections with the public responsibility to support such national priorities as protecting public health. for the first time. improving the quality of care. The Privacy standards:  limit the non-consensual use and release of private health information. Compliance will be required on April 14. If you are entitled to COBRA benefits. conducting medical research. PRIVACY AND CONFIDENTIALITY The Final Rule for Privacy was published just as President Clinton was leaving office. DHHS Secretary Tommy Thompson used the time to solicit additional comments during March.

however. Beneficiary Coverage A qualified beneficiary generally is any individual covered by a group health plan on the day before a qualifying event. however. A qualified beneficiary may be an employee. independent contractors and directors. the employee's spouse 65736839. than individual health coverage. is not covered under COBRA. is only available in specific instances. The term "employees" includes all full-time and part-time employees. require that these plans have rules outlining how workers become entitled to benefits. health maintenance organization. the Internal Revenue Code and the Public Health Service Act to provide continuation of group health coverage that otherwise might be terminated. Who Is Entitled to Benefits? There are three elements to qualifying for COBRA benefits. however. reimbursement or combination of these. as well as self-employed individuals. For this purpose. Medical benefits provided under the terms of the plan and available to COBRA beneficiaries may include:  inpatient and outpatient hospital care  physician care  surgery and other major medical benefits  prescription drugs  any other medical benefits. spouses and dependent children the right to temporary continuation of health coverage at group rates. It does. COBRA contains provisions giving certain former employees. ERISA neither establishes minimum standards or benefit eligibility for welfare plans nor mandates the type or level of benefits offered to plan participants. It is ordinarily less expensive. This coverage. since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. though. The law amends the Employee Retirement Income Security Act (ERISA). Group health plans sponsored by private sector employers generally are welfare benefit plans governed by ERISA and subject to its requirements for reporting and disclosure. apply to plans sponsored by the Federal government and certain church-related organizations. It applies to plans in the private sector and those sponsored by state and local governments. self-funded pay-as-you-go basis. Plan Coverage Group health plans for employers with 20 or more employees on more than 50 percent of the working days in the previous calendar year are subject to COBRA. which initiate the coverage. retirees. The law generally covers group health plans maintained by employers with 20 or more employees in the prior year. the term employees also include agents. COBRA establishes specific criteria for plans. Under COBRA. fiduciary standards and enforcement.doc Ver 0. The law does not. such as dental and vision care Life insurance.External Agents ___________________________________________________________________ Congress passed the landmark Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit provisions in 1986. but only if they are eligible to participate in a group health plan. however. a group health plan ordinarily is defined as a plan that provides medical benefits for the employer's own employees and their dependents through insurance or another mechanism such as a trust.00a Page 107 of 150 . Group health coverage for COBRA participants is usually more expensive than health coverage for active employees. beneficiaries and events.

except for COBRA continuation coverage. a retired employee. the retired employee's spouse and dependent children. The types of qualifying events for employees are:  voluntary or involuntary termination of employment for reasons other than "gross misconduct" reduction in the number of hours of employment The types of qualifying events for spouses are:  Termination of the covered employee's employment for any reason other than "gross misconduct"  Reduction in the hours worked by the covered employee  Covered employee's becoming entitled to Medicare  Divorce or legal separation of the covered employee  Death of the covered employee The types of qualifying events for dependent children are the same as for the spouse with one addition: loss of "dependent child" status under the plan rules as shown in Figure 1.External Agents ___________________________________________________________________ and dependent children.doc Ver 0. create rights and obligations for employers. Qualifying Events Termination Reduced Hours Beneficiary Employee Spouse Dependent Child Spouse Dependent child Coverage 18 months Employee entitled to Medicare Divorce or legal separation Death of covered employee 36 months Loss of "dependent child" Dependent status child Figure: 2 Periods of Coverage Your Rights: Notice and Election Procedures 36 months COBRA outlines procedures for employees and family members to elect continuation coverage and for employers and plans to notify beneficiaries. Qualifying Events "Qualifying events" are certain types of events that would cause. Employers and plan administrators have an obligation to 65736839. The qualifying events contained in the law. an individual to lose health coverage. and in certain cases.00a Page 108 of 150 . Qualified beneficiaries have the right to elect to continue coverage that is identical to the coverage provided under the plan. The type of qualifying event will determine who the qualified beneficiaries are and the required amount of time that a plan must offer the health coverage to them under COBRA. A plan. and plan administrators and qualified beneficiaries. at its discretion. may provide longer periods of continuation coverage.

notification and type of coverage options.00a Page 109 of 150 . Second. Plan administrators must automatically furnish the SPD booklet 90 days after a person becomes a participant or a beneficiary begins receiving benefits or within 120 days after the plan is subject to the reporting and disclosure provisions of the law. Specific Notices Specific notice requirements are triggered for employers. Plan administrators are responsible for determining whether these qualifying events have occurred. COBRA coverage is retroactive if elected and paid for by the qualified beneficiary. Election The election period is the time frame during which each qualified beneficiary may choose whether to continue health care coverage under an employer's group health plan.and 30-day requirements if allowed by plan rules. qualified beneficiaries and plan administrators when a qualifying event occurs. Qualified beneficiaries have a 60-day period to elect whether to continue coverage. their spouses and newly hired employees informing them of their rights under COBRA and describing provisions of the law. reduced hours of employment or entitlement to Medicare.doc Ver 0. Plan administrators. First. termination. Disabled beneficiaries must notify plan administrators of Social Security disability determinations. employers are relieved of the obligation to notify plan administrators when employees terminate or reduce their work hours. There are two special exceptions to the notice requirements for multi-employer plans. A notice must be provided within 60 days of a disability determination and prior to expiration of the 18-month period of COBRA coverage. Employers must notify plan administrators within 30 days after an employee's death. Notice Procedures General Notices An initial general notice must be furnished to covered employees. ERISA requires employers to furnish modified and updated SPDs containing certain plan information and summaries of material changes in plan requirements. A qualified beneficiary must notify the plan administrator within 60 days after events such as divorce or legal separation or a child's ceasing to be covered as a dependent under plan rules. the time frame for providing notices may be extended beyond the 14. upon notification of a qualifying event.External Agents ___________________________________________________________________ determine the specific rights of beneficiaries with respect to election. COBRA information also is required to be contained in the summary plan description (SPD) which participants receive. These beneficiaries also must notify the plan administrator within 30 days of a final determination that they are no longer disabled. must automatically provide a notice to employees and family members of their right to elect COBRA coverage. This period is measured from the later of the coverage loss date or the date the notice to elect COBRA coverage is sent. 65736839. Multi-employer plans may provide for a longer period of time. The notice must be provided in person or by first class mail within 14 days of receiving information that a qualifying event has occurred.

