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

...............................................................................113 8..........128 10..............117 8....4........125 9...9..................2....................................115 8.....124 9................................................121 8......3 Appendix C: The Cash Flux of the US Healthcare Industry....................5 Effect of external agencies...............................................doc Ver.........................................................................................................7 Exercise..105 8.......................................1 Unit Objectives ..........1 The Accreditation Process.........116 8............................................................131 __________________________________________________________________________________ 65736839..........................115 8.........103 8..125 9.................................................................Healthcare Market Overview ___________________________________________________________________ 8..2 CORBA...............................................5...129 11 Glossary.........................................3..... Inc)....5..................................................128 (Source: Gartner Research......4 Member has filed a claim.....1 HIPAA.............................................102 8..................................5 Clearing Houses...................................12 References...................................125 9....114 8........8 General Agents...2 Workflow ..............................106 8........................................................................5....................................4 Government Acts and Regulations.....................................4 Appendix C: Sample Quote Sheet.....................2 Appendix B: The world Healthcare market and Healthcare IT spending...................................................3 Clearinghouse Income...........................4 References.............0 Page 4 of 132 ............3 Review Questions..........123 9..........103 ELECTRONIC HEALTH TRANSACTIONS STANDARDS ....................................................................2 Getting a provider..................127 10..........................7 Specialized Adjudication Engines/Companies...................................................................102 8.............................................4.........101 8.........................................4 Exercise......................3.....................................125 10 Appendices........................................................................117 8.......2 Clearinghouse versus Direct Filing................................................................................4...................................117 8.............6 Health Resources and Services Administration (HRSA)..................120 8...................3..............................................................................4 Agency for Health Care Research and Quality (AHRQ) .113 8..............1 Appendix A: Total E-Business Services Forecast for Healthcare.....................123 9..................................3..124 9................103 8.................3................10 Drug Manufacturers....................................3 Centers for Disease Control and Prevention (CDC)..............123 9...........5................127 10.....103 8..124 9.9 Accreditation Agencies.....................11 Review Questions..................................................................................................3 An Enrolled member wants to seek medical services.....2 DEPARTMENT OF HEALTH AND HUMAN SERVICES (DHSS)..........6 Third Party Administrators.... 1..................................127 10...............103 8..........................5 National Information Center on Health Services Research and Health Care Technology (NICHSR).....................................................113 8.................2...........121 9 Summary.............................................................2.................................115 8..................................................................3.............................1 The Beginning: Member wants to purchase insurance....3 Exercise...............2............1 Benefits Of A Clearinghouse...................................................2.....

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

Provider Organizations are adopting some Cost Cutting measures. US also leads in the IT development of this market. (Refer Appendix C).3 Trillion. Before BBA. Furthermore. The US is the largest player in the Healthcare market and is worth $ 1. 1. privacy and security. The trend is still continuing and the growth is expected to continue.  HIPAA (Health Insurance Portability and Accountability Act) This act impacts all segments of healthcare industry with focus on standardization. In the last few years.3. However. 1999 . they will now receive $74 billion over the same period. The US Congress is currently debating on a “Patients bill of rights” that will allow the patient to get better care under this system. skilled nursing providers were slated to receive $83 billion during 9802. will continue to grow as newer technologies and sciences (Genomics.1 Trends in Healthcare – Provider Space There are two major regulations. The past few years has seen a consolidation in the hospital and health sectors. Initially small players focused on local markets dominated the Industry. However. which is a core focus for most governments around the world. also the fastest-growing segment of the U. reaching $30 billion by 2005. 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.a whopping number by any standards. At present. 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. 70% of the Federal budget of the US. As a reciprocative step. struggling independent facilities in rural markets. will seek acquisition by larger chains.S. Cap on spending by government (BBA) is focusing efforts on cost cutting in this space. But the Healthcare market. Furthermore.Healthcare Market Overview ___________________________________________________________________ Industry. a decrease of about 11%. Also. it is estimated that about 13% of the overall industry bed capacity are operating in bankruptcy. The last few years have seen smaller provider sub segments face financial challenges.when CHRISTUS Health was formed. In the last few years there has been an increasing number of acquisitions and the industry is moving into the consolidation phase. however as a result of the BBA.but low activity expected.0 Page 6 of 132 . 1. population. US is the largest spender in this market. due to increasing health care costs. This trend has slowed considerably and can be considered to be over for now. __________________________________________________________________________________ 65736839. Proteomics and Bio technology) revolutionize health care. the members participating in these plans feel that the HMOs squeeze the patients to maximize their profit. The last few years have seen a rise in the Assisted Living Centers.6 million) represents the largest number of users of long-term healthcare services.doc Ver. See Appendix A).310 Billion annually (2001) and is growing at 7%. there has been a tremendous pressure on the bottom line of these companies. The total health care spending (by private and public in the US) is 1. and is estimated to grow to a huge USD 4 Trillion by the end of 2003 (Dataquest. 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. accounting for 43% of the world spending. which are going to have a major impact in the way healthcare providers operate presently. (Refer Appendix B). The last major merger happened in Feb 1. Industry sources project expenditures for senior living of $18 billion in 2000. Individuals aged 85 and older (3. The world market for Healthcare is USD 3 Trillion presently. which are coming into place. Large corporations want see employee health insurance costs to reduce overheads.

Hartford. Numerous companies have exited Medicare Choice markets following implementation of the BBA in 1997. Ongoing pressure to reduce healthcare costs will prolong the merger trend in coming years.unitedhealthgroup. Cigna. Prescription drug coverage has increased (95% of all members). Group Insurance etc.0 Page 7 of 132 .g. And this has resulted in higher costs. which collectively serves 21.aetna.3 members of Prudential Health Care recently acquired.doc Ver. HIPAA is going to have sweeping effect on HMO. which requires them to re-look at their transactions. and also provide coverage for members participating in government programs like Medicare and Medicare. Property and Casualty. resulting in more people covered.000 members). 1. Medical costs rose 7. CT www. on average.3. People older than 65 years (currently 14%) are estimated to rise to 18.com __________________________________________________________________________________ 65736839. Aging Population Poses New Challenge for the Healthcare organizations. Retirement and Investment Services. including Aetna (affecting 355. More than 35 class-action suits have been filed against managed care companies to date. Provides both Indemnity and HMO based Health insurance plans 6.4 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. CT www.Healthcare Market Overview ___________________________________________________________________ labor costs (typically 40 -50 % of hospital operating costs) are steadily rising (specialized skills shortage). The last few years have seen Rising Costs for the MCO (Managed Care Organization). Furthermore Managed Care Consolidation has seen larger companies acquiring smaller. Recent times have seen HMOs exiting Medicare Choice plans. 1. E. undercapitalized players. 10.2 Trends in Healthcare – Payer Space There has been a rise in Regulations & Lawsuits against payers.com Leading provider of health and retirement benefit plans. Aging of the baby boom generation (born between 1946-1964).5% in 2025. HMOs cut 400. Plans available across the country United Health Care Minneapolis. Hartford.000 members in 1999 and another 327. These companies cater to small and large Employer Groups. 1. Individuals. MN www. the number continues to climb. Aetna. Managed Care Market Still Top-Heavy in the sense the managed care sector is fairly concentrated.6 million Americans.cigna.5 Million members enrolled in Medical HMO Plans.5% in 1999. among others.000 in 2000.3 million of those are Managed Health Care Members includes 5. the rapid expansion of the elderly segment of the population is presenting HMOs with a new set of challenges. Large HMOs are notifying the HCFA of their intent to exit Medicare + Choice market in 2001.com Into Health Care. 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. Provides both Indemnity and HMO based Health insurance plans 21 million subscribed members in various health plans. Pharmaceutical costs are rising about 15 %.

com/ __________________________________________________________________________________ 65736839.5 References AETNA Intranet http://www. operates in many markets.gigaweb.com/ 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.gartnerg2.doc Ver. no risk). 1.jup.8 million Fully Insured Managed Care Members. 1.aetna.com/ http://www.com/ http://www. 445.0 Page 8 of 132 .000 Medicare members and 530.com/ http://www. 1.Healthcare Market Overview ___________________________________________________________________ Primarily into Managed Health Care.gartner. About 5.8 million self-insured members (fee basis.

hospitals began to suffer from patients’ inability to pay their bills. during the Great Depression. President Nixon’s Administration announced a new national health strategy. 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. physicians in private practice almost always billed patients directly on a fee-for-service basis. the Kaiser Permanente health plan had a growing network of hospitals and clinics and a half million people enrolled. coverage for the uninsured. __________________________________________________________________________________ 65736839. In adopting this policy. The foundation heard grievances against physicians. efficient delivery systems and more. 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. access to services for the poor and minorities.Healthcare Overview ___________________________________________________________________ UNIT . However. and the Blues would simply pay the bills on a fee-for-service basis. The HMO Act of 1973 authorized $375 million in federal funds to help develop HMOs.0 Page 9 of 132 . When the war ended. Paul Ellwood of Minneapolis. were all on the agenda. During World War II. Ten years after the war.doc Ver. Blue Shield) did not try to tell physicians how to practice medicine. In 1954. Over the initial objections of physicians. Shadid rendered care to his patients. “Provider-oriented” meant that. prepaid health care remained a minor phenomenon until the 1970s. These members paid a predetermined fee and Dr. In the 1930s. 1.II 2 Healthcare Overview 2. In the late 1960s and early 1970s. Oklahoma 1929. consumer rights. Physicians were free to practice as they saw fit. the San Joaquin County (California) Medical Society formed the San Joaquin Medical Foundation in response to competition from Kaiser. In some locations prepaid group practice plans were quite successful at attracting members. politicians and interest groups promoted various proposals for reforming the healthcare system. the Administration was influenced by Dr. 2. This plan is considered the earliest example of an independent practice association (IPA) model prepaid health plan. the development of health maintenance organizations (HMOs). who argued that the structural incentives of traditional fee-for-service medicine had to be reversed in order to achieve positive reform. Other local physicians became concerned about their own patient base. In 1929 Dr. Thus early insurance was restricted to Indemnity insurance.2 Genesis Of Healthcare Until the early 20th Century. provider-oriented insurance organizations. In 1971. developed peer review procedures. Kaiser opened his plans to the public. financially stressed hospitals prevailed on state legislatures to legalize the insurance schemes that became known as Blue Cross which were created as non-profit. The foundation accepted capitation (fixed) payments from subscribers. Issues of cost containment.1 Unit Objectives This unit will present an overview of the healthcare industry to the reader. and monitored quality of care. Kaiser believed he could reorganize medical care to provide millions of Americans with prepaid and comprehensive services at prices they could afford. Michael Shadid started a rural farmers' cooperative health plan in Elk City. and it paid the affiliated independent physicians and hospitals according to a relative value-based fee schedule. Blue Cross (and later. Dr.

Healthcare Overview ___________________________________________________________________ Managed care.doc Ver. however. and the federal government implemented Medicare. This workflow is specific to Aetna-USHC (a leading provider of healthcare services). 2. __________________________________________________________________________________ 65736839. the nature of this information being very generic.3 How the industry Works? Managed care market dominates the healthcare industry. the managed care segment had 181 million members. State governments turned to managed care to help with the Medicaid program. the figure can be said to portray the actual workflow for any managed care organization. we will be better equipped to understand the workflow as depicted in the following figure. enrolling about 65 million members (close to a quarter of the population of U. 1. (HMO is a subset of managed care) continued to grow throughout the 1970s. there were over 600 HMOs in operation. Employers came to look upon managed care as a less expensive yet comprehensive and high quality form of insurance to offer to their employees. as it came to be called. The workflow for this model can be depicted as shown in the following figure. 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. After the five pillars have been introduced. By the end of 20th century.0 Page 10 of 132 . or. The major players in this flow.S.A). Overall. 1980s and 1990s. thereby dominating the healthcare market. We will see each of these in greater details in the next section.

0 Page 11 of 132 . 1.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.doc Ver.

A. A doctor. He can purchase this insurance coverage for himself and his family (also called his dependents). This is known as Individual Insurance. A member is a person who purchases insurance from (or enrolls with) an insurance company. depending on his popularity with the patients). these companies do not have the infrastructure to perform as an insurance company. his employer will pay for his insurance coverage. For insurance company.4. Such groups are known as self-insured groups. have their advantages and disadvantages. capitation helps them to forecast their spending. Individual insurance is restricted to people who need to have specific coverage not offered in their group scheme. as the total expenditure remains constant irrespective of the number of members having to seek medical services. However.4 2. A group has much more bargaining power due to the simple fact that group insurance is less risky for the insurer. This is a powerful perk used to retain good staff. There are other variants of insurance in the market. they are feasible only in case of very large organizations. Due to its bargaining power. Though self-insured schemes are quite popular. they outsource the administrative part to the insurance companies while retaining the money reimbursement part with themselves. 1.2 Providers. In most cases. a pharmacy or hospitals are all referred to as providers. In such a case the employer becomes his plan sponsor and the insurance is known as Group Insurance.0 Page 12 of 132 . One of the most popular of these forms is a fixed monthly fee (capitation fee). A Provider is that entity which offers actual medical services to the members. He is free to choose any of the services offered by the insurance company. Group insurance allows the insurer to spread the risk over a larger number of people. or less.S. in which the employers pay for the healthcare subscription (in case of normal group insurance. Under this agreement they provide medical care at reduced rates to the members. They offer a great flexibility to the company in providing insurance of choice to the employees.4. it also restricts his earnings. However. These monetary benefits are offered in various forms. while in case of individual insurance the risk is concentrated on a single member and his dependents. This way. and is a very good illustration of the amount of importance that is attached to health insurance in U. but the trend is towards group insurance due to its basic advantage of reduced cost and enhanced services. In case of some large corporations like AT&T or IBM the company itself provides insurance to its employees. Members. A variant of this is the Company Paid Groups. While on one hand capitation ensures a fixed monthly income for the provider. or to those who do not have a employee sponsored group insurance scheme. The main advantage with group insurance is the freedom of choice for a member. Both individual and group insurance. the members have to pay for healthcare coverage). group insurance schemes are able to get better deals for their members than in case of individual insurance. he has to pay for those services. 2. from the provider’s point of view it’s a choice between a fixed income and a varying income (which may be more.Healthcare Overview ___________________________________________________________________ 2. So. So. The providers enter into an agreement (contract) with the insurance company. Reduction in this cost to the member is a great advantage with group insurance. in return they are offered monetary benefits by the insurance company. __________________________________________________________________________________ 65736839.1 Healthcare pillars. 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.doc Ver. they are able to achieve a balance between providing desirable healthcare coverage to their employees without causing administrative overheads.