Since in this case divorce is the qualifying event under COBRA. Inc. David loses his health coverage when he and his wife become divorced. a stockbroker. Example 4: Jane W. however. the plan need only provide continuation coverage beginning on the date the waiver is revoked.00a Page 110 of 150 . vision and prescription benefits under single or multiple plans maintained by the employer. Individuals do not have to be given the option to elect just the non-core benefits unless those were the only benefits carried under that particular plan before a qualifying event. individuals may generally elect either the entire package or just core benefits. A waiver of coverage may be revoked by or on behalf of a qualified beneficiary before the end of the election period. The health plan of the chemical company has a pre-existing condition clause for maternity benefits. Then. has health coverage through his wife's plan sponsored by the XYZ Co. a beneficiary may have had medical. If a plan provides both core and non-core benefits. she has the right to elect and receive coverage under the old plan for COBRA purposes because the new plan limits benefits for pre-existing conditions. Assuming a qualified beneficiary had been covered by three separate health plans of his former employer on the day preceding the qualifying event. 65736839. except where they are mandated by law in which case they become core benefits. Even though Jane signs up for the new employer's plan.. Example 3: RST. leaves in June 1988 to take a position with a competing firm. is a small business. Each qualified beneficiary. Example 2: Day laborer David P. since the firm had fewer than 20 employees in 1987 and is not subject to COBRA requirements. A parent or legal guardian may elect on behalf of a minor child. Covered Benefits Qualified beneficiaries must be offered coverage identical to those received immediately before qualifying for continuation coverage. She is not entitled to COBRA coverage with the plan of RST. dental. Core benefits include all other benefits received by a beneficiary immediately before qualifying for COBRA coverage. John may elect and pay for a maximum of 18 months of coverage by the employer's group health plan at the group rate. that individual has the right to elect to continue coverage in any of the three health plans. hospitalization. John is fired for a reason other than gross misconduct and his health coverage is terminated. Non-core benefits are vision and dental services. Mary H. Inc.. David is entitled to a maximum of 36 months of COBRA coverage. left brokerages firm in May 1990 to take a position with a chemical company. may independently elect COBRA coverage. participates in the group health plan maintained by the ABC Co. which maintained an insured group health plan for its 10 employees in 1987 and 1988. which has no health plan. a secretary with six years of service. She was five months pregnant at the time. David may purchase health coverage with the plan of his former wife's employer. A beneficiary may then reinstate coverage. How COBRA Coverage Works Example 1: John Q.doc Ver 0.External Agents ___________________________________________________________________ A covered employee or the covered employee's spouse may elect COBRA coverage on behalf of any other qualified beneficiary. For example.

COBRA does not prohibit plans from offering continuation health coverage that goes beyond the COBRA periods. Some plans allow beneficiaries to convert group health coverage to an individual policy. it must be offered to you. A plan.00a Page 111 of 150 . may permit a beneficiary to receive a maximum of 36 months of coverage. The premium cannot exceed 102 percent of the cost to the plan for similarly situated individuals who have not incurred a qualifying event. may provide longer periods of coverage beyond those required by COBRA.External Agents ___________________________________________________________________ A change in the benefits under the plan for active employees may apply to qualified beneficiaries. Although COBRA specifies certain maximum required periods of time that continued health coverage must be offered to qualified beneficiaries. 65736839. COBRA beneficiaries generally are eligible to pay for group coverage during a maximum of 18 months for qualifying events due to employment termination or reduction of hours of work. Certain qualifying events. If this option is available from the plan under COBRA. Beneficiaries also may change coverage during periods of open enrollment by the plan. Duration of Coverage COBRA establishes required periods of coverage for continuation health benefits. the premium for those additional months may be increased to 150% of the plan's total cost of coverage. however. If a qualified beneficiary is determined under Title II or XVI of the Social Security Act to have been disabled at the time of a termination of employment or reduction in hours of employment and the qualified beneficiary properly notifies the plan administrator of the disability determination. Paying for COBRA Coverage Beneficiaries may be required to pay the entire premium for coverage. however. plus two percent for administrative costs. or a second qualifying event during the initial period of coverage. The plan must allow you to pay premiums on a monthly basis if you ask to do so. Premiums due may be increased if the costs to the plan increase but generally must be fixed in advance of each 12-month premium cycle. For disabled beneficiaries receiving an additional 11 months of coverage after the initial 18 months. Coverage begins on the date that coverage would otherwise have been lost by reason of a qualifying event and can end when: The last day of maximum coverage is reached Premiums are not paid on a timely basis The employer ceases to maintain any group health plan Coverage is obtained with another employer group health plan that does not contain any exclusion or limitation with respect to any pre-existing condition of such beneficiary A beneficiary is entitled to Medicare benefits Special rules for disabled individuals may extend the maximum periods of coverage. Premiums reflect the total cost of group health coverage. is not available if the beneficiary ends COBRA coverage before reaching the maximum period of entitlement. including both the portion paid by employees and any portion paid by the employer before the qualifying event. In this case. the 18-month period is expanded to 29 months. The premium is generally not at a group rate. the option must be given for the beneficiary to enroll in a conversion health plan within 180 days before COBRA coverage ends.doc Ver 0. The conversion option.

Premiums for the rest of the COBRA period must be made within 30 days after the due date for each such premium or such longer period as provided by the plan.doc Ver 0. Further information on FMLA is available from the nearest office of the Wage and Hour Division. only on a periodic basis. The United States Public Health Service administers the continuation coverage law as it affects public sector health plans. catastrophic and other benefit limits. You have 60 days to appeal a denial and must receive a decision on the appeal within 60 days after that unless the plan provides for a special hearing. plan administrator. The due date may not be prior to the first day of the period of coverage. Department of Labor.00a Page 112 of 150 . There can be charges up to 25 cents a page for copies of plan rules. The Departments of Labor and Treasury have jurisdiction over private sector health plans. Employment Standards Administration. Claims Procedures Health plan rules must explain how to obtain benefits and must include written procedures for processing claims. Contact the plan administrator for more information on filing a claim for benefits.S. Claims procedures are to be included in the SPD booklet. 1993. when an employer's obligation to maintain health benefits under FMLA ceases. You should submit a written claim for benefits to whomever is designated to operate the health plan (employer. listed in most telephone directories under U. Complete plan rules are available from employers or benefits offices. COBRA beneficiaries remain subject to the rules of the plan and therefore must satisfy all costs related to deductibles. or a group. however. however. Premiums for successive periods of coverage are due on the date stated in the plan with a minimum 30-day grace period for payments. If the claim is denied notice of denial must be in writing and furnished generally within 90 days after the claim is filed. 65736839. Government. requires an employer to maintain coverage under any "group health plan" for an employee on FMLA leave under the same conditions coverage would have been provided if the employee had continued working. A COBRA qualifying event may occur. any additional information needed to support the claim and procedures for appealing the denial. and FMLA leave is not a qualifying event under COBRA.External Agents ___________________________________________________________________ The initial premium payment must be made within 45 days after the date of the COBRA election by the qualified beneficiary. etc. such as when an employee notifies an employer of his or her intent not to return to work. effective August 5. The plan. Coverage provided under the FMLA is not COBRA coverage.). Coordination with Other Benefits The Family and Medical Leave Act (FMLA). is not obligated to send monthly premium notices. For example. Role of the Federal Government Continuation coverage laws are administered by several agencies. The notice should state the reasons for the denial. the due date for the month of January could not be prior to January 1 and coverage for January could not be cancelled if payment is made by January 31. which meets. Payment generally must cover the period of coverage from the date of COBRA election retroactive to the date of the loss of coverage due to the qualifying event. must make the decision.

External Agents ___________________________________________________________________ Conclusion Rising medical costs have transformed health benefits from a privilege to a household necessity for most Americans. it is forwarded to the insurance company responsible for payment. This process may be repeated until the claim passes the inspection.5. we make no guarantees. and logistical content errors. it is returned to the HealthCare Provider along with an explanation of what was wrong. False 2. While we try to keep the information timely and accurate. ______ Contains provisions giving certain former employees the right to temporary continuation of health coverage at group rates. If errors are detected. Say True or False.1 Benefits Of A Clearinghouse  Cash Flow If a HealthCare Provider were to send claims through the mail.5 Clearing Houses A HealthCare Transaction Clearinghouse performs auditing services on insurance claims. True 8. Say True or False. COBRA 3. The HealthCare Provider may then correct the related errors and resubmit for another pass. 3. COBRA creates an opportunity for persons to retain this important benefit. down from 4-8 weeks on paper claims. Be sure to periodically contact the health plan to find out about any changes in the type or level of benefits offered by the plan. Exercise HIPAA Means Health Insurance Portability & Affordability Act. Workers need to be aware of changes in health care laws to preserve their benefit rights.doc Ver 0. 8. syntax.3 1. many weeks would pass before he would receive mail notification that errors were holding up payment release on his submitted claims. A good starting point is reading your plan booklet. Improved efficiency in healthcare delivery by standardizing electronic data interchange is a main feature in HIPAA. Most of the specific rules on COBRA benefits can be found there or with the person who manages your health benefits plan. The Department of Labor maintains this article to enhance public access to the Department's information. This is a service that is continually under development. We will make an effort to correct errors brought to our attention. A Clearinghouse collapses the wait cycle into an average of 5-21 days. 65736839. 2.4. Net result: Improved cash flow. 8.00a Page 113 of 150 . If a claim is determined to be free of typographical. Answers: 1.

and yet others in-between somewhere.  Connectivity Some insurance companies offer direct filing software.30. HealthCare Providers. Insurance companies tend to "pick" on some HealthCare Providers and not on others. A clearinghouse serves as a liaison to the HealthCare Provider. Then rejection occurs. When the claim travels electronically through a clearinghouse. Some clearinghouses though. 8. Today's HealthCare Clearinghouse market is very confusing. Some clearinghouses charge $0. Direct Filing Same. Audits performed on claims are not critiqued in favor of the insurance company with regard to how claims are coded.000 combinations of errors. Coding is crucial in determining the income of a HealthCare Provider. The industry is riddled with organizations that are exceptionally difficult to decipher. a clearinghouse has nothing to gain by delaying submissions or other operational errors. but most are not reported back to the HealthCare Provider. Instant notification back to the Provider. This may go unnoticed by incompetent or negligent staff inside the office of the HealthCare Provider. since the software may reject certain coding combinations during data entry.50 per claim. In many cases claims just "sit there" until a tracer or formal complaint is received. Filing a claim to an insurance company direct is almost reminiscent of allowing the IRS to file your tax return. Topic Audit Logic Unbiased Processing Clearly.doc Ver 0. have strong ties with insurance companies that result in biased editing. 65736839. A clearinghouse has everything to gain by HealthCare Providers getting paid quickly and collecting as much of a submitted claim value as possible. But clearinghouses can typically access hundreds of insurance companies through a single port of entry from the office of the HealthCare Provider. Typically.External Agents ___________________________________________________________________  Guaranteed Delivery Insurance Companies often claim not having received claims that HealthCare Providers send through the mail. these instances are greatly reduced. Insurance companies have everything to gain by delaying payment to HealthCare Providers.5. HealthCare Providers using the free or low cost software distributed by some insurance companies are subject to biased auditing without knowing so.000 . direct filing to insurance companies offers potentially hard to detect disadvantages to U.2 Clearinghouse versus Direct Filing Using A Clearinghouse Routinely check for as many as 10. others nothing.S.00a Page 114 of 150 .