2. If the claim is found to be valid. Though they offer great flexibility to members in their choice of providers.e. the insurance company is able to offer healthcare at reduced rates. Formation of an IPA gives the providers more bargaining powers with the insurance company and assures them of an increased patient volume. After that. 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. This staff model however is feasible only in case of very large insurance companies. In case of Indemnity plans. i. As with self-insured groups.3 Benefits. This constitutes the Staff Model of managed care. Then depending on the choice of coverage the member is said to have medical benefits or dental benefits or vision benefits. as they are in a better position to regulate the expenses.The PCP manages their complete healthcare. they file a claim (a request to refund the expenses incurred) with the insurance company. they are very expensive. Staff model is beneficial from the insurance companies point of view.doc Ver. In case of certain large hospitals with a significant patient base. __________________________________________________________________________________ 65736839. company to the member. In general. The providers themselves have an increased patient volume and hence offer services at reduced rates.0 Page 13 of 132 . The reduced cost of a managed care plan is the main reason for members preferring them to indemnity plans. the insurance company pays a part (usually 80%) of the expenses. The right of a member to receive services from the insurance company as per their mutual agreement. The major line of coverage provided by the insurance company.e.Healthcare Overview ___________________________________________________________________ Sometimes. the members visit a provider and pay him for his services. right from providing services to filing claims. In case of managed care. the insurance company may directly employ providers. There has been a gradual shift in the choice of members from Indemnity (traditional fee-forservice) plans towards Managed Care (prepaid) plans. the member is called a Plan. Such a group is called an IPA or an individual practice association. individual providers form a group. the hospital itself may function as the insurer. Thus. 2. These when customized as per the member’s requirements and put down on paper as a legal document forms a policy. whom sets forth the terms and conditions of this agreement is called a Policy.4. they may outsource the administrative functions to an insurance company while keeping the money reimbursement part with themselves. 1. The insurance company offers a better deal to its members for using a provider within this network. the IPA. we can say that a plan is the general range of benefits offered by the insurance company. The insurance company may provide medical/dental/vision coverage. This is one of the most stable models of managed healthcare. In some cases. the insurance company contracts with providers and form a network of such providers. In turn the insurance company is able to offer a range of providers to the members at a single source. The members pay a fixed monthly fee and need to choose a provider within the network as their primary care physician or a PCP. Due to the control over the choice of provider. or. which contracts with the insurance company. 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. Benefits can be described in two ways 1.

EPO or exclusive provider organization. 1.4. also claims with any missing information are resolved manually by Adjudication experts. Claim is either filed on paper or sent electronically . benefits. As explained earlier. 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. 2. a hybrid of HMO and POS plans. Claims adjudication is a very complex process and requires information of almost all the entities associated with health care such as members. Apart from speeding up the process. On completion of claims adjudication. This is known as coordination of benefits (COB). The recent trend has been to go for PPO plans. Hence. it also reduces the necessity for claim examiners. while having the option of Indemnity type coverage at a higher fee. member receives a check for payment of the expenses. 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. It also gives the amounts applicable to him. The member is also sent a letter called the explanation of benefits (EOB). The claim is then adjudicated (or tested for authenticity) as per the company’s business rules and policies. Sometimes. as it offers the best of both Indemnity and Managed care plans.0 Page 14 of 132 . The checks can include. Members cannot avail services from a provider not contracted with the insurance company. is a recent addition to the stable of managed care plans.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.The claim is received by the insurance company. 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. thereby making the process more cost effective. providers. 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. It has a major disadvantage that it limits the choice of providers to a network. policy etc. referrals. also know as Claim Examiners. members may be enrolled with multiple carriers (insurance companies). Complex or ambiguous claims. __________________________________________________________________________________ 65736839. a Claim is a request filed by the member (or his PCP) for the refund of medical expense incurred by him.Healthcare Overview ___________________________________________________________________ The model of managed care as described above is known as a HMO or a health maintenance organization.4 Claims. 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. validated for necessary information and then loaded into a database. POS provides the member with the option of having HMO type coverage at a lower fee. nowadays there is a major emphasis on automated claims adjudication.

it is forwarded to the insurance company responsible for payment. 1. 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. So in case of very specific claims (such as processing of vision claims). the process of adjudication may be outsourced to another organization that has the necessary rule engine in place. An insurance company has its own marketing workforce and also a pool of agents (brokers). If errors are detected. claims which require very specific processing are sent to these specialized adjudication companies. This helps reduce the cycle time for claims adjudication. and logistical content errors.doc Ver. the nature of claims processing being highly situation specific.In addition. there are agencies that aid the insurance company on various other fronts. Apart from these regulating agencies. Together they use various methods and strategies to sell the plans to as many customers as possible. Health care is a highly regulated area in U. Health Care Financing Administration (HCFA) along with others are responsible for regulating the healthcare industry.6 External Agents. It requires some help from some external sources or agencies. 2. 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. Following are some examples of such agencies.A. Center for Disease Control and Prevention (CDC). Center for Medicare & Medicaid Services (CMS). These rates are based on a variety of factors and involve statistical and mathematical computations. syntax. Government agencies such as Department Of Health And Human Services (DHSS). 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. If a claim is determined to be free of typographical. After that come the Specialized Adjudication Engines/Companies who offer help on adjudication of claims. These organizations are known as specialized adjudication companies (Magellan and ADESSO are two such organizations). 2. Since claim adjudication is a complex process. __________________________________________________________________________________ 65736839. 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).0 Page 15 of 132 .4. All the services and management activities cannot be carried by the insurance company itself on it's own. Agency for Health Care Research and Quality (AHRQ). as there is stiff competition in the market.5 Sales. it is not possible for an insurance company to have a rule engine for adjudication of every type of claim. Sales and Marketing form an important activity in the health insurance industry. The role of the actuary is to decide the rates for the various services offered by the insurance company.Healthcare Overview ___________________________________________________________________ Also. 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.S. Meanwhile. Usually. Clearinghouses perform auditing services on insurance claims. it is returned to the Provider/Member along with an explanation of what was wrong.4.

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

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

1.human. Review Questions.      www.0 Page 18 of 132 .edu/ “History of managed care” by Tufts managed care institute.7 1. 4. 2.Healthcare Overview ___________________________________________________________________ Figure 2: Detailed Workflow 2.8 References.insurance. 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. “Future of managed care” by Tufts managed care institute.doc Ver.com http://trochim. 2.yourdoctorinthefamily.cornell. 3.com www. __________________________________________________________________________________ 65736839.

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

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

3.2. 1.Members ___________________________________________________________________ UNIT . Claim will be validated and the insurer will reimburse the amount to the provider/member.III 3 Members 3.0 Page 21 of 132 . an insurer provides ID cards to its members.2 Introduction Member is a person who is the actual beneficiary of the healthcare plan. These will be used to show the validity of the policy taken. 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"). Some employers sponsor healthcare plans to its employees and its dependents. Provider will check the eligibility of the member for that service. The provider/ member then will file a claim to insurance company.1 Unit Objective This unit will acquaint the reader with the role played by the member in the Healthcare Industry. The pictorial view of the process is as shown in figure 1. Member can go to a service provider (hospital.1 Insurance Business: An Overview. Once enrolled. __________________________________________________________________________________ 65736839. 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. doctor) to avail the service.doc Ver.

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

3. He/She will probably want to get quotes from several insurance companies before choosing one. he/she is taking a major risk by choosing not to get coverage. Moreover. if it is later discovered that he/she withheld information from the insurer. Before issuing an individual insurance policy.3 3. However. Advantages of individual coverage If available.1 Individual and Group Insurance in detail Individual Insurance Individual members are those who purchase insurance directly from an insurance company. individual insurance is often more expensive to make up for the insurer's increased risk exposure. It is unwise to try to hide a pre-existing condition from the insurer.0 Page 23 of 132 . by contrast. 1.2 How to get individual insurance? To get individual insurance. the insurer will want to know everything about his/her personal health history. When an individual apply for insurance. ironically. Individual insurance is somewhat more risky for insurers than group insurance. a member is responsible for 100% of the cost. Deductible and co-payment affect the premium. he/she may find it difficult to obtain coverage. For this reason. however. An unexpected illness or serious injury can put him/her and his/her family in financial peril. he/she is evaluated in terms of how much risk he/she present to the insurance company. In a group insurance situation. a person may still be able to get a policy with an exclusion rider. Individual insurance coverage is. If the insurer doesn't want to cover a particular health condition. __________________________________________________________________________________ 65736839. individual insurance is generally more difficult to obtain and more costly than group insurance. a person is directly in control of his/her policy. 3. With individual insurance. just to make sure that he/she is getting the best coverage for his/her money. In case of individual insurance. This is generally done through a series of medical questions and/or a physical exam. Although someone may think he/she can do without health insurance. or get in touch with the insurance agent. the employer or association pays at least part of the cost of group insurance. The risk potential will determine whether person qualifies for insurance and how much the insurance will cost. since it is usually more comprehensive and less expensive than individual insurance. and can often choose his/her deductible amount and co-payment percentage. his/her coverage could be canceled altogether. because group insurance allows the insurer to spread the risk over a larger number of people.3. since many insurers use information from the Medical Information Bureau to determine whether an applicant is insurable. But. is usually available without taking a medical examination or answering health questions. the provisions of the policy are negotiated between the insurer and master policy owner (usually an employer or association). group insurance is generally a better option. much easier to come by when someone is healthy. If he/she is already sick or have a history of health problems.doc Ver. Disadvantages of individual coverage Often. He/She can negotiate to have certain provisions included or excluded. individual coverage is infinitely better than being uninsured in the event of illness or injury.Members ___________________________________________________________________ 3. Group insurance. a person can either contact the insurer directly. Individual insurance often doesn't provide as much coverage as group insurance policies in the same price range.

In fact. By agreeing to a higher deductible and/or co-payment. And as long as he/she retains a reasonable out-of-pocket maximum. 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). It does no good to have guaranteed renewable insurance if the insurance company goes belly-up." this limits out-of-pocket costs. emergency-room care. The provision can be very important if the person is unable to work for an extended period of time. Best. 1. x-rays. Many policies do cover outpatient treatment. someone will want to find a policy with the highest lifetime payout possible. since it really depends on how much someone can afford to pay. Anything less than $1 million may be insufficient to cover you in the event of a catastrophic illness. his/her insurance coverage continues. and if someone might never have to worry about his/her out-of-pocket costs unless he/she becomes seriously ill. an HMO. Lower out-of-pocket maximums can mean substantially higher premiums. "Guaranteed renewable" provision This means the insurer can't cancel the coverage if someone becomes ill. or Standard & Poor's. but they will rise for all policies in the class (not just individual’s). Some managed healthcare systems provide coverage on an individual basis as well. Anything over a year is extremely undesirable. Three months to one year is standard. __________________________________________________________________________________ 65736839.0 Page 24 of 132 . However. The premiums may go up over the years. or POS plan can often give the most cost-effective insurance coverage. he/she can cut his/her insurance premiums dramatically.Members ___________________________________________________________________ What to look for in an individual policy? If someone can find one that offers individual insurance. he/she shouldn't have to worry about medical costs getting out of hand. if someone is getting individual insurance from a traditional insurer. Coverage of pre-existing conditions Many insurance companies impose a waiting period before covering preexisting conditions. Major medical coverage Major medical coverage (which covers all hospital costs including rooms. but he/she pays dearly for this protection. anesthesia. tests. Choosing an out-of-pocket maximum is a personal matter. Out-of-pocket maximum Also called a "stop-loss. However. PPO. The shorter this period is better. here are some things he/she should look for:  Financial stability An insurer with an "A" or "A+" rating from A. High benefit ceiling Policies with unlimited payouts are rare in this day and age.        Providers who will offer individual insurance Most people purchase individual health insurance coverage through traditional insurers. As long as he/she continues paying premiums. although cosmetic and other truly "elective" surgeries are rarely covered.M. 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.doc Ver. Waiver-of-premium provision This allows a member to skip the premium payments if he/she becomes seriously ill. Moody's.

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

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

as it is helpful in growing their relationship. one can provide his/her company with significant benefits in terms of employee recruitment. staff members can select a higher plan and simply have the balance deducted from their salary. a payment can be made directly on a yearly. Benefits to the company Introducing a Healthcare group scheme for employees. (Examples are the Irish Farmers’ Association. Plan Sponsor is profited by:  They get the Health Insurance plan at a cheaper rate.) 3. SI Groups pay "Service Charges" to insurer for administration / management of medical insurance (adjudicating claims etc. they are entitled to claim tax relief on the full premium. The financial risk is borne by the Plan Sponsor.3.  They will be given more priority for processing of their claims then others get.Members ___________________________________________________________________ Fast access to the best in modern healthcare Members can choose admission dates to fit in with work and family commitments. But these figures are much lower than paying premium to cover all the employees. thereby reducing their effective rate of BIK to the standard rate of income tax. 1. __________________________________________________________________________________ 65736839. Ease of Payment Payments can be made by direct debit through company bank account. 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. leading to less stress for them and their employees. Insurance Company is profited by:  Getting a fixed sum of money for adjudication of claims.  Their Work will be given higher priority by the insurance company.3. Tax Relief for employees Employees are liable for Benefit-in-Kind (BIK) taxation on the paid Healthcare premium at their top rate of tax. sports clubs and interest groups. The SI group also has to maintain certain bank balance at all times to ensure the continuance of medical benefits to their employees. Flexible cover options Once employer chooses a particular level of cover. quarterly or monthly basis. the company can claim healthcare payments under the Corporation Tax shelter.doc Ver.6 Self Insured Group Plan Sponsors / Companies who pay the Claims' amount of their employees themselves are called SI (Self Insured) Groups.  Risk is moved to the Insurance Company. Benefit in the premium amount Some group schemes qualify reduction in the premium amount. retention and goodwill. professional bodies. 3. Alternatively.0 Page 27 of 132 . half-yearly. the Credit Unions and the Small Firms Association. In a company-paid scheme.5 Affinity Groups An Affinity scheme is appropriate for members of business organizations.) for their employees.