"Administrator" does not include any of the following: 65736839. imply that something was initially received. They typically fall into one of three possible group types. standard working relationship with insurance companies Unbiased. 8. Guaranteed Delivery & Connectivity. 2. 8. Cash Flow. Rebates. residents of this state in connection with life. thus avoiding the typical enormous overhead of Type 2 clearinghouses. The following chart will illustrate all the groups Clearinghouse Types  Type 1 Type 2 Type 3 Biased processing. to understand how clearinghouses make their money. Answers: 1. all clearinghouses are not created equal.3 Clearinghouse Income  Type 1 Biased.6 Third Party Administrators Third Party Administrator is an entity required to make or responsible for making payment on behalf of a group health plan. however. most income derives from insurance companies and is formally referred to as "rebates". Insurance companies typically do not charge anything to receive claims.5. to whom services are rendered.4 1. Unbiased and "rebate" free. close affiliation with leading Type 2 clearinghouses.00a Page 115 of 150 . dental. 2. but render unique and superior audits resulting in improved services at a lower cost to the HealthCare Provider. As Type 1 clearinghouses developed "rebate" income.  Type 2  Type 3 8.External Agents ___________________________________________________________________ As indicated. Exercise List down the Benefits of a Clearinghouse.5. A HealthCare Transaction Clearinghouse performs auditing services on ___________ _______.   It may be helpful. Type 2 clearinghouses followed up by negotiating rebates as well. or disability insurance or self-insurance programs. Type 3 clearinghouses utilize Type 2 gateways for transporting claims. Primary income is derived from the submitting HealthCare Provider. "Administrator" means any person who adjusts or settles claims on. health. Insurance Claims. Typically competitive in cost and superior in service. Type 3 clearinghouses "lease" Type 2 gateways to insurance companies at volume driven rates.doc Ver 0. close affiliation with insurance companies Unbiased.

upon application. a plan or sponsor of a plan that is either domiciled in this state or has its principal headquarters or principal administrative office in this state unless the person is duly licensed under sections 3959.   Administrators may be tested and shall be licensed by the superintendent of insurance in accordance with rules adopted by the superintendent. The system contains the most commonly used routines to analyze a healthcare claim and one can also write specific rules required for adjudicating the claims. The aggregate excess insurance stop-loss attachment point factors. and any ownership relationship of five per cent or more between the administrator and such insurance payers. be licensed without testing.  Fail to disclose in written form the method of collecting and holding any plan sponsor's funds.01 to 3959. Any person who administers pension plans for the benefit of the person's own members or employees or administers pension plans for the benefit of the members or employees of any other person.16 of the Revised Code.  Fail to disclose in written solicitation material and on an on-going basis. or provide administrative services to. identifying what each fixed cost includes. or disability benefits exclusively for the person's own members or employees.00a Page 116 of 150 . to the plan sponsor all of the following: All fixed plan costs. Any person who administers or operates the workers' compensation program of a selfinsuring employer under of the Revised Code. An administrator who has been licensed or certified by the state of the administrator's domicile under a statute or rule of the Revised Code shall. No administrator shall do any of the following:  Use plan sponsor funds for any purpose or purposes not specifically set forth in written form by the administrator. Any person that administers an insured plan or a self-insured plan that provides life. No person shall solicit a plan or sponsor of a plan to act as an administrator for. Any health-insuring corporation holding a certificate of authority of the Revised Code or an insurance company that is authorized to write life or sickness and accident insurance in this state. including any minimum attachment point factors. at least once annually. Levels of the specific excess insurance stop-loss deductible.  Fail to remit insurance company premiums within the policy period or within the time period agreed to in writing between the insurance company and the administrator. health.doc Ver 0. that enables to conquer the mysticism of Claims Adjudication. The names of all insurance payers providing protection for the plan sponsor's plans. provided the state of domicile recognizes and grants licenses to administrators of this state who have obtained licenses under such sections. 8. dental.External Agents ___________________________________________________________________    An insurance agent or solicitor licensed in this state whose activities are limited exclusively to the sale of insurance and who does not provide any administrative services. Features: Repricing 65736839.7 Specialized Adjudication Engines/Companies Adjudicator A powerful engine that links to the existing software equipped with simple Boolean rules.

supporting brokers in plan development.9 8. The initial phase "Building the Application". 65736839. the remaining three phases of the accreditation process cover a period of approximately three to six months. purchase. including licensing and appointment with insurance payer. but is not limited to. They are the people who work behind the scenes to reduce administrative hassles.doc Ver 0. the leading accreditation organization for traditional health insurers). This system comes equipped with "AccuChecker for Windows". organizational charts. serve and renew policies.9.1 Desktop Review In the desktop review process. formal policies and procedures. 8. resolve complex service issues. position descriptions. computing the amount approved according to established fee Schedules and provider's contractual agreement Gives you the tools to automate correspondence with patients and providers AccuChecker is one such Adjudication Engine. also uses the HFCA published guidelines for medical procedures. These phases include the following: 8. usually takes several months. and preserve the integrity of brokerclient relationships.1. After receiving a desktop review summary. the applicant usually must provide additional documentation clarifying any pending issues. which consists of completing the application forms and supplying supporting documentation. a comprehensive database that contains procedures.00a Page 117 of 150 . consultation. enroll. the system allows you to insert additional files with the information needed. one or more full-time URAC reviewers analyze the applicant's documentation in relation to the URAC standards. If you process claims that require different fee schedules. and program descriptions and plans for departments such as quality management and credentialing. like for example Workers Compensation cases. As a full-service agency.1 Accreditation Agencies The Accreditation Process Organizations applying for accreditation participate in a process that entails a rigorous review occurring in four phases. 8. modifiers and diagnoses Detects unbundling and upcoding Allows you to reduce levels of service Alerts of potential fraudulent billing Prepares an explanation of benefits with messages specific to your operation. contracts. negotiation. sample template letters. "AccuChecker for Windows" has the 2001 tables of procedures and ICD-9 codes. they provide valuable services. diagnoses and the Medicare fee schedule.9. procedures. The applicant's documentation usually consists of. Once the application and base fee are received by URAC (The American Accreditation Healthcare Commission/Utilization Review Accreditation Commission (URAC). case installation and communication. in an effort to maximize cost containment and fairness in adjudicating claims.8 General Agents They provide end-to-end connectivity that allows brokers and their clients to shop.External Agents ___________________________________________________________________ Validates eligibility of patients. as well as plan management and customer service.

3 Committee Review The last phase in the accreditation process is a review by two URAC committees that include professionals from a variety of areas in health care as well as industry experts selected from or chosen by URAC's member organizations. Conditional accreditation may be awarded to applicants who have appropriate documentation.. its accreditation will likely be rescinded. carried out by the same team that performed the desktop review. denied accreditation. In addition. Organizations that are unable to meet URAC standards may be placed on corrective action status. Each accredited site is given its own certificate. attesting to the program the organization is accredited for.g.doc Ver 0. During the onsite visit. Conditional accreditation may also be awarded to companies determined to be "start-ups". which has the authority to grant accreditation. and an accreditation certificate is issued to each company site that participated in the accreditation review. Follow-up activities for organizations receiving conditional accreditation or corrective action may include submission of additional or revised documentation and another onsite review.4 Accreditation Status Applicants who successfully meet all requirements are awarded a full two-year accreditation. If an accredited company is unable to comply with URAC Standards.00a Page 118 of 150 . Ongoing Compliance with the Standards Accredited organizations must continue to remain in compliance with the applicable standards throughout the accreditation cycle. An accreditation recommendation is then forwarded to URAC's Executive Committee. e. Accreditation Certificates A certificate of accreditation is awarded to accredited organizations. Accredited organizations also provide copies of accreditation certificates to regulators in states where URAC accreditation is deemed.1. but incomplete implementation of certain policies and procedures. those that have not yet implemented their program or have not had at least six months of operational experience at the time of the onsite review. After reviewing the summary and considering the Accreditation Committee's recommendation. When these follow-up activities are complete.9. or choose to withdraw. audits are conducted and personnel and credentialing files analyzed.1. 8.9. Complaints against an Accredited Company 65736839.9. The committee review process begins with a written summary documenting the findings of the desktop and onsite reviews.External Agents ___________________________________________________________________ 8. a follow-up executive summary is submitted to URAC's committees for a possible change to full accreditation. URAC reviewers also share "best practices" and provide other helpful guidance. 8.2 Onsite Review After the desktop review is complete. management is interviewed about the organization's programs and staff is observed performing its duties.1. the Executive Committee makes a final accreditation determination. During this review. Education and quality management programs are reviewed in detail as well. This summary is submitted to URAC's Accreditation Committee for evaluation with discussion with the review team as needed. This will help the applicant differentiate its various products in the health care market and target a variety of current and potential clients. the accreditation review team conducts an onsite review to verify compliance with the standards.

a single policy covers the medical expenses of many different people (a group) instead of covering just one person. the formal application will be assigned to an Accreditation Reviewer. Because only one policy is issued for the entire group. because group insurance allows the insurer to spread the risk over a larger number of people. In certain circumstances. URAC may sanction an accredited company. and presentation of the application to the URAC committees. Member’s risk potential will determine whether he qualifies for insurance and how much the insurance will cost. onsite review. the initial cost of establishing group coverage is lower than the cost of issuing a separate policy to each person. URAC's model of performing accreditation reviews allows the Accreditation Reviewers to develop an in-depth knowledge of the organization under review and provides a mechanism for the applicant to receive on-going feedback regarding the application and review findings. members purchase individual insurance directly from an insurance company. Employer-sponsored plans and associations are among the most common sources of group health insurance. Individual insurance is somewhat more risky for insurers than group insurance. With group health insurance. Once completed. Once the pre-pay is processed. and 2) the formal application. Unlike other URAC accreditation programs. with the sponsoring employer or association paying all or part of the premium. URAC will send the primary contact person a letter and/or email confirming receipt of the preapplication. When they apply for individual insurance. Accreditation Cycle and Reaccreditation URAC accreditation is granted for two years starting the first day of the month following URAC's Executive Committee approval. URAC will initiate the formal application process. The application process is divided into two distinct phases: 1) the pre-application. online formal application which contains questions specifically related to the Standards. providers or regulators. This is generally done through a series of medical questions and/or a physical exam. individual insurance is generally more difficult to obtain and more costly than group insurance.00a Page 119 of 150 . Individual health insurance is a type of policy that covers the medical expenses of only one person. depending on the nature and frequency of the violations. Web Site Accreditation Process The Web site accreditation process has some notable differences from the other accreditation programs. The letter of receipt will include confidential access codes assigned to the applicant that are used to access the secure. Complaints may originate from consumers. onsite visits are not "required" during the application process and a telephone interview of corporate officials is conducted instead. Unlike group insurance. URAC first requires applicants to submit a “pre-applications” including payment information and general information about the company and it’s Web site. Accredited companies seeking reaccreditation must submit the reaccreditation application to URAC at least four months before the accreditation expiration date or six months prior to expiration if the accredited company is a network reapplying for Health Plan or Health Network accreditation.doc Ver 0. which may or may not include an onsite visit. they are evaluated in terms of how much risk they present to the insurance company. 65736839. For this reason.External Agents ___________________________________________________________________ URAC has a grievance procedure for investigation of complaints about an accredited company. URAC reserves the right to conduct an onsite review if the telephone interview and formal application are inconclusive. After an investigation of each complaint. The Accreditation Reviewer will follow the formal application through the accreditation process and is the same reviewer who will conduct all activities associated with the review process -desktop review. Sanctions may range from a letter of reprimand to revocation of accreditation.