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

 Someone.400 for individuals ($3.800 for families). 4.0 Page 29 of 132 . insurers are running into problems with state laws that prohibit such high-deductible plans. is not eligible to open an MSA. Enlist advantages and disadvantages of individual and group insurance.850 for families). __________________________________________________________________________________ 65736839.doc Ver. are those who pay the Claims' amount of their employees are Self Insured Groups. 3. 2. 1.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. Many insurance companies are still developing qualified high-deductible insurance plans and products with a savings component. This includes Medicare coverage. 5. Many financial institutions are also still in the development stage with their Archer MSA account products.3. However.8 Exercise 1. Plan sponsors/ Employers 4. and The annual out-of-pocket expenses do not exceed $3. For Self-insured groups insurance company may provide the services. In fact. are those who purchase insurance directly from an insurance company in case of an individual insurance.200 to $4. Individual Members 2. in some states. Employers 3. The biggest challenge in setting up an Archer MSA may be finding a company that offers them. having additional coverage under a health plan that is not a high deductible. are those who purchase insurance in an employer sponsored insurance. 3.200 for individuals ($5.600 and $2. Administrative /Management of medical insurance 5. Answers: 1. there are exceptions to this rule.

billing. For an employer ID numbers and passwords for its employees will be provided. Member will receive membership letter once the enrollment is over. Required data will be captured and sent to the insurance company electronically. a member can start filling up the claims. Data entry operators will make you enroll online.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.4. Member can fill up the forms and send it to the respective postal addresses. This is the most commonly used approach. product issuance. Employer then validates and sends the information to the insurance companies electronically. Employees are allowed to select the benefits they wanted to opt for. Enrollment in the office outlets of the insurance company There will be city-based office outlets set up by the company. Member has to approach the office. Web-based applications For an individual web based application will facilitate online registration/ enrollment to get enrolled.    __________________________________________________________________________________ 65736839. verifying. Member will provide all necessary data to the insurance company that will include personal information. and making available all necessary eligibility information for enrollee membership.0 Page 30 of 132 . This is most commonly used methodology for large employers having more than 300 employees. The enrollment process will then be automated. Enrollment through the employer based systems Employers do have employees data maintenance systems. There will be online systems set up there. benefit information that he/she has opted for.4. and claim adjudication. Collecting and updating the systems with the data completes the enrollment process. The data will be received and formatted fed to the systems.Members ___________________________________________________________________ 3.doc Ver. 3.4 3. 1. Membership letters and other details will be sent to the member once the process is over. Once the enrollment is over.1 Member’s enrollment What is Enrollment? The enrollment process comprises of collecting.

membership letters will be sent explaining the benefits he/she has opted. pharmacist). eligibility information. hospital.3  Output of enrollment process ID Cards A person insured under an insurance company is given an identity card. Member Member Member Employer Associations Insurance Company Fig 3: Enrollment Data Flow 3. ID card would have details about the member's SSN.0 Page 31 of 132 . Name. Employer Report A report will be sent to the employer giving the details of its employees enrolled and their details.    __________________________________________________________________________________ 65736839.doc Ver. Membership letters Once the enrollment process is complete. membership number and other details. Member has to show his/her identity card when he/she approaches a service provider (doctor.Members ___________________________________________________________________ Enrollment Data Flow is shown in figure 3. 1.4. Provider Report Providers are made aware of the new members enrolled under his/her name.

Electronic data transfer. Electronic data transfer from employers d.4.4 Enrollment: Overall Picture Please refer to figure 4 for the pictorial view of enrollment process.Members ___________________________________________________________________ 3. 4 Enrollment Process 3. Web-based applications. Member needs to show _______ as a token of its membership in the insurance company.4. 2. Traditional Paper transfer b. Answers 1.0 Page 32 of 132 . 1. 3. Fig.5 Exercise 1. Direct enrollment in the field offices c. Employers having own member's database provide data to the insurer via _________. 2. ID card __________________________________________________________________________________ 65736839. 3.doc Ver. Means of enrollment are a. Enlist the means of enrollment.

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

After getting confirmation from the insurer. By permitting healthcare providers to access this information directly. Even an employer is given access to this data so that it can monitor eligibility status of its employees. the deductible and all other information. 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. employers and to its members.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. Eligibility data flows as shown in the figure 5. The Employer Eligibility information will be maintained and accessed by the employers.0 Page 34 of 132 . the information needs to be validated before giving any kind of service. 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. Every time a member visits a provider. Employer groups normally use online administrative system that will provide eligibility status of a member. The Member Member may be interested in looking for their benefit data.doc Ver.  Member having HMO plan __________________________________________________________________________________ 65736839. 3. Insurance companies set online systems through which providers can query for the eligibility data for the member approached to him. Some employers provide an online eligibility status inquiry similar to that given for employers.Members ___________________________________________________________________ A member is also allowed to monitor its own/ dependent's eligibility status. 1. provider will give service to the member.5.

mental retardation. 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.6 Answers __________________________________________________________________________________ 65736839. These are generally unattended. Provider need not do any eligibility checks for member’s eligibility. 3. or turns age 23. This includes children who are away at school as well as divorced children living at home and dependent upon member for support. If member is divorced.5. 4. Coverage for an enrolled child will end when the child marries. But there is no restriction on the choice of the provider. legally adopted children. 1. This methodology eliminates the need to submit paper forms or produce and send cumbersome tapes. which can get lost or damaged.doc Ver. Providers need not validate the member eligibility before catering any kind of service.4 Eligibility Data Transfer Most of the insurance companies transfer the eligibility data electronically. automated transmissions that include security features like encryption technology and unique IDs and passwords for user verification and system access. 2. children who do not live with the member are eligible if member is legally required to support those children. (Y/N) Providing member's eligibility data to the providers is a responsibility of the insurer.  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. If goes to in-network provider the co-pay will be less. 3. Exercise 1.  Member having PPO plan A member will fall under a network and can get service from any provider falling in that network. moves out of the household. foster children. Stepchildren. Provider validates the eligibility of the member for the service asked.Members ___________________________________________________________________ Every member has associated Primary Care Physician (PCP) for medical services and Primary Care Dentist (PCD). 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. (Y/N)    3.  Member having indemnity plan Member is free to go to any provider.5. So eligibility checks would be carried away but will not hold back the member from getting the service. 3.0 Page 35 of 132 . coverage may be continued. cartridges and diskettes.5. Affidavits of Dependency and legal documentation are required with enrollment forms for these cases. (Y/N) Daughter July aging 26 passing through a phase of mental illness is treated as a valid dependent. (Y/N) Son Bill of age 21 got married and moved out will be a valid dependent of Joe. The service will be provided only if the person is eligible for the same. or a physical disability.

1. 2.doc Ver.0 Page 36 of 132 . 3. N Y N Y __________________________________________________________________________________ 65736839.Members ___________________________________________________________________ 1. 4.

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

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. 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. proposed adoption. web-based applications or the walk in offices situated. o Add or delete family members at open enrollment.Members ___________________________________________________________________ o Provider directory Provider directory is that enlists the providers those are in the network of the insurer/in contract with the insurer. Some of the cases are:    A marriage or divorce of the employee The death of the employee's spouse or a dependent The birth. 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. o Updating personal information Member may wish to update the personal information such as address or contact number etc.  Update information These services are catered through phone calls. Internet also helps out by providing enough data on the site. o Clarification about the benefits Member can get the doubts about the benefits at any point of time. 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.  Distribution of ID cards. 1. Some times the employers update the insurer about these changes.doc Ver. can walk in the offices set up by the insurer and do the changes.0 Page 38 of 132 . booklets:  __________________________________________________________________________________ 65736839. These forms could be submitted via postal mail to the claims offices (the address is generally specified on the ID cards). Log issues and complaints: o Logging provider complaint Member is free to log in any complaint about the service or the provider. are made available on the web-sites/applications that might be needed by the member.

statements:   Can be viewed on computer. The acknowledgement letter contains the detail about the payment such as premium amount. The member receives the acknowledgement letter from insurer giving detail about the premium received. Can be stored electronically on computer for easy retrieval.  Updating member with new products. o o o New benefits information. recording.pdf) attachment.8 3. Can print as many copies as needed. fills in the detail (name. Sending statements through email has many advantages. New facilities information About products and programs that are available in the state. The member has to fill a form for the ID card issuance.8. Member is kept updated with the information by weekly/ monthly reports or news on the websites. claim payments.   Some insurance companies also send the premium statements through email.doc Ver. policy number etc. The member tears of the lower part of invoice. The facility to replace the ID card would be provided. Once the money is transferred to insurer’s account. policy number etc. facilities: There are many upcoming services/ benefits newly provided by the insurance company.0 Page 39 of 132 . 3.1 Member Group Maintenance What are Groups? Groups are the frameworks used to organize billing. 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. 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.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). Address of the insurer is preprinted on the envelope. The premium statement is sent to the member along with an envelope.   3. Charging to the member’s credit card Some times member authorizes the insurer to charge the premium to his/her credit card. Monthly statements are emailed to the member portable document format (. Payment by cheque If the member is willing to make a payment through cheque. moth. cheque number. A new card will be sent to the address we have on file for you.) and sends it along with the cheque in the envelope received with the invoice. 1. he/she receives a premium statement through post. __________________________________________________________________________________ 65736839.

Third Party Phone Number Change. Recalculate Family Contract. Comment. the breakdown of the employee into groups will be done. ID-Card Request. 3. __________________________________________________________________________________ 65736839. Employment Change. Third Party Address Maintenance.8. membership Termination date changes. Change Membership Termination Date. Family Effective Date Change. Contact Address Changes) Third Party Address Change. Member Name Change. Group Maintenance includes               Office Details changes (Contact Number. Employment Change. Payroll Change. Office Effective Date Change.0 Page 40 of 132 .Members ___________________________________________________________________ 3. Membership Termination.8. Provider Office Change. Other maintenance performed on the member data is … Members Maintenance includes       Member's personal information changes (Address Change. Payroll Change. Being a parent entity some data is defined at a group level that will be inherited by the members following under that group. 1. Mass Id-Card Request. Provider Office Change.2 Groups Formation When a plan sponsor enrolls its employees.3 Groups Maintenance Member and Groups' maintenance is performed annually. Office Termination Change.doc Ver. Suspended). Family Group to Group Change. Membership details (Effective Date Change. Mass Id-Card Request (Co-pay Change). 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. Most Groups' renew their Plans every year in January. The CONTRACT IS RENEWED for a group and the members are REINSTATED. groups are created and entered into the systems first then the enrollment for the individual members would be done. Membership Effective Date 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.

9. pay attention to whether the contract is non-cancelable or guaranteed renewable. 5.9.they can be used in any way the member wishes them to use. but the premium can be raised under certain circumstances (the state insurance department must approve the change. When the groups are formed in case of a group insurance? 3. Employers can provide coverage for employees too.1 Member’s concern When a member buys an individual disability insurance policy. they must have the permission of state's insurance department. 3. Answers: 4.0 Page 41 of 132 . Enlist the services offered for group maintenance.2 Exercise Questions 1. 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. For a guaranteed renewable contract company cannot raise your premium on an individual basis. 5. Guaranteed renewable means that the policy can't be canceled as long as member pays premiums. Opting for the guaranteed renewable provision may save as much as 30 percent of the premium cost. which would apply to all individuals in the same insurance classification). 4.9 Disability Benefits Disability income insurance provides members with an income if they become sick or injured and are unable to work.Members ___________________________________________________________________ 3. Guaranteed renewable. What types of services does the insurer provide? 2. Disability benefits contracts in which policy cannot be canceled and premium cannot be raised are _________. Non-cancelable. __________________________________________________________________________________ 65736839. Often. 3. Disability benefits contracts in which policy cannot be canceled but premiums can be raised are _________. 1. A non-cancelable contract is preferable to a guaranteed renewable contract.doc Ver. noncancelable policies are offered only to low-risk occupational groups at a high premium. so may be premium will be raised only every few years. The funds paid are not specified for medical expenses .

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

1.doc Ver.Members ___________________________________________________________________ __________________________________________________________________________________ 65736839.0 Page 43 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. organization or institution that provide services to those enrolled into the system i.g.doc Ver. BACKUP-PROVIDER:   __________________________________________________________________________________ 65736839. Dentists. 1.   SPECIALIST: A specialist is one who has one or more areas of specialization in medical field. IPA or PORG: (Independent Practice Association or Provider ORGANIZATION) It is the legal entity that provides administrative and contract related services for providers. There can be numerous classifications of providers depending upon the facilities provided by them. COMMUNITY PROVIDER: These providers do not have a contract at all with Healthcare organization.1 Provider types Providers are those people.  Other way of classifying them based on the type of contract is as follows:  PCP: Primary care physician. the members. NON-PREFERRED PROVIDER: These are those providers who are not contracted to furnish services or supplies within ‘PREFERRED’ network. Every member is supposed to approach the PCP first before going to anyone else.Providers ___________________________________________________________________ UNIT .e. Hospital etc.  NON-PAR: These are those non-participating providers whose contract with Healthcare organization is terminated. Group Or Entity: These are group of people who provide services under a common name e. PREFERRED PROVIDER: These are those providers who work on contract basis by negotiating the compensation they charge. As the name suggests it is the PCP who is in constant touch with the members directly.   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. physicians etc.IV 4 Provider 4.0 Page 44 of 132 .