which allows him to buy outside the preferred network for same Co-pay. either electronically or through postal mails. based on the manufacturer.00a Page 120 of 150 . Various inclusion/exclusion rules are applied. it is entered in the database. Health Insurance sets up a contract with each of them. The drug information is obtained from First Data Bank. The policy is typically negotiated between the insurer and the "master" policy owner (employer or association) without any input from the member. where each person's risk potential is evaluated and used to determine insurability.External Agents ___________________________________________________________________ Unlike individual insurance. contract. The specific policy provisions are all determined in advance. In the invoicing stage. his claim is adjudicated online by the Real time Adjudication System. all eligible people can be covered by a group policy regardless of age or physical condition. a set of jobs does the actual rebate amount calculations. 65736839. A member can take a plan. along with the business rules from the contracts and summary files are obtained which form the input to the invoicing stage. which is an independently managed US wide database for drugs. for all the products they wish to add to preferred drug list. Any drug on the NDC list can be covered under the contract (but usually very costly and very rarely used drugs are not part of rebate contract). Invoices for the dollar amounts payable by each manufacturer is prepared. Once the claim is adjudicated. Doctors can prescribe a drug outside this preferred list. Formulary and Cost Management Group using VDS on-line transactions only enter all these information. The Volume Discount System runs on a quarterly basis. The on-line screens are also used to enter the business rules (exclusion & inclusion) that determine the actual set of already adjudicated claims that can be considered for the rebates as defined in the contracts.doc Ver 0. such as average age and degree of occupational hazard.10 Drug Manufacturers Health Insurance group identifies potential drug manufactures. but this plan attracts higher premium. A member has to pay standard Co-pay when he buys a preferred drug. product indicator etc. An extraction job runs on this database every quarter and pulls out those claims for which there are rebate contracts set up. Actual rebate value is decided when the contract is set up and varies over a wide range depending on the contract and manufacturer. Whenever a member goes to buy a drug from a pharmacy. Once the rebate checks arrive. regarding rebates that can be obtained from the individual manufacturers when drugs bought under health insurance policies cross pre-defined limits. The invoice amounts and the details are communicated to the manufacturing companies. client. These limits are decided at the contract level and can be directly proportional to the number of drugs sold or can be based upon the market-share value for that drug across all the competitor drugs. group. the only real disadvantage of group insurance is limited or no freedom to customize the policy to member’s individual needs. who to promote the sales. This process also generates detailed utilization information to support rebates invoiced. as are the deductible amount and co-payment percentage. the relevant details are entered through Volume Discount Allocation system. want to put their products on preferred drug list/network. but if he buys drug outside the preferred drug network. The contract details of every manufacturer are set up through some process like Volume Discount on-line processes. In general. The premium for group insurance is calculated based on characteristics of the group as a whole. 8. Doctors as well as pharmacies are provided with the preferred drug list (usually on-line). he has to pay higher Co-pay.

com http://www.com http://www.com http://www. 25.com 65736839.nlm.insurance.com http://www.os. 4. 21. 16.dhhs.12 References 5. 15. yourhealthplanonline.com http://www.dhhs. 20. 22.gov/ http://www. 17.External Agents ___________________________________________________________________ 8. http://www.accuchecker. What is the role of Drug Manufacturers in a Healthcare Industry? What are the four parts of Administrative Simplification in HIPAA? 8.com http://www. 8. 2.insurance.00a Page 121 of 150 . 12.com http://www.gov/nichsr/nichsr.hcfa. 9.yourhealthplans.hrsa. 6.iix. 23.com http://www.healthinsurance.hipaadvisory.nih. 10.horizon-healthcare.yourhealthplans. 7. 11. Explain the role of Third party Administrators.cdc.alliance-edi.gov http://www. List down some of the features of Adjudicators.com http://www.iix. 19.accuchecker.com http://www.com http://www.com http://www.html http://www.alliance-edi.gov/ http://www. 24. 18.com http://www.com http://www.gov/ http://www.horizon-healthcare.healtheon. 13. 14.doc Ver 0. 3.com http://www.11 Review Questions 1.

External Agents ___________________________________________________________________ 26.hcfa.healtheon.com http://www.hipaadvisory.com http://www.dhhs.os. 28.dhhs.nih. http://www. 30. 32.hrsa.nlm.gov/ http://www.gov/ http://www.com http://www. yourhealthplanonline.healthinsurance.00a Page 122 of 150 . 33. 29.html 65736839. 27. 34.cdc.gov/ r. 31.com http://www.doc Ver 0.gov/nichsr/nichs http://www.gov http://www.

Summary ___________________________________________________________________ UNIT .doc Ver 0.1 Unit Objectives This unit will summarize the contents of this course material by presenting a detailed description of healthcare industry workflow. Figure 4: Detailed Workflow This diagram can be broken down into following stages – 65736839. 9.2 Workflow The detailed workflow for the healthcare industry can be represented as shown in the Following figure.IX 9 Summary 9.00a Page 123 of 150 .