3. Backup provider provides medical services to the patients of the provider when he is not available. which involves clearing provider claims within a fortnight (subject to the provider electronically filing the claim in a prescribe format).2 Credentialing Criteria The process requires providers to present documentation of training. Some HCO(s) have pioneered the E-Pay/E-Cash option. Health insurance companies sometimes delegate credentialing to some physician groups. 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 __________________________________________________________________________________ 65736839.2 FACILTIES: These are those providers who provide facilities such as wards.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.doc Ver. there will be routine visits to the provider's office and a re-credentialing process every two years. Provider Participation HCO (Healthcare organizations) usually elicit provider participation (into their network) using some standard marketing strategies. ICU’s. Based on nature of service.1 Provider Contract Process Providers who wish to participate in one of the networks must complete an application and the corporate credentialing process.g. Maternity Home etc. SUPPLIERS: These are those providers who provide medicines and surgical instruments. 4. so as to assure a minimum amount of revenue by way of claims. path labs etc.PHO(s). Pharmacies. These are specialist networks of providers. which share knowledge and intellectual property via the Internet. EQUIPMENTS: These are those providers who provide medical equipment for executing medical tests such as X-ray labs.Providers ___________________________________________________________________ A provider can specify another provider as his/her backup. 4. providers can be classified as following:    4.g. • E Learning Virtual Communities As some of the fringe benefits. large HCO(s) provider e-learning options to enrolled providers via virtual communities on the Internet.0 Page 45 of 132 . 1. or an appropriately delegated credentialing process. Hospital. • Minimum number of member visits Some HCO(s) guarantee providers. individual practice associations (IPAs).3. 4. 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. education and other relevant information. Once a provider is accepted as a participating provider. and physician hospital organizations .. e. a minimum number of member (or dependent) visits. E.

per month)  By integrated delivery systems.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. the system uses a three-part quality factor to adjust the physician’s capitation payments. For example. specialists. DEA registration.4 Types of Contracts All major health insurance companies have several different types of provider contracts based on the type of servicing provider.5 Provider Reimbursement Most health insurance companies incorporate the following payment methods to reimburse providers for services.  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. professional organizations. Medicare/Medicaid) Work history Malpractice insurance coverage history Clinical privileges at a hospital hospital 4. Additionally. 1. many participating primary care physicians are compensated in accordance with the Quality Care Compensation System* (QCCS) described below. membership/privileges. 4. 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. Specialist contracts and Hospital contracts.doc Ver. In most areas. Some of the different types of provider contracts include PCP contracts. physician hospital organizations. physicians are paid by capitation. 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.Providers ___________________________________________________________________     Disciplinary history (including licensure.0 Page 46 of 132 . a physician receives payment for a patient whether the physician sees the patient that month or not.3. independent practice associations (IPAs). 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 Review considers: __________________________________________________________________________________ 65736839.3. Under capitation. hospitals.3.

It depends on the plan taken by the member. Some plan has flexibility to visit any provider without any prior authorization in that case referral doesn’t come into picture. The inquiry can be done either on the basis of member number or referral number which ever is known. Referral is not always required to visit outside PCP.   __________________________________________________________________________________ 65736839. The information which needs to be entered are Member number. 4. Contract is an agreement between the provider or group of providers and the _________________. A PCP or an authorized provider provides it when special care is required. 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.0 Page 47 of 132 . 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. PAR or Participating 3.5. (E. Exercise The legal entity that provides administrative and contract related services for providers are also a type of provider – True or False. 4.5 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.doc Ver. Insurance Company 4. 1. PORG etc) 2. True. diabetes and heart failure   4. Referral maintenance – through this process one can modify the existing referral entry. Answers: 1.Providers ___________________________________________________________________ Results of member surveys Review of the care (like childhood immunization rates. If some referral has to be cancelled then we can do that through this process. A referral once issued has a validity period.1 Referrals processing  Referral entry – All the referral should be entered in the referral database so that it can be used if required. A provider is called as ________ provider if he has a valid contract with the company.g. Encounter date. details of the provider for whom referral given. 3. 2. 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.4 1. A PCP can issue themselves referrals for non-routine services. Referral entry can be done through batch or online processing however inquiry and maintenance is done through online screens. IPA. referral validity ‘From’ and ‘To’ date and service code (it specifies the king of service/treatment). Suppliers 4. details of the provider who is referring. Providers who provide medicines and surgical instruments are known as ___________.

4. the referral will not be purged. 4. 58560). and the referral has been logically deleted. 58550. AUSHC then reimburses that organization for allowing our customers to use the network.  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. primary care physicians. This information will be written to a yearly archive file that is used to recall purged referrals.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. etc.6. Our objective is to establish networks large enough to satisfactorily serve the targeted population to whom they will be available.  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.) who have agreed to treat AUSHC members at negotiated rates and have agreed to abide by patient and quality management programs. The second is a file that is used by another job. o If the referral is 18 months or older. the referral will not be purged.6 Provider Network A network is a group of contracted providers (doctors.  Tough Standards: All providers must meet our comprehensive credentialing standards.1 Quality Provider Networks AUSHC believes members benefit from quality provider networks in the following ways:  Comprehensive: Several providers participate with AUSHC including.g. o If the procedure/service code indicates that it is an infertility referral (e. with the following exceptions: o If the date of the referral entry is less than 18 months from the current date. 58555. one of the toughest participation requirements in the country. it will be written to two output files. All providers’ performance in monitored regularly. Primary care physicians. hospitals. This is possible if the provider is connected to the company’s network directly or through a third party. availability of health care services. __________________________________________________________________________________ 65736839.0 Page 48 of 132 . laboratories. and a visit has been taken within the last 6 months.5.  Electronic referrals – Direct online entry by provider. 1. If the referral meets the purge criteria below.Providers ___________________________________________________________________  Referral purging – This can be done in batch mode. and acute care hospitals. local practices. All referrals over 18 months old are purged. Factors such as population. A rental network is an arrangement in which another organization (besides AUSHC) contracts with a group of providers. A Job will scan all referrals within the referral database. and a visit has been taken within the last 30 months. 4. the referral will not be purged. specialists. which will do the actual erase of the referral. 58552. The first will be a detailed dump of the referral that will be written to a purge file.doc Ver. 58551. in particular. must meet more than two-dozen criteria for admission into our networks. and travel time are taken into consideration when contracting with local providers to join the networks.

given to each provider to identify the provider easily.doc Ver. The status can be retired. Aetna reimburses the rental network organization for allowing our members to use the network.4 Network Hospital Standards Our current hospital contracts require network hospitals to represent and warrant that they are. In other words.3 Rental networks A rental network is an arrangement in which another organization (e.Providers ___________________________________________________________________ 4.1 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. and will remain during the term of the contract. If it is any group or hospital then name of that should be stored. They compare the existing network with adequacy guidelines for the specific service area and identify whether there is a need for new providers. The criteria used to select participating providers reflect minimum network composition standards. 4. 4. All the inquiry or maintenance of providers is done based on provider number. 1. closed. Labs etc. All facilities are also required by contract to notify us of any change in coverage. Doctors. The local Network Management staff has the ongoing responsibility of ensuring that each network has the proper composition of providers. Instead of engaging in direct contracting arrangement with individual providers. In the healthcare organization. 4. 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. deceased etc.6. Pro Net) contracts with the providers. and provide evidence of such insurance upon request. and when members have access to the various types of medical services they may need.6. Provider name – it is the name of the provider if he is an individual provider. A provider who is providing healthcare services on current date is an active provider. appropriately licensed and accredited by either the American Osteopathic Association (AOA) or the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). Provider maintenance should be done everyday in order to keep the provider database up to date all the time.. Provider status – Shows current status of the provider. licensure or accreditation status. networks are adequate when there are enough providers available for the member population in a geographic area.   __________________________________________________________________________________ 65736839.7 Provider maintenance This process involves collecting information on all type of Health Care Providers. but may vary to accommodate local supply and regulatory requirements.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. network staff target providers to be recruited and contracted.g. one the major database is Provider database. They must also maintain adequate malpractice and general liability insurance or self-insurance.7.6. which includes hospitals. After developing a list of providers by type needed to meet customer needs. 4.0 Page 49 of 132 .

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

0 Page 51 of 132 .Providers ___________________________________________________________________ Answers: 1.healtheon. C.org/ http://www.com/ http://www. Provider number 3.com/ http://www. 3.asp/ http://www.edu __________________________________________________________________________________ 65736839.ucla. 4.com/www/provider.healthaffairs.com/healthcareproviderinfo. Claims payment schedule 4.doc Ver. 4.10 References AETNA Intranet http://www.com/ http://www. 2. (E.doctorandpatient.healthinsurance.masslegalnurse. In Indemnity plan referral is not mandatory) 2. 4. False.doctorquality. 1.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.g.9 1.

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

Together they use various methods and strategies to sell the plans to as many customers as possible. This bonus is one time payment for new application and it depends on number of new application submitted. As in every other business.00a Page 53 of 150 . A substantial percentage from customer groups’ payments result in distributing some percentage as commission to brokers. Brokers are also called Producers in this context.doc Ver 0.1 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. An insurance company has its own marketing workforce and also a pool of external agents (brokers). The various entities involved like Brokers and Underwriters are also discussed. 5. This bonus is in addition to commission a producer receives on premium paid by Customer Groups. Producer Data is frozen at the end of a year.2 Introduction Sales and Marketing form an important activity in the health insurance industry. Medicare Promotion Compensation – Some companies pay bonus to brokers for bringing in new Medicare Applications. The banding of the medicare promotion award could be something like this: Program To Date Application Level Payoff per Application   65736839. Users within the company need to maintain particulars of brokers and information regarding broker-customer relationship. 5. Each Customer group should submit a stipulated minimum number of applications for corresponding broker to qualify for commission. 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. 5. In such cases the Customer and Cash receipts information is maintained and broker commission is calculated from that. 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. as there is stiff competition in the market.3. in health insurance too brokers bring together buyers and sellers against a commission.Sales ___________________________________________________________________ UNIT .V 5 Sales 5.3 Brokers An insurance company generally has a pool of brokers. Key Producer Compensation – Sometimes the company identifies key producers and gives them bonus if they get more than a fixed number of new subscribers. here buyers being the customer group buying a plan and sellers being the insurance company.1 Unit Objectives This unit aims to familiarize the reader with some aspects of insurance sales and quote creation.000 per Customer group per calendar year.

State regulations affect prices. It contains information about: 1. They group and combine benefits into plans and maintain data about product-offerings in different service-areas i. Admin users usually do product setup.000 per Customer group per calendar year. Name of the firm buying the policy 2. Service Area – Area in which the members will be based 3. All these affect the cost of the plan. A highly specialized and trained user group called Actuarials does rate Setup. statutory information etc 5. benefits and new locations where plans will be offered for sale. given by a seller to prospective buyers.e.6 we will study in details how Actuarials arrive at these rates. Details of coverage (benefits like pcp visit.) These are all mainly data-entry operations.rates are revised from time to time and hence the dae of commencement of coverage affects the rates. (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.4. But they do not apply these factors. Hence Book Rates are same for any customer group availing a particular plan in the same area and hence the name Community Rates.Sales ___________________________________________________________________ 1-250 $100 250-500 $125 500-1000 $150 1000-2000 $175 2000+ $200 Cap of $60. They enter data about new/updated plans. (In section 5. Rates (the premium due per member.doc Ver 0. These rates are called Community rates or Book Rates or Base Rates and they depend only on:  The plan chosen . Some standard information – like applicable conditions.  The location / service area of the customer group .the benefits included in a plan are basis of the cost of the plan. do not take account of any factors specific to any customer-group.Government regulations often mandate certain kinds of coverage.00a Page 54 of 150 . These rates need to be approved by the concerned department in some states. 5. a quote is a statement of cost. for the member(s). tax structures etc. 6. On the basis of statistical considerations and mathematical calculations and with the aid of rating applications. Effective Date & Renewal Date (date from which the policy will take effect and date when the policy will be due for renewal. make certain products saleable in certain area and withdraw some products from some areas as and when required.  The effective date . benefits and conditions of a chosen plan. However. If not renewed by that time.4 5. In context of health insurance. Name of Plan 4. possibly after relevant customizations. Actuaries also calculate the values of group-specific factors for different locations at different times.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. Actuaries come up with rates for each product.1 Quote Creation What is a quote? A quote is a statement of rates of a particular product.) 65736839. inpatient hospitalization etc) 5. the policy becomes void) 1.4. In case of a group insurance policy the rates may be banded on basis of age/ gender/ family status).

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

They can make adjustments according to their discretion.7).Sales ___________________________________________________________________ Underwriters have the final say on the rates. thus entering into a legally binding contract and members are enrolled for the accepted policy.doc Ver 0. 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. If rates are acceptable to the customer group they sign on the quote sheet.00a Page 56 of 150 . (We will discuss activities of underwriters and special rates in detail in section 5.

The final say on the rates is with (a) marketing people (b)actuaries (c) underwriters (d)underwriters 3. Underwriters and Marketing assistants use both of these. managerial and underwriter users to the suitable application. 4. Group-specific 65736839.2.which would act as a single interface or gateway for all marketing.00a Page 57 of 150 . Quoting Engines and Renewal Applications use the data generated by these applications. Admin applications are used by Admin Users for Product Setup.Sales ___________________________________________________________________ Marketing assistants Fig 3. Renewal Applications pick up contracts that will be shortly due for renewal.Intranet for use of all internal users and Internet for use by customers to get data online. An optional layer above these would be a web-based front end . The difference between Book Rate and final rate would be due to ______________factors. and are also used for renewing contracts. 3.same 4. Actuaries to calculate the Base Rates of Products use rating applications.doc Ver 0. 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. Exercises: 1. Quoting Engines generate quotes with customer specific rates.0 Here we see that central to the system are the Admin and the Rating Applications. Enveloping all these there may or may not be a Quote front end .c . Product Setup is done by (a) admin users (b)marketing people (c)actuaries 2. a . Answers: 1.

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

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

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

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

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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4 Indemnity plans.this means that. They prefer to use managed care plans. For people who cannot afford to spend large amounts on their healthcare. as explained earlier. The insurer will reimburse only 80% of the costs. But. Managed Care Plans   6.00a Page 65 of 150 . i. Managed care plans originated in the early 1970s. The coinsurance limit is $1000. 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. Indemnity insurance is not a good option. this freedom comes at a very high cost. rest the member will have to pay out of his pocket. a routine checkup is not covered.doc Ver 0.e. It involves a lot of paperwork and is time consuming. 65736839.00 80% if true emergency. provide great flexibility to members in choosing a provider. There is no coverage for any preventive care. Members have to pay heavy premiums and need to meet deductibles before they can start claiming benefits. which are more cost effective. which the member may have to pay is $1000. insurer will provide 100% reimbursement of costs.Benefits ___________________________________________________________________  Filing of claims is the responsibility of the member. this amount is $600. 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.   For the entire family to be covered.Above this. the maximum amount.

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

e. HMO members are required to obtain all treatment from HMO providers.00 100% None $35. HMOs often have nominal copayments. Members cannot use services of any out-of–network provider (i. members are responsible for paying a percentage of the bill every time they receive medical care. Except for emergencies occurring outside the HMO's treatment area. before health problems become severe.  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.e. regardless of how much medical care is needed in a given month.doc Ver 0.00 copay 100 % 65736839. Advantages  With most types of insurance (other than HMO). HMOs encourage members to seek medical treatment early.e. HMO members pay a fixed monthly fee. tight controls can make it more difficult to get specialized care.Benefits ___________________________________________________________________ the PCP and the insurer manage their complete healthcare. many HMOs offer health education classes and discounted health club memberships. In contrast. Besides reducing out-of-pocket costs and paperwork. The HMO will not pay for non-emergency care provided by a non-HMO provider.   Disadvantages:  An HMO member must choose a primary care physician (PCP). Additionally. Additionally.The HMO will continue to cover his treatment as long as he is a member. Instead of deductibles. a provider not contracted by the insurer) without prior permission of the insurer. This screening process helps to reduce costs both for the HMO and the members. This leads to ‘Low out of pocket costs’. there may be a strict definition of what constitutes an emergency. The PCP provides general medical care and must be consulted before members seek care from another physician or specialist.00a Page 67 of 150 . Additionally. HMOs generally do not place a limit on the member’s lifetime benefits (i. but it can also lead to complications if the PCP doesn't provide the referral needed by the member i. the total amount of money he can claim during his lifetime) . there may be a deductible that must be met before the insurer starts picking up the tab. Hence. the focus is on wellness and preventative care.

For example. When members receive care from a non-participating provider they receive benefits. In some cases. which are at the higher level of benefit coverage. The insurer then pays the covered amount directly to the healthcare provider. usually 100% payment rate. and the member pays his or her co-payment amount. 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. there is a strong financial incentive to do so. which are at the lower level of benefit coverage. The PPO sponsor (employer or insurance company) generally reimburses the member for the cost of the treatment minus any co-payment.  Every time he avails the service of a provider he has to pay $10 irrespective of the kind of services availed. or by some other type of organization. he will have to pay $35 as $10. by one or more employers.00a Page 68 of 150 . Advantages  Free choice of healthcare provider. PPO members usually pay for services as they are rendered.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. there are several important differences between HMOs and PPOs.doc Ver 0. the provider may submit the bill directly to the insurance company for payment. a preferred provider organization (PPO) is a managed healthcare system. members may receive 90% reimbursement for care obtained from innetwork physicians but only 60% for out-of-network treatment. In return. known as ‘Preferred Benefits’. PPO physicians provide medical services at discounted rates and may set up utilization control programs to help reduce the cost of medical care. the insurance company will pay 100% of the providers charges  If compared with the Indemnity plan provided in the earlier section. 6. A PPO is actually a group of doctors and/or hospitals that provide medical services only to a specific group or association. The healthcare providers and the PPO sponsor(s) negotiate the price for each type of service in advance. usually 80% payment rate. In case he has to use the emergency room facilities. it becomes clear that the cost for the member is much less.  copay. known as ‘Non-Preferred Benefits’. In order to avoid 65736839.4. as PPO members are not required to seek care from PPO physicians. However.00 copay $10. However.00 copay 100%  For all kinds of treatment. When a member receives care from a participating provider they receive benefits. The PPO may be sponsored by a particular insurance company.2 Preferred Provider Organization (PPO) Like an HMO.

and members may be required to meet a deductible. Disadvantages  As mentioned previously. he may choose to continue seeing him. 80% / 20% 80% / 20% Preferred option closely mirrors the HMO option while the non-preferred option approaches the Indemnity option. Like an HMO. members may receive 90% reimbursement for care obtained from in-network providers but only 60% for treatment provided by out-of-network providers. When a member uses the in-network benefits. the member pays no deductible and usually only a minimal co-payment when he uses an in- 65736839. there is a strong financial incentive to use PPO network physicians.00 80%/20% Same as preferred if true emergency. the POS plan mirrors an HMO.00 $200.doc Ver 0. For example.4.00 100% 100% Non-preferred Benefit $200. Additionally. the expenses and paperwork are higher as compared to HMOs. most PPO members choose to receive their healthcare within the PPO network. One side is for in-network services and the other side is for out-of-network services. else none.Benefits ___________________________________________________________________ paying an additional 30% out of their own pockets. The benefits are reduced in case of non-preferred option. if a member’s longtime family doctor is outside of the PPO network. A PPO member has to file claims on his own. Thus.3 Point Of Service (POS) POS plans give two benefit levels.00 3x deductible None 80% / 20% $1000. The plan can be visualized as having 2 sides. but it will cost more.00 office visit 100% None 100% after $10.00a Page 69 of 150 . most PPOs have larger copayment amounts than HMOs. Hence.00 copay $25.  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.

00 100% 100% Out-of-network $200. members must have paid a specified deductible before coverage begins on out-of-network care. members always retain the right to seek care outside the network at a lower level of coverage. he can mix the types of care he receives.   Disadvantages  There are substantial co-payments and deductibles for out-of-network care. The member will likely be subject to a deductible and co-payment. In most cases. the member’s child could continue to see his pediatrician who is not in the network. he also must choose a primary care physician who is responsible for all referrals within the POS network. as with HMO coverage.00a Page 70 of 150 . co-payment is around $10 per treatment or office visit. No deductible is required for in-network services. Like a PPO.00 copay $25. POS plan encourages members to use innetwork providers but does not make it mandatory. while the member himself receives his healthcare from in-network providers.00 100% None 100% after $10. the POS plan is an indemnity plan. As in an HMO. For example. else none. Advantages  POS coverage allows a member to increase his freedom of choice. But. Usually. members must choose a primary care physician (PCP) and hence there is a tight control to get specialized care within the network. Unlike HMO coverage. 80% / 20% 80% / 20% 65736839. while there is no PCP for out-ofnetwork services.  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 $10.00 80%/20% Same as preferred if true emergency.00 $200. As with HMO coverage.00 3x deductible None 80% / 20% $1000. members pay only a nominal amount for in-network care.doc Ver 0. When he uses the out-of-network benefits.Benefits ___________________________________________________________________ network healthcare provider.

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

3. Answers Indemnity HMO N Y Indemnity Freedom EPO HMO PPO POS 1. 2. which plan is most effective? POS plans do not offer out-of-network coverage (Y/N). 6. 5. indemnity plans should be preferred.doc Ver 0.1 Exercise Plan offers the maximum freedom of choice for a member.5. 1. 65736839. On the other hand. 3. if his goal is maximum flexibility and cost is not a major factor. If the goal is to minimize costs. 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.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. 5. Considering the cost for a member. 2. 4. the choice ultimately depends on the member’s personal circumstances and preferences. Plot a graph of ‘cost to member’ (x axis) versus ‘freedom of choice’ (y axis) and place the various plans on it. he is probably better off with a managed care plan. 4. PPO plan members do not have to choose a PCP (Y/N).00a Page 72 of 150 .

and then file a claim for reimbursement.6. 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.1 Vision Plans Vision insurance provides coverage for services relating to the care and treatment of eyes. Depending on the specific plan. insurers offer a wide variety of specific plans.00a Page 73 of 150 . Most of these plans in some or other will belong to the two main categories listed above.2 Dental Plans Dental insurance provides coverage for services relating to the care and treatment of teeth and gums. while others may limit coverage to reasonable and customary charges incurred during routine eye exams.6. Or the member may be required to cover the charges out-of-pocket at the time of service. With some employer-sponsored vision plans. 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. 65736839. Dental plans are of three types based on the mode of treatment and payment. This keeps the cost of dental care much lower than medical care. It depends on the specific plan. 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). The regular dental visits allow problems to be diagnosed early and corrected without involved diagnostic testing or treatment. It typically covers services delivered by an optometrist or ophthalmologist.doc Ver 0. insurers provide the following plans: 6. Regular dental checkups and cleaning will be sufficient to maintain dental health. Reasonable and customary charges generally don't include the cost of glasses and contact lenses. 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.6 Other Plans In addition to the common Indemnity and Managed care plans listed above. 6.Benefits ___________________________________________________________________ Cost Figure 3: Variation of Freedom with Cost 6.

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

e.5 Medigap Medicare does not cover all health-care costs during retirement. Medigap policies are sold through private insurance companies. people may be eligible if they are disabled or have endstage terminal disease. regardless of their medical condition. the HCFA sets standards and policies. The Health Care Financing Administration (HCFA). Medigap policies pay most. Also covered are laboratory tests.  Part C expands the kinds of private health-care plans that may offer Medicare benefits to include managed care plans. Medigap is specifically designed to fill some of the gaps in Medicare coverage. or psychiatric hospital. In addition. Three tier plans  Lowest copay for Generic drugs  Medium copay for branded drugs  Highest copay for Non formulary drugs 6.4 Medicare Plans Medicare is a government-sponsored program that provides health insurance to retired individuals. Most people become eligible for Medicare upon reaching age 65. the costs associated with an overnight stay in a hospital. Only ten standardized plans can be offered as Medigap plans. Although the Social Security Administration processes Medicare applications and claims. Department of Health and Human Services. 65736839.. whether it was received while member was an inpatient at a hospital.Benefits ___________________________________________________________________ 3. 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. medical savings accounts. A third part. They are in addition to the fee-for-service options available under Medicare Parts A and B. if not all.6. and nursing service s). at a doctor's office. skilled nursing facility. and private fee-forservice plans.doc Ver 0. Some also provide coverage for deductibles and services that are not covered by Medicare such as prescription drugs and preventive care. or as an outpatient at a hospital or other health-care facility. has overall responsibility for administering the Medicare program. All ten must cover certain services. and ambulance service.00a Page 75 of 150 . Part A also covers hospice care and home health care. a division of the U.Medicare Part A (hospital insurance) and Medicare Part B (medical insurance). There is no variation in the types of medigap policies provided by various insurance companies. physical therapy or rehabilitation services. Physician care.6.  Part B covers other medical care. However. meals. Members may purchase a supplemental medical insurance policy called Medigap. Medicare coverage consists of two main parts . Medicare coinsurance amounts. 6.S. such as charges for the hospital room. they are standardized and regulated by federal and state law.

physician services.they can be used in any way the member wishes them to use. and speech therapy. services for the mentally retarded in intermediate care facilities. which pay for hospital bills and doctor visits. Each state administers its own Medicaid programs based on broad federal guidelines and regulations. medical transportation. as well as young and middle-aged people who have been injured or have suffered a debilitating illness.6. including hospital bills. The treatments covered by long term care insurance usually include four general types of care: in home care. each state (1) determines its own eligibility requirements. As with other insurance policies. 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. Some of the most frequently covered optional services are clinic services. assisted living and nursing home living.7 Long Term Care Most of plans discussed till now are the kind. States may elect to provide other services for which federal matching funds are available. a disability buy-out policy disburses funds for one partner or business entity to buy a disabled partner's share of the company. It is a joint federalstate program to provide medical assistance to aged. and long-term nursing home care. dependent children) who cannot afford the necessary medical care. (2) prescribes the amount.Benefits ___________________________________________________________________ 6.doc Ver 0. and are reestablishing a customer or client base. The funds paid are not specified for medical expenses . home health care. (3) chooses the rate of reimbursement for services. Within these guidelines. members pay a set premium that offsets the risk of a much larger out-of-pocket expense.8 Disability Income Insurance Disability income insurance provides members with an income if they become sick or injured and are unable to work.6. 6. offers the assistance people need if they have a chronic illness or disability that leaves them unable to care for themselves. Medicaid pays for a number of medical costs.6 Medicaid Medicaid is a health insurance program for people with low income. Recovery benefits that pay after members return to work full-time. or blind individuals (or to needy.6. This may be used to help the aged. 65736839. and (4) oversees its own program. optometrist services and eyeglasses. disabled. which is usually very high. adult day care.00a Page 76 of 150 . occupational therapy. They pay hospital and medical expenses above a certain deductible. prescribed drugs. However the maximum lifetime limit of benefits is high enough to cover the cost of catastrophic illness. duration.9 Catastrophic Coverage Plans Catastrophic coverage is not a separate entity by itself but forms a part of an existing plan. however. For jointly owned businesses. Most of the plans seen till now can be customized to include coverage for catastrophic illnesses. Employers can provide coverage for employees too. Long-term care.6. and types of services. 6. prosthetic devices. 6.

Benefits ___________________________________________________________________ The most common example is the Medicare plans which include a clause for catastrophic coverage. 6. medical. For this reason. When they apply for individual insurance. with the sponsoring employer or association paying all or part of the premium. 8. the initial cost of establishing group coverage is lower than the cost of issuing a separate policy to each person. Individual health insurance is a type of policy that covers the medical expenses of only one person. Y 7.doc Ver 0.7 Individual Insurance and Group Insurance. Medicare has parts. plans are similar to HMO plans The federal government regulates Medicare benefits? (Y/N). 6. the only real disadvantage of group insurance is limited or no freedom to customize the policy to member’s individual needs. In case of Dental insurance. Key person insurance 5. Policy extends the Medicare policy by offering additional benefits. All people who cannot afford medical care. catastrophic PPO and catastrophic EPO coverage. Employer-sponsored plans and associations are among the most common sources of group health insurance. 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. Unlike group insurance.00a Page 77 of 150 . Long Term care covers nursing home care? (Y/N) Who all are eligible for Medicaid benefits? 1. Because only one policy is issued for the entire group. The policy is typically negotiated between the insurer and the "master" policy owner (employer or association) without any inputs from 65736839. 2.10 Exercise Pharmacy plans usually have tiers of benefits. Is used to protect a firm against the loss of income resulting from the disability of a key employee. Y 8. 4. 7. 3. With group health insurance. Unlike individual insurance. medicare+choice) 3. such as average age and degree of occupational hazard. 5. The premium for group insurance is calculated based on characteristics of the group as a whole. they are evaluated in terms of how much risk they present to the insurance company. where each person's risk potential is evaluated and used to determine insurability. Medigap 4. Individual insurance is somewhat more risky for insurers than group insurance. all eligible people can be covered by a group policy regardless of age or physical condition. Member’s risk potential will determine whether he qualifies for insurance and how much the insurance will cost. Answers 1. 3 (hospital. 6. In general. Others include disability income insurance. This is generally done through a series of medical questions and/or a physical exam.6. 3 2. Capitation 6. because group insurance allows the insurer to spread the risk over a larger number of people. individual insurance is generally more difficult to obtain and more costly than group insurance.