to the quote requester. the flow is a bit more complicated. 9. claim posting address amongst other things. then the insurance company pays him a commission based on the size and nature of the deal.Summary ___________________________________________________________________ 9. They can also be contracted in the form of an IPA or may be put on the payroll of the insurance company. if a medical condition arises which requires treatment from a specialist. They collect the required information such as number of members. The PCP will also file a claim on behalf of the member. He pays the provider then and there and files a claim with the insurance company. The member only has to pay fixed copay to both the PCP and the specialist. income data. network they need to get accreditation 9. The actuaries calculate the rates for the various services to be offered by the insurance company. The member first has to visit his PCP. Now the member is formally enrolled with the insurance company. In case of POS and PPO plans. as in the staff model. then things are very simple. the marketing department of the company creates a quote and presents it to the plan sponsor. it is necessary that he should have satisfied his deductible for that particular year.1 The Beginning: Member wants to purchase insurance The sales and marketing department approaches potential member(s). However. Hospitals and pharmacies are usually contracted on a volume-for-rebate basis. 65736839. their age. type of plan. they will have to meet a deductible before they can avail this facility.00a Page 124 of 150 . Based on these rates. it needs to have an agreement with healthcare providers such as doctors. the PCP will provide a referral to the member. the member can seek services from out of network providers.2. Based on their judgment and experience they tailor the rates and prepare the details of plan coverage and commercial agreements.2 Getting a provider For an insurance company to deliver healthcare services to its members. The insurance company guarantees an increased patient volume and they in turn give rate discounts to the members. If there was any broker involved in the deal. If this is accepted by the quote requester. doctors are contracted by paying them a fixed capitation fee (this is the case for most individual doctors). He can go to any provider of his choice.2. which is submitted.2. Also the concept of coinsurance will come into picture. This data goes into an offer presentation. the underwriters validate the rates offered by the marketing department. However. etc to prepare a quote. This referral authorizes the member to seek medical services of a specialist provider. In case of managed care plans. member number. payment details. If the member is enrolled in an Indemnity plan. The PCP will try to provide as many services as he can. hospitals and pharmacies. But before the providers can become a part of the from the relevant accreditation agencies. If this quote is accepted. then the policy department of the insurance company prepares a policy which has details such as policy number. But.doc Ver 0. Usually.3 An Enrolled member wants to seek medical services. In case of PPO plans the member has the added advantage that he does need to have a PCP for In-network care. previous medical history. This is the flow in case of HMO and EPO plans. PCP information (in case of managed care plans).

5 Effect of external agencies Health insurance is a highly regulated area in the U. If the claims are found to be free of such errors. As a matter of fact. The government controlled Medicare and Medicaid are amongst the most important healthcare plans available.4 Member has filed a claim In most cases the claim is first validated for typographical and information errors by clearinghouses. Claims adjudication requires a lot of information about various entities such as members. Incorrect claims are returned back to the member (or his PCP whoever has file the claim). The federal government too. then the member is paid for his expenses. which paved the way for the managed care model. the primary payer takes care of the COB or coordination of benefits.4 References.2. 65736839. If the claim requires very specialized processing (and if the rule engine for that is not available with the insurance company). 9.A. they are sent to the insurance company.Summary ___________________________________________________________________ 9. the claim examiners do the adjudication manually. There is usually a rule engine (a software) in place for adjudication. He is also sent an EOB detailing the payments made and the reasons for those. There are several government agencies that help in regulation of the healthcare industry.3 Review Questions. In case of the member having coverage with multiple carries. This helps reduce the burden on the insurance company and speeds up the process. The turn around time take to process the claims is also an important consideration for members and providers.doc Ver 0.2. as otherwise these claims would have to be adjudicated manually. The information about the entire processing is usually stored in a database for further reference. In case the claims have incomplete information or the information is ambiguous. policy that are stored in their respective databases. plays an important role in shaping the way the industry functions. Hence the insurance companies try to reduce the time for adjudication by going automatic claim adjudication systems. In short claims adjudication requires lot of database interaction and is the most complex of all processes. Accreditation agencies such as URAC (The American Accreditation Healthcare Commission/Utilization Review Accreditation Commission) play an important role in ensuring that only qualified providers are able to sell their services in the market.S. The federal spending on healthcare also has been on a steady rise. then the claim adjudication is outsourced to a company specializing in adjudication of such claims. NA 9. providers.00a Page 125 of 150 . The company validates the claims based on various factors (as were detailed out in the unit on claims). If the claim is found to be a valid one. In addition there are several other agencies such as clearinghouses and third party administrators who help the insurance companies deliver better services to the members. it was the path breaking HMO act of 1973. which has since then dominated the market. 9.

00a Page 126 of 150 .Summary ___________________________________________________________________ 65736839.doc Ver 0.

5 515.682 258.393 411.505 54.402 66.086 14.1 Appendix A: Total E-Business Services Forecast for Healthcare Total E-Business Services Forecast for Healthcare.146 592.749 5.018 91. 65736839.122 17.8 46.081 81.444 184.437 266.187 40.756 50. Other countries spend less on IT as a % of revenues.479 9.2 835.850 48.6 43.S.8 Asia/Pacific Canada Europe Japan Latin America Rest of World United States Total Healthcare Worldwide 42. In Germany/ France.1.140 5.628 289.804 109.800 20. by Region.doc Ver 0.113 500.819.917 29.805 646.5% in Europe.877 1. Japan and Australia. there are Insurance-based systems in which providers are subcontracted by the government.964 151.931 1.843.Appendix ___________________________________________________________________ 10 Appendices 10.674 32.741.867 161.829 31.1 1.00a Page 127 of 150 .259 194.408 69.477 141.020 293.979 363.752 140. 1998-2003 (Millions of U.050.5 45.988 210.523 442.979 3.268.144 13.090.551 45.2 Appendix B: The world Healthcare market and Healthcare IT spending The US healthcare market is predominantly privately run.403 1.201 2.164 417. Whereas they are Tax based systems (all providers are government owned) are in vogue in UK/Australia.606.668 44.314 25.285 816.612 1.3 Source: Dataquest (January 2000) 10. Dollars) Healthcare 1998 1999 2000 2001 2002 2003 CAGR (%) 53.834 10.

00a Page 128 of 150 . less choice to patients and administration efficiencies. investment in IT in healthcare is at a low of 3% as compared to an overall average of 6% and 12% for Financial services. a core focus for most governments around the world will continue to grow as newer technologies and sciences (Genomics. Inc) 10. Inc) 65736839. (Source: Gartner Research.doc Ver 0. Proteomics and Bio technology) revolutionize health care. but the profit angle is increasingly focused on.Appendix ___________________________________________________________________ Worldwide. (Source: Gartner Research.3 Appendix C: The Cash Flux of the US Healthcare Industry Healthcare started in a “not for profit” mindset and that still has influence in decisions made in this sector. Other countries spend less on healthcare than the US does because single payer systems tend to have efficiencies in purchasing. Healthcare market.

00a Page 129 of 150 . Service Area is determined by the location of the subscriber's primary care doctor.3 Trillion. (Source: Gartner Research. The total health care spending (by private and public in the US) is 1. 2001 ABCDEF Inc Effective Date 10/01/2001 Renewal Date 10/01/2001 Service Area Colorado .60 $227.4 Appendix C: Sample Quote Sheet Page 1 XXXX Proposal For July 26.doc Ver 0.Appendix ___________________________________________________________________ US is the largest spender in this market.a whopping number by any standards. account for 43% of the world spending.00 $264. 70% of the Federal budget of the US.US also leads in the IT development of this market. Rates will vary for other service areas. 65736839. Inc) 10.70 $413.30 The foregoing rates apply in the Service Area specified above.Central Benefits For ZZZZ Plan Primary Office Visit Copay: ($5) Specialist Copay: ($5) SPU Surgery Copay: ($0) Hospitalization Copay/A: ($0) Emergency Room Copay: ($35) MH O/P Copay: ($25) 20v/cal Routine Eye Exam Copay: ($5) Routine GYN Exam Copay: ($5) 1v/yr Pediatric Preventive Dental Copay: ($5) Quote ID 7011968 Colorado Composite Rates Single Parent and Child(ren) Couple Family $114.

employee. Benefit Waiting Period (BWP) Standard BWP is 3 months minimum. employee/children and employee/family.(b) 3 tier whichis an average rate for employee only. upon oral or written request.e.doc Ver 0. 07/26/2001 1:48:14 PM 7011882 LIFRAM12 65736839. Employer Authorization ___________________________________ Date ______________________ CC: AAAAA BBBBBB For office use only Grp Type 10 Code P RA TR X Val'd Seq#/Grp# 058963532205 Quote ID Customer ID 7011968 Calc 2254643 U PPID Rate Colorado law requires carriers to make available a Colorado Health Plan Description Form. and an unmarried child of any age who is medically certified as disabled and dependent upon the parent.The carrier also must provide the form. i. to any person who is interested in coverage under or who is covered by a health benefit plan of the carrier. an unmarried child who is a full-time student under twenty-four (24) years of age and who is financially dependent upon the parent.The form must be provided automatically within three (3) business days to a potential policyholder who has expressed interest in a particular plan. a composite rate structure (an average rate based upon employee enrollment which vary by family status)or an age banded rate structure (a rate based on the age of the enrolledemployee).which is intended to facilitate comparison of health plans. spouse or children and employee/family and (c) 4 tier which is an average rate for employee only.. Any changes in benefit level or conditions stated above may require a change in rates. This proposal is subject to change at any time prior to the acceptance by AUSHC of Employer's offer.Groups with under 10 employees may only elect an age banded rate structure. Rates are pending approval by state regulators and are subject to adjustment based on regulatory determinations.Appendix ___________________________________________________________________ Quote Conditions Assumed Dependent Eligibility Dependent means a spouse. 6 months maximum or match the incumbent carrier's BWP up to 6 months maximum.within three(3) business days. There are three different rate tiers available when electing the composite rate structure.employee/spouse. (a) 2 tier which is average rate for employee only and employee/family. There are two different rate structures available depending on the employer case size.Groups with 10 or more eligible employees have the right to see what the premium would be quoted either of two ways. These monthly quoted rates are valid as of the Effective Date and apply only to the benefit level and conditions stated above and are subject to the terms and conditions set forth in the HMO's Group Master Contract.00a Page 130 of 150 . an unmarried child under nineteen (19) years of age.

) Co-insurance: A specific percentage of the cost of treatment the member has to pay for all covered medical expenses remaining after the deductible has been met.               65736839. o What are the payments that the member makes? Policy: The legal document or contract issued by the insurance company to the member that sets forth the terms and conditions of the insurance. the member. PCP: Or the primary care physician is a doctor contracted by the insurance company to manage the healthcare of a member. o What will be the maximum amount for which the member is covered. pharmacies all can be providers. Deductible: The minimum amount. A plan document identifies the benefits the members are to receive and the requirements they must meet to become entitled to those benefits. Dental. fully or partially. Premium: A fixed amount. Provider: The person or group that provides medical services. Referral: An authorization from a PCP permitting a member to visit a specialist doctor for further treatment. For e.: A member has to pay $5 every time he visits his PCP. which the member has to pay for service availed from a provider. It covers aspects like – o Policy agreements. Diagnosis Code : Code used for diagnosis that the patient has undergone. (2) A major line of coverage provided by an insurance company (i. Long Term Disability.Glossary ___________________________________________________________________ 11 Glossary  Benefit: (1) Right of the insured to receive either cash or services promised under the terms of an insurance policy. Co-Pay: The fixed amount. o What types of medical services will be covered.g. his co-pay is $5. doctors. Medical. hospitals. Network: A group of providers in designated areas who are contracted by the insurance company to provide healthcare services to its members.doc Ver 0.e. Benefit Code : Code assigned to Benefits.e. Life. For e.00a Page 131 of 150 . which has to be paid by the member to the insurance company before he can claim for benefits.g. Insurer: The organization that provides insurance. Plan: An agreement between the Insurance Company and the member that details the services that can be provided to the plan holders i. Member: The person or group who seeks insurance. benefits meaning Medical Services (Service Types .say Surgery) Insurance company will pay for. etc. which the member has to pay to the insurance company on a timely basis (annually/quarterly/monthly) as a fee for providing insurance coverage.

Glossary ___________________________________________________________________ Rider : These are add-ons to basic plan at some extra cost and will cover additional benefits. Generally observed for Indemnity Plans. on monthly basis and/or per member basis . Capitation : Fixed amount of money paid to provider. Primary care Physician : The physicians/doctors providing full range of basic health services to patients. AT&T) makes contrat with healthcare companies for adjudicating claims for a fixed sum of money. AT&T ) provides insurance for its employees by collecting money from them annually ( funding or contribution) .       65736839. The member is expected to consult its PCP first for any kind of health service for HMO care .e. Drug Code : Code for medication provided as a part of treatment. The service is specific whereas service type is generic. where in the company (i.for full medical care of an individual.00a Page 132 of 150 .doc Ver 0. Proc/Service Code : Code for particular service coming under particular service type. Self Insured Groups : Some companies like (Eg.

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