 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.A count on their employer for health insurance coverage.Benefits ___________________________________________________________________ the member. 6. he can continue the coverage for 36 months. as are the deductible amount and co-payment percentage. the Health Insurance Portability and Accountability Act (HIPAA) expanded on COBRA.00a Page 78 of 150 .S. his employer is not required to pay any part of it. 6. If a person is entitled to COBRA coverage for other qualifying reasons. The specific policy provisions are all determined in advance. But what will happen to their health insurance if they stop working or no longer qualify for benefits? Their company might begin downsizing. They could suffer a serious injury and become disabled. In 1996.  Increase the tax deductibility of medical insurance premiums for the selfemployed. if his employment has been terminated or if his work hours have been reduced.1 Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) If a person and his dependents are covered by an employer-sponsored health insurance plan.8. As an employee. the person will have to pay the premium for COBRA coverage.A.  Require health insurance companies that serve small groups (2-50 employees) to accept every small employer that applies for coverage. These events can occur when least expected. his dependents may be eligible for COBRA benefits if they are no longer entitled to employer-sponsored benefits due to divorce. In addition. death. he is entitled to COBRA coverage only if his employment has been terminated or downsized. 65736839. However.doc Ver 0.2 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. leaving them without health benefits. or in certain other situations. COBRA entitles him to continue coverage under circumstances that would otherwise cause him to lose this benefit. Most employers are required to offer COBRA coverage.S.8. A person can continue his health insurance for 18 months under COBRA. So the federal government has provided certain laws to help people cope with the situations mentioned above.8 Laws and Legislations Most people in U. The major provisions of HIPAA do the following:  Allow workers to move from one employer to another without fear of losing group health insurance. The two most important of these are – 6.

yourhealthplans. Long-term care is covered under Medicare.  Coinsurance is the insurance provided by two insurance companies to one individual. 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. the other partner is no longer able to perform his duties. in case. 6. Copay is what the member pays to the insurance company for treatment. “A to Z of Health Insurance” – By Prashant Burse.   Medicaid policy is the most expensive type of Indemnity plan.10 References 1.doc Ver 0. 4.9 1. 6.   Deductible is usually zero for most HMO plans. 4.Benefits ___________________________________________________________________ 6. which plan is most cost effective and why? State whether true of false – Private insurance companies provide Medicare plans.com 3.  In case of a joint business venture.  Review Questions. “Managed Care – An Overview ” – By Amit Shukla. http://www. 2. 2.insurance. 65736839. Abhishek Virginkar and Saurabh Kulkarni. 5.com http://www.00a Page 79 of 150 . 3. each partner can take out an insurance policy to cover the expenses.

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

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

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

e if the provider is hospital type or a specialist etc. o Provider type is evaluated i.Capitation of the Provider is validated . o Provider Specialty is validated .doc Ver 0.00a Page 83 of 150 . Determination of whether the claim is too old.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. o Determination of whether this claim is a fraudulent specific member claim. o Provider name and address is validated. o Provider no is validated. o Date of Service of the Claim is compared with the current date.1  Claim Preparation and determining eligibility The member information is validated. 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 provider information is validated. Determine if the claim is timely filed    65736839.e. DOS > suspense or term date). o Member no is validated. o Check is done for whether Provider is suspended.Claims ___________________________________________________________________ 7. o Par status of Provider is validated .2. o Determination of whether member is suspended or terminated ( i.

Area . CONTRACT.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. if the claim has not been file within the proper timeframe it is denied . Place of Provider network.  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.    Product benefit eligibility is checked  Here. it is determined if the member is eligible for the benefit of the product under which the member is covered.member category etc . PLAN. provider specialty . The difference of the dates is compared with the timely filing limits which is predecided based on different types of Provider. Place of service and the benefit code of the claim . diagnosis code. Group/plan eligibility is checked.00a Page 84 of 150 . proc code .  Par status of provider. Provider no .  Provider network. and presence of any rider . depending on the member region. procedure code . any exception override is checked on various factors like service start and end dates .  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.   Determination of whether this is a member reimbursement or provider is already reimbursed. etc it is determined if there is to the benefits payable for the product for which claim is filed.e for which no authorization needed).  Direct access ( i. Group.Place of service is checked with a history claim for determining duplicity. Product exception o In this.  Presence/Absence of referral. o Determination of whether the member is covered under the GROUP. Also a 65736839.types of benefits provided. AND PRODUCT which for which the Claim has has been filed Benefit eligibility is checked o Here depending on the Provider type.Claims ___________________________________________________________________ o Date of service of the Claim is compared with the received date of the Claim. member no . 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). o Here the Date of service of the claim.  Determination of whether the claim is duplicate ( by comparing with history).  Claim emergency or non emergency. based service. it is determined if the member is eligible to receive the particular benefit for which claim has been filed.doc Ver 0.

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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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. Healthcare company discovers that another insurer is the primary carrier.2. This provision prevents double or over-payment by the carriers.2.3  Update Claim Accumulator updates o This involves updating of Various accumulators for Copay .00a Page 88 of 150 . 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 . the process followed is .   7.  Inform the provider that he/she can return their previous payment or elect to have them debit his/her account after 60 days.Claims ___________________________________________________________________ Cross/Blue Shield).  Provide the name and address of the primary carrier and the patient’s name and address and any other pertinent information. after a provider has been paid.4  Claim adjudication outputs Check extract o Adjudicated claims that are passed to Accounts payable for check printing.  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. o o 7. deductible . they will:  Notify the provider that they have discovered that another insurer is the primary carrier.Penalties etc that a Healthcare company liable to pay in certain cases  Any Other Information required .doc Ver 0. o Denial letters are sent if :  other insurance paid in full  experimental procedure not covered  Cosmetic surgery not covered    65736839. Claims database updates o Processed Claims stored for maintaining History. thereby giving him/her an opportunity to seek reimbursement from the member’s primary insurer. If. a. coinsurance etc depending upon the processing of the claim. The insurance industry has established standard rules to determine which insurer is primary payor. Referral updates o Referrals are updated for no of visits after the claim has been processed properly.

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

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.doc Ver 0.00a Page 90 of 150 .

5 Duplicate Claims In case of late payments by insurance company.1. When members have encounters with provider. assign points / marks.Claims ___________________________________________________________________ 7. Mostly all the In-patient type of services and none of the Out-patient type of services are eligible for this incentive. especially the big providers like Hospitals.1. Hospitals send the survey results to Insurance company. In the physician surveys.4 COB Adjustments If Coordination of benefit applies for any member. the physicians fill in the data such as quality of operating rooms.3. which should be covering the visit and specific services for the member. these amounts are then adjusted during adjudication against the claims filed by provider.  Efficiency of Care 65736839.3. This incentive to be paid is decided as fixed % of the contractual amount between Insurance company and the provider. Higher these points. 7.3. then the claims filed would require specific referral already in place. then all his claims are bound to get denied if filed for services covered under capitation.3. 7.3 Copay Adjustments If the claim filed required member to pay some copay amount. Procedures are in place which detect such duplicate claims and avoid the repayments.1. these providers will file claim for the services rendered to the member.2 Provider as Specialist If a provider is giving services to member as a Specialist. then provider receives payment from primary and secondary insurance companies.6 Provision for Advance Payment Some insurance companys also have a facility to pay the providers some lumpsum amount in advance. then the insurance company will pay the provider adjudicated amount less the copay amount as described by member’s plan.1. based on some algorithms. It becomes mandatory to identify all the types of services that will become eligible for consideration under quality incentive. 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. administration in the hospital etc.3.3. If the provider is non-capitated.doc Ver 0.1. are paid extra for the quality of services they provide. would come in the form of claims filed by the providers. 7. 7. 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.1.00a Page 91 of 150 . both with a few exception. provider has tendency to file the same claim again. the higher will be the incentive.3.1 Claim Payments Provider Payments Inputs for any provider payment. then claim gets adjudicated against Insurance Company’s business policies and rules as imposed by federal/state laws. Once the service is provided to a member.7 Provision for Advance Payment Some providers. These routines (which are black box to the insurance company’s system). This data is then passed through ‘United States Quality Algorithms (USQA)’ routines.1 Capitated Provider If provider is a Capitated Provider. Otherwise claims without proper referral get denied. a survey is conducted where in the member fills in a form to comment about the quality of service provided by the hospital.3.3 7.1. 7. Over a specific period of time. in most of the general scenarios. Principle categories for this payment are as follow:  Quality of Care It measures the quality of care based on physician and member surveys. He has to file claims with all the involved insurance companies. 7.

points are assigned and based on the points. medicine and OB/GYN. Also. 7. 7. For this category: higher the points.3.1 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.4 Claim Adjustments These are the various types of adjustments that can be made to the claim. 7.2. 65736839.3. then the insurance company will reimburse all the amount paid towards copay back to member.00a Page 92 of 150 . 7. 7. lower will be the payments. then Insurance Company will then deny such a claim. 7. Higher the points.8 Payment to Insurance Company It may happen that provider claims are incorrectly adjudicated and provider is overpaid.3. adverse events and C-section rates.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.3. insurance company intimates provider of the extra payment made and provider is required to repay to the company accordingly. Under such circumstances.2.3. as defined in the plan adopted by member. the provider is informed by the Insurance Company regarding the reasons and split of payments. then higher will be the costs that hospital incurs and hence the claim amount.4 Co-insurance Applies In this case. part or full payment made by him to provider.3. system assigns points. So.doc Ver 0. longer the stay.Claims ___________________________________________________________________ It measures the efficiency of the care based on length of stay for surgery. a fixed % of adjudicated claim amount is paid back to the member.2. the payment is made. When provider’s claim is adjudicated. If a member spends more time in hospital for a service. through USQA routines. 7. lower will be the payments as it is hospital’s responsibility to see that fewer adverse events arise.2.3 Deductible Applies Member pays to the provider Out-of-Network and files a claim with the Insurance company. Based on the answers. In this case insurance company pays directly to member. whether denied or paid.1.2 Member Re-imbursement Following are various scenarios when member is eligible for re-imbursement by The Insurance Company. For each of these measures. higher will be the payments. the lesser will be the incentives paid. higher the adverse conditions.  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. If the member has not reached the Deductible limit.

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. minus debit option is used to create an equal amount negative check. Original completed claim remains unchanged. It is completed and stored. Claim gets completed without adjudication. 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. The check status is changed from open (blank) to Stopped (S).00a Page 93 of 150 . Provider over-payment letter is generated one claim per letter.e. On receipt of the manual check paperwork a Manual claim is entered. i. there has to be a claim for which a check is created. 7.4.4. If provider does not agree to cut and send check to refund over-payment. A new set of claims are generated which have amount equal to negative of the amounts of the original claims. when stop payment is done.2 Minus Debit Adjustment In case of overpayment to providers.4. the original claims remain untouched. cash date for check is recorded and necessary deductions are applied to claim. A connection is established between the manual check and the claim entered. Deduction may be split across multiple claims. Such a check is created by entering data into the system manually. Further claims of the provider are not paid till the all the amount on the negative claim has been recovered. 7.Claims ___________________________________________________________________ 7.5 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).doc Ver 0. The original claims are overridden with new payment codes. In the process. The claim does not undergo adjudication. 7. a letter is sent to the provider notifying of over-payment. The check status is also changed from open (blank) to Void (V). 7.3 Manual Check Adjustment Sometimes a check is required to be created manually if there is a need to adjust amount of payment. 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. This is to account for the payment being made using the manual check.1 Refund Adjustment This type of adjustment takes place when a Health Services Provider overpays the provider.4. New negative claims created with negative dollar amount. Only in this scenario a stop can be issued on the check. The manual check request paperwork is then sent to Claims system. When provider agrees and refunds over-payment (provider will cut check and send in).4. 65736839.

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

7.g. 7. coinsurance. 65736839. It gives the member a detailed explanation of these amounts. which acts as an intermediary between Health Care Company and the Federal government. The list of claims in the wait status for more information. The encounters have to be submitted in a fixed format called the Uniform Billing Code1992 form. When requesting payment from a secondary payer it is extremely important that the EOB/remittance information be provided from the primary payer.1 Accumulators 7.  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. It also gives the cap amounts applicable to him.6 Claims accepted.7.7 7. etc are applicable and not for all type of claims. It is not a bill but an explanation of the benefits.1 What are Accumulators? Accumulators are generally database records.00a Page 95 of 150 . While the Medicaid submissions go directly to the state.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.doc Ver 0. Claims rejected and reasons for the same. dedicated to accumulating specific type of data over a specific period. The Explanation of Benefits provides members a statement of claim payments.      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. for indemnity or fee for service claim where deductible. Medicare submissions are sent to CMS (Center for Medicare and Medicaid services). 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. 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.

3. deductible paid by member in a specific later portion of the effective year. 65736839. 2001 will go on accumulating the data till end of Nov-2001.1 Periodic Accumulators These accumulators will cover up the amounts for period as mentioned in the effective plan for the member. depending upon how many visits covered for a specific service to same provider. during predefined period. Say. 7.6 Out of Pocket . in case member chooses to continue.7.7.3.7. Carry over Deductible Updates Some plans provide for the provision that. In this case.3. 7.3 Deductible . o Member’s deductible limit is say $ 500.member.7.00a Page 96 of 150 . 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). 7.for member.2 7. This reduces burden on member and acts as incentive for member to continue with the co-insurance company. In a general scenario.3. Example: o If a member XYZ has plan year 01-Jan-2001 to 31-Dec-2001.4 Visits – for member Visits of the member to provider are accumulated.7.7. 7.7.7. it accumulates $ 350.7.3 What is accumulated? 7.2 Function/Purpose of Accumulators The main use of accumulators is during the claims adjudication process. accumulators for the next period will get updated for the deductibles paid.3. Accumulators records are updated accordingly in such cases. member + family These accumulators include combined figures of co-insurance and deductibles. It comes into picture when deductible limit is met. o Accumulator for yr. this figure may be used to decide the method of payment. member no more pays copay to provider. So.3. the amount of money that is going to be paid to/from a member is decided based on the accumulator amounts. member + family Copay is accumulated separately for member as well as member and all his/her dependents.Claims ___________________________________________________________________ 7. the corresponding accumulators are updated with those amounts for the latest instance under consideration. Some plans provide for facility of carry over deductible. o Members pays remaining deductible (part or full. 7. say $100) during the last 30 days of plan year.7.1 Copay – for member. When the same has been decided.doc Ver 0. say partial/full/some percentage of billed. 7. o Plan provision says Carry over deductible is applicable for last 30 days of the plan year.5 Family Dollars Insurance company’s disbursement to member or the provider.7. (Details will come down the line in the document) 7. member + family Co-insurance is also accumulated separately for member as well as member and all his/her dependents. Once the maximum limit set by plan is met. will be considered as deductible paid towards next year.2 Co-insurance – for member.4 Types of Accumulator  7.4. member + family Co-insurance is also accumulated separately for member as well as member and all his/her dependents.

9 1.7.00a Page 97 of 150 . 3. 7.2 Lifetime Accumulators These accumulators will sum up the amounts for the life time for a member. 2.8 Overall Claims system diagram : Figure 3: Claims overview 7. 5.Claims ___________________________________________________________________ o o Then new accumulators will be generated as if paid for the next year 2002. Review Questions. $100 will get updated in these accumulators.doc Ver 0. 4. because of this facility. he now needs to pay $100 less towards deductible in the next plan year.4. If member chooses to continue. 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. 7.

Accumulators are updated for denied claims.    State whether true of false – COB deals with claim payment.DRIVER) SA_AETHMOM2.   Member encounters have to be submitted to the government in a fixed format.ehealthinsurance.com/ Aetna Batch driver file (CLPRD. Claim adjustments can be done before Claim adjudication.DOC (System appreciation document) and other docs from Encounter data reporting project 65736839. Copay is not the member’s responsibility.  Pre-certification penalty is in excess of any deductible and/or coinsurance applicable to the claim.00a Page 98 of 150 .DOC (System appreciation document for Claims maintainance project) SA_AETEDR2.doc Ver 0. EOB is letter sent after adjudication. 7.Claims ___________________________________________________________________ 6.10 References http://www.CLDJABDJ.

doc Ver 0.Claims ___________________________________________________________________ 65736839.00a Page 99 of 150 .

doc Ver 0.two national health care programs that benefit about 75 million Americans. CMS runs the Medicare and Medicaid programs . CMS runs the State Children's Health Insurance Program (SCHIP).2 Introduction In Heath Care Industry. CMS maintains oversight of the survey and certification of nursing homes and continuing care providers (including home health agencies. Department of Health and Human Services.3 8.  conducts research on the effectiveness of various methods of health care management. providers. and financing. intermediate care facilities for the mentally retarded. and makes available to beneficiaries.1 Unit Objectives This unit will acquaint the reader with the role played by the external agents in the Healthcare Industry. It requires some help from some external sources or agencies. And CMS. helps millions of Americans and a small company get and keep health insurance coverage. And with the Health Resources and Services Administration. Approximately 158.00a Page 100 of 150 . 8. and hospitals). CMS:  assures that the Medicaid. and helps eliminate discrimination based on health status for people buying health insurance. treatment.000 laboratory entities fall within CMS's regulatory responsibility. Medicare and SCHIP programs are properly run by its contractors and state agencies. all the services and management activities cannot be carried by the insurance payer itself on it's own.S.VIII 8 External Agents 8.External Agents ___________________________________________________________________ UNIT . researchers and State surveyors information about these activities and nursing home quality. CMS also regulates all laboratory testing (except research) performed on humans in the United States. including regulation of laboratory testing (CLIA). 8. with the Departments of Labor and Treasury. 65736839. and  assesses the quality of health care facilities and services and taking enforcement actions as appropriate.1 Government Agencies Centers for Medicare & Medicaid Services (CMS) The Centers for Medicare & Medicaid Services (CMS) is a federal agency within the U. This unit deals with the various different agencies in a Health Care Industry and the role played by them. a program that is expected to cover many of the approximately 10 million uninsured children in the United States. and quality-of-care improvement.  establishes policies for paying health care providers. CMS spends over $360 billion a year buying health care services for beneficiaries of Medicare. Medicaid and SCHIP. development of coverage policies.3. CMS also performs a number of quality-focused activities.

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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The Privacy Rule was published on December 28.00a Page 104 of 150 . for many of us. an organization with a computer network will be required to implement one or more security authentication access mechanisms . present or future. Normally. WHO IS AFFECTED? All healthcare organizations. even 1-physician offices. Steps will include:            Building initial organizational awareness of HIPAA Comprehensive assessing of the organization's information security systems. clearinghouses. For example. Let's try to make "Administrative Simplification" simple! HIPAA's "Administrative Simplification" provision is composed of four parts. Compliance is required for the Privacy Rule on April 14.specifics that. Required compliance responses aren't standard. HOW WILL WE BE AFFECTED? Broadly and deeply. information systems Developing new internal communications Training and enforcement Now. we'll explore the next level of HIPAA ." "role-based. life insurers. public health authorities.fines up to $25K for multiple violations of the same standard in a calendar year -. 2000.doc Ver 0. HIPAA calls for:    Standardization of electronic patient health. 2002. cause more confusion than clarity. More specifically. service organizations." past. and Protection of confidentiality and security of health data through setting and enforcing standards. because organizations aren't. including Developing new policies. Effective compliance will require organization-wide implementation. billing agencies.depending on its network environment. health plans and health care providers Security standards protecting the confidentiality and integrity of "individually identifiable health information."user-based. each of which have generated a variety of "rules" and "standards." Many of the rules and standards are still 65736839. processes. So the compliance date for that rule is October 16." and/or "context-based" access .External Agents ___________________________________________________________________   Improved efficiency in healthcare delivery by standardizing electronic data interchange. administrative and financial data Unique health identifiers for individuals. and universities.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. employers. including: -. or adapting. and procedures Building "chain of trust" agreements with service organization Redesigning a compliant technical information infrastructure Purchasing new. information systems vendors. The Transactions Rule was published on August 17. ARE THERE PENALTIES? HIPAA calls for severe civil and criminal penalties for noncompliance. but due to minor glitch didn't become effective until April 14. 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. health plans. This includes all health care providers. 2000. 2003. the effective date is 60 days after a rule is published. 2001. employers.

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

 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. privacy is about whom has the right to access personally identifiable health information.External Agents ___________________________________________________________________ The Security Standard does not require specific technologies to be used. Once COBRA coverage is chosen. Also. There was a time when group health coverage may have been terminated when a worker lost his job or changed employment. A paperwork glitch delayed notification of Congress. In general.2 CORBA Health insurance programs allow workers and their families to take care of essential medical needs. including treatment and payment.  Security: It is the responsibility of organizations that are entrusted with health information to protect it against deliberate or inadvertent misuse or disclosure. there will be specific federal penalties if a patient's right to privacy is violated. your health plan must give you a notice stating your right to choose to continue benefits provided by the plan.00a Page 106 of 150 . solutions will vary from business to business. an individual's health care information should be used for health purposes only. you may be required to pay for the coverage. 8. pushing the effective date of the rule until April 14. 2003 for most covered entities. These programs can be one of the most important benefits provided by an employer. depending on the needs and technologies in place. The rule covers all individually identifiable health information in the hands of covered entities. and fighting health care fraud and abuse. That changed in 1986 with the passage of health benefit provisions in the Consolidated Omnibus Budget Reconciliation Act (COBRA). conducting medical research.4. DHHS Secretary Tommy Thompson used the time to solicit additional comments during March. You have 60 days to accept coverage or lose all rights to benefits. What Is the Continuation Health Law? 65736839. Compliance will be required on April 14.000 comments and plans to issue guidelines and clarification of the final rule in response.  Accountability: Under HIPAA. PRIVACY AND CONFIDENTIALITY The Final Rule for Privacy was published just as President Clinton was leaving office.  give patients new rights to access their medical records and to know who else has accessed them.  restrict most disclosure of health information to the minimum needed for the intended purpose. for the first time.doc Ver 0. so the Congressional Review period didn't begin until February. improving the quality of care. The Privacy standards:  limit the non-consensual use and release of private health information. DHHS received over 11. 2001. 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. Now. on December 28.  establish new criminal and civil sanctions for improper use or disclosure. If you are entitled to COBRA benefits. 2001. no transactions adopted under HIPAA currently require an electronic signature. 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. regardless of whether the information is or has been in electronic form.  establish new requirements for access to records by researchers and others.

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

Qualifying Events "Qualifying events" are certain types of events that would cause. A plan. and in certain cases. 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. 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. except for COBRA continuation coverage. may provide longer periods of continuation coverage. an individual to lose health coverage.doc Ver 0. Employers and plan administrators have an obligation to 65736839. and plan administrators and qualified beneficiaries. Qualified beneficiaries have the right to elect to continue coverage that is identical to the coverage provided under the plan.External Agents ___________________________________________________________________ and dependent children. at its discretion.00a Page 108 of 150 . a retired employee. The qualifying events contained in the law. 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. create rights and obligations for employers.

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

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

the option must be given for the beneficiary to enroll in a conversion health plan within 180 days before COBRA coverage ends. however. may provide longer periods of coverage beyond those required by COBRA. Certain qualifying events. however. the premium for those additional months may be increased to 150% of the plan's total cost of coverage. is not available if the beneficiary ends COBRA coverage before reaching the maximum period of entitlement. 65736839.00a Page 111 of 150 . For disabled beneficiaries receiving an additional 11 months of coverage after the initial 18 months. The premium is generally not at a group rate. it must be offered to you. Some plans allow beneficiaries to convert group health coverage to an individual policy. The conversion option.External Agents ___________________________________________________________________ A change in the benefits under the plan for active employees may apply to qualified beneficiaries. Premiums reflect the total cost of group health coverage. may permit a beneficiary to receive a maximum of 36 months of coverage. 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. the 18-month period is expanded to 29 months. Paying for COBRA Coverage Beneficiaries may be required to pay the entire premium for coverage. including both the portion paid by employees and any portion paid by the employer before the qualifying event. 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. Although COBRA specifies certain maximum required periods of time that continued health coverage must be offered to qualified beneficiaries. COBRA does not prohibit plans from offering continuation health coverage that goes beyond the COBRA periods. Duration of Coverage COBRA establishes required periods of coverage for continuation health benefits. If this option is available from the plan under COBRA. plus two percent for administrative costs. 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. The premium cannot exceed 102 percent of the cost to the plan for similarly situated individuals who have not incurred a qualifying event. A plan. 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. 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. Beneficiaries also may change coverage during periods of open enrollment by the plan.doc Ver 0. In this case.

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

A good starting point is reading your plan booklet. and logistical content errors. down from 4-8 weeks on paper claims. COBRA creates an opportunity for persons to retain this important benefit. 2. 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. This is a service that is continually under development. Most of the specific rules on COBRA benefits can be found there or with the person who manages your health benefits plan. 65736839.doc Ver 0.4. 8. it is returned to the HealthCare Provider along with an explanation of what was wrong. Say True or False.External Agents ___________________________________________________________________ Conclusion Rising medical costs have transformed health benefits from a privilege to a household necessity for most Americans.00a Page 113 of 150 . If a claim is determined to be free of typographical. A Clearinghouse collapses the wait cycle into an average of 5-21 days.5 Clearing Houses A HealthCare Transaction Clearinghouse performs auditing services on insurance claims. While we try to keep the information timely and accurate. 8. Net result: Improved cash flow. syntax.3 1. Say True or False.1 Benefits Of A Clearinghouse  Cash Flow If a HealthCare Provider were to send claims through the mail. Answers: 1.5. Improved efficiency in healthcare delivery by standardizing electronic data interchange is a main feature in HIPAA. Exercise HIPAA Means Health Insurance Portability & Affordability Act. ______ Contains provisions giving certain former employees the right to temporary continuation of health coverage at group rates. The Department of Labor maintains this article to enhance public access to the Department's information. The HealthCare Provider may then correct the related errors and resubmit for another pass. This process may be repeated until the claim passes the inspection. We will make an effort to correct errors brought to our attention. COBRA 3. we make no guarantees. 3. many weeks would pass before he would receive mail notification that errors were holding up payment release on his submitted claims. it is forwarded to the insurance company responsible for payment. If errors are detected. True 8. False 2. Workers need to be aware of changes in health care laws to preserve their benefit rights.

A clearinghouse serves as a liaison to the HealthCare Provider. In many cases claims just "sit there" until a tracer or formal complaint is received.000 . Instant notification back to the Provider. But clearinghouses can typically access hundreds of insurance companies through a single port of entry from the office of the HealthCare Provider. A clearinghouse has everything to gain by HealthCare Providers getting paid quickly and collecting as much of a submitted claim value as possible. others nothing.S.  Connectivity Some insurance companies offer direct filing software. Some clearinghouses charge $0.2 Clearinghouse versus Direct Filing Using A Clearinghouse Routinely check for as many as 10.External Agents ___________________________________________________________________  Guaranteed Delivery Insurance Companies often claim not having received claims that HealthCare Providers send through the mail.5. Audits performed on claims are not critiqued in favor of the insurance company with regard to how claims are coded. Coding is crucial in determining the income of a HealthCare Provider.00a Page 114 of 150 . Insurance companies have everything to gain by delaying payment to HealthCare Providers. Some clearinghouses though. 8. The industry is riddled with organizations that are exceptionally difficult to decipher. have strong ties with insurance companies that result in biased editing.30. Insurance companies tend to "pick" on some HealthCare Providers and not on others.000 combinations of errors. Then rejection occurs. Direct Filing Same. a clearinghouse has nothing to gain by delaying submissions or other operational errors. When the claim travels electronically through a clearinghouse.doc Ver 0. HealthCare Providers. Filing a claim to an insurance company direct is almost reminiscent of allowing the IRS to file your tax return. HealthCare Providers using the free or low cost software distributed by some insurance companies are subject to biased auditing without knowing so. This may go unnoticed by incompetent or negligent staff inside the office of the HealthCare Provider. Today's HealthCare Clearinghouse market is very confusing. since the software may reject certain coding combinations during data entry. 65736839.50 per claim. and yet others in-between somewhere. these instances are greatly reduced. Typically. but most are not reported back to the HealthCare Provider. direct filing to insurance companies offers potentially hard to detect disadvantages to U. Topic Audit Logic Unbiased Processing Clearly.

5. As Type 1 clearinghouses developed "rebate" income. imply that something was initially received. close affiliation with insurance companies Unbiased.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. to understand how clearinghouses make their money. however.   It may be helpful. to whom services are rendered. but render unique and superior audits resulting in improved services at a lower cost to the HealthCare Provider.3 Clearinghouse Income  Type 1 Biased. 8. residents of this state in connection with life.5. Answers: 1. thus avoiding the typical enormous overhead of Type 2 clearinghouses. all clearinghouses are not created equal. most income derives from insurance companies and is formally referred to as "rebates". 2. 2. Insurance Claims. or disability insurance or self-insurance programs. dental. Primary income is derived from the submitting HealthCare Provider.  Type 2  Type 3 8. Insurance companies typically do not charge anything to receive claims.doc Ver 0.00a Page 115 of 150 . Rebates. Type 3 clearinghouses utilize Type 2 gateways for transporting claims. Type 3 clearinghouses "lease" Type 2 gateways to insurance companies at volume driven rates.4 1. health. The following chart will illustrate all the groups Clearinghouse Types  Type 1 Type 2 Type 3 Biased processing. standard working relationship with insurance companies Unbiased. Typically competitive in cost and superior in service. 8. Type 2 clearinghouses followed up by negotiating rebates as well. Guaranteed Delivery & Connectivity. Unbiased and "rebate" free. close affiliation with leading Type 2 clearinghouses. Cash Flow. A HealthCare Transaction Clearinghouse performs auditing services on ___________ _______. They typically fall into one of three possible group types. "Administrator" means any person who adjusts or settles claims on.External Agents ___________________________________________________________________ As indicated. Exercise List down the Benefits of a Clearinghouse. "Administrator" does not include any of the following: 65736839.

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. to the plan sponsor all of the following: All fixed plan costs. health. Any person that administers an insured plan or a self-insured plan that provides life.7 Specialized Adjudication Engines/Companies Adjudicator A powerful engine that links to the existing software equipped with simple Boolean rules. Features: Repricing 65736839.01 to 3959. 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. including any minimum attachment point factors. The names of all insurance payers providing protection for the plan sponsor's plans. or provide administrative services to. at least once annually.  Fail to disclose in written solicitation material and on an on-going basis. provided the state of domicile recognizes and grants licenses to administrators of this state who have obtained licenses under such sections. upon application.  Fail to disclose in written form the method of collecting and holding any plan sponsor's funds.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. be licensed without testing. Levels of the specific excess insurance stop-loss deductible. 8. and any ownership relationship of five per cent or more between the administrator and such insurance payers.  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.16 of the Revised Code. or disability benefits exclusively for the person's own members or employees. 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.doc Ver 0. dental. No person shall solicit a plan or sponsor of a plan to act as an administrator for. 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. identifying what each fixed cost includes. 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. that enables to conquer the mysticism of Claims Adjudication. The aggregate excess insurance stop-loss attachment point factors.   Administrators may be tested and shall be licensed by the superintendent of insurance in accordance with rules adopted by the superintendent.00a Page 116 of 150 . Any person who administers or operates the workers' compensation program of a selfinsuring employer under of the Revised Code. 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.

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. case installation and communication. Once the application and base fee are received by URAC (The American Accreditation Healthcare Commission/Utilization Review Accreditation Commission (URAC). they provide valuable services. These phases include the following: 8. position descriptions. a comprehensive database that contains procedures. the remaining three phases of the accreditation process cover a period of approximately three to six months. usually takes several months. purchase. As a full-service agency.External Agents ___________________________________________________________________ Validates eligibility of patients. formal policies and procedures. "AccuChecker for Windows" has the 2001 tables of procedures and ICD-9 codes. They are the people who work behind the scenes to reduce administrative hassles. including licensing and appointment with insurance payer. If you process claims that require different fee schedules. The initial phase "Building the Application". like for example Workers Compensation cases. 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. and preserve the integrity of brokerclient relationships.1 Desktop Review In the desktop review process. The applicant's documentation usually consists of. but is not limited to.1 Accreditation Agencies The Accreditation Process Organizations applying for accreditation participate in a process that entails a rigorous review occurring in four phases. After receiving a desktop review summary. the system allows you to insert additional files with the information needed. as well as plan management and customer service. and program descriptions and plans for departments such as quality management and credentialing. 65736839. procedures. enroll.00a Page 117 of 150 . This system comes equipped with "AccuChecker for Windows".9. the leading accreditation organization for traditional health insurers). resolve complex service issues. negotiation. contracts. diagnoses and the Medicare fee schedule. 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. sample template letters. serve and renew policies. 8. also uses the HFCA published guidelines for medical procedures.doc Ver 0. one or more full-time URAC reviewers analyze the applicant's documentation in relation to the URAC standards.1.9 8. consultation. the applicant usually must provide additional documentation clarifying any pending issues. which consists of completing the application forms and supplying supporting documentation. organizational charts. supporting brokers in plan development.9.

8. Education and quality management programs are reviewed in detail as well. Ongoing Compliance with the Standards Accredited organizations must continue to remain in compliance with the applicable standards throughout the accreditation cycle..doc Ver 0. Organizations that are unable to meet URAC standards may be placed on corrective action status. The committee review process begins with a written summary documenting the findings of the desktop and onsite reviews. its accreditation will likely be rescinded. This will help the applicant differentiate its various products in the health care market and target a variety of current and potential clients.9. carried out by the same team that performed the desktop review. a follow-up executive summary is submitted to URAC's committees for a possible change to full accreditation.External Agents ___________________________________________________________________ 8.9. Each accredited site is given its own certificate. Accreditation Certificates A certificate of accreditation is awarded to accredited organizations.4 Accreditation Status Applicants who successfully meet all requirements are awarded a full two-year accreditation. attesting to the program the organization is accredited for. e. If an accredited company is unable to comply with URAC Standards. Conditional accreditation may also be awarded to companies determined to be "start-ups". Conditional accreditation may be awarded to applicants who have appropriate documentation. This summary is submitted to URAC's Accreditation Committee for evaluation with discussion with the review team as needed. Follow-up activities for organizations receiving conditional accreditation or corrective action may include submission of additional or revised documentation and another onsite review.1.3 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. 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. but incomplete implementation of certain policies and procedures. During this review. URAC reviewers also share "best practices" and provide other helpful guidance. denied accreditation.9.1. 8.g. Complaints against an Accredited Company 65736839. audits are conducted and personnel and credentialing files analyzed. management is interviewed about the organization's programs and staff is observed performing its duties. and an accreditation certificate is issued to each company site that participated in the accreditation review.2 Onsite Review After the desktop review is complete. or choose to withdraw. An accreditation recommendation is then forwarded to URAC's Executive Committee. In addition.00a Page 118 of 150 . Accredited organizations also provide copies of accreditation certificates to regulators in states where URAC accreditation is deemed. which has the authority to grant accreditation. the Executive Committee makes a final accreditation determination. When these follow-up activities are complete. During the onsite visit. After reviewing the summary and considering the Accreditation Committee's recommendation. the accreditation review team conducts an onsite review to verify compliance with the standards.1.

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

the relevant details are entered through Volume Discount Allocation system. 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. The contract details of every manufacturer are set up through some process like Volume Discount on-line processes. Actual rebate value is decided when the contract is set up and varies over a wide range depending on the contract and manufacturer. In the invoicing stage. Whenever a member goes to buy a drug from a pharmacy. 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).doc Ver 0. such as average age and degree of occupational hazard. it is entered in the database. all eligible people can be covered by a group policy regardless of age or physical condition. The specific policy provisions are all determined in advance. Once the rebate checks arrive. Health Insurance sets up a contract with each of them. regarding rebates that can be obtained from the individual manufacturers when drugs bought under health insurance policies cross pre-defined limits. Formulary and Cost Management Group using VDS on-line transactions only enter all these information. The Volume Discount System runs on a quarterly basis. who to promote the sales. 65736839. The invoice amounts and the details are communicated to the manufacturing companies. Various inclusion/exclusion rules are applied.10 Drug Manufacturers Health Insurance group identifies potential drug manufactures. Doctors can prescribe a drug outside this preferred list. either electronically or through postal mails. The policy is typically negotiated between the insurer and the "master" policy owner (employer or association) without any input from the member. a set of jobs does the actual rebate amount calculations. The premium for group insurance is calculated based on characteristics of the group as a whole. The drug information is obtained from First Data Bank. for all the products they wish to add to preferred drug list. 8. group. client. In general. based on the manufacturer. where each person's risk potential is evaluated and used to determine insurability. which is an independently managed US wide database for drugs. Invoices for the dollar amounts payable by each manufacturer is prepared. which allows him to buy outside the preferred network for same Co-pay. A member has to pay standard Co-pay when he buys a preferred drug.00a Page 120 of 150 . This process also generates detailed utilization information to support rebates invoiced. product indicator etc. A member can take a plan. 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. want to put their products on preferred drug list/network. but if he buys drug outside the preferred drug network. the only real disadvantage of group insurance is limited or no freedom to customize the policy to member’s individual needs. Once the claim is adjudicated. as are the deductible amount and co-payment percentage. but this plan attracts higher premium. he has to pay higher Co-pay. along with the business rules from the contracts and summary files are obtained which form the input to the invoicing stage. Doctors as well as pharmacies are provided with the preferred drug list (usually on-line).External Agents ___________________________________________________________________ Unlike individual insurance. his claim is adjudicated online by the Real time Adjudication System. An extraction job runs on this database every quarter and pulls out those claims for which there are rebate contracts set up. contract.

com http://www.doc Ver 0.hcfa. 25.yourhealthplans.alliance-edi.alliance-edi. 2.gov http://www.com http://www.hrsa.dhhs.gov/ http://www.dhhs.accuchecker.com http://www.nih.12 References 5.com http://www.com http://www. 18.accuchecker. 11.cdc.com http://www. 12.com http://www.hipaadvisory.gov/ http://www.gov/nichsr/nichsr. 21.com http://www. List down some of the features of Adjudicators.com http://www.com 65736839. 4.insurance.com http://www. 14.External Agents ___________________________________________________________________ 8.html http://www. 22. What is the role of Drug Manufacturers in a Healthcare Industry? What are the four parts of Administrative Simplification in HIPAA? 8.insurance.nlm. 3. 24.com http://www.com http://www. 15. 16.11 Review Questions 1.horizon-healthcare. 8.iix. yourhealthplanonline.00a Page 121 of 150 .yourhealthplans. 7. 13.healthinsurance. 23.horizon-healthcare.iix. 17. 19.com http://www. 10.com http://www.healtheon. 6. 9.os. http://www.com http://www.gov/ http://www. 20. Explain the role of Third party Administrators.

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

doc Ver 0.00a Page 123 of 150 .1 Unit Objectives This unit will summarize the contents of this course material by presenting a detailed description of healthcare industry workflow.IX 9 Summary 9. 9. Figure 4: Detailed Workflow This diagram can be broken down into following stages – 65736839.2 Workflow The detailed workflow for the healthcare industry can be represented as shown in the Following figure.Summary ___________________________________________________________________ UNIT .

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

In case the claims have incomplete information or the information is ambiguous. then the claim adjudication is outsourced to a company specializing in adjudication of such claims. He is also sent an EOB detailing the payments made and the reasons for those. The company validates the claims based on various factors (as were detailed out in the unit on claims). The federal spending on healthcare also has been on a steady rise. as otherwise these claims would have to be adjudicated manually. which has since then dominated the market.A. providers. The government controlled Medicare and Medicaid are amongst the most important healthcare plans available. plays an important role in shaping the way the industry functions. As a matter of fact. then the member is paid for his expenses.3 Review Questions. There are several government agencies that help in regulation of the healthcare industry. they are sent to the insurance company. 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. 9. it was the path breaking HMO act of 1973. Incorrect claims are returned back to the member (or his PCP whoever has file the claim).2.2.5 Effect of external agencies Health insurance is a highly regulated area in the U. There is usually a rule engine (a software) in place for adjudication. policy that are stored in their respective databases. the primary payer takes care of the COB or coordination of benefits.4 References. which paved the way for the managed care model.4 Member has filed a claim In most cases the claim is first validated for typographical and information errors by clearinghouses. 9.00a Page 125 of 150 .doc Ver 0.Summary ___________________________________________________________________ 9. If the claim requires very specialized processing (and if the rule engine for that is not available with the insurance company). The information about the entire processing is usually stored in a database for further reference.S. If the claims are found to be free of such errors. Hence the insurance companies try to reduce the time for adjudication by going automatic claim adjudication systems. 65736839. the claim examiners do the adjudication manually. Claims adjudication requires a lot of information about various entities such as members. The turn around time take to process the claims is also an important consideration for members and providers. NA 9. The federal government too. In short claims adjudication requires lot of database interaction and is the most complex of all processes. In case of the member having coverage with multiple carries. 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. This helps reduce the burden on the insurance company and speeds up the process. If the claim is found to be a valid one.

doc Ver 0.Summary ___________________________________________________________________ 65736839.00a Page 126 of 150 .

850 48.682 258.140 5.018 91.402 66. Whereas they are Tax based systems (all providers are government owned) are in vogue in UK/Australia.1 1.187 40.668 44.829 31. Other countries spend less on IT as a % of revenues.8 46.931 1.201 2.674 32.505 54.146 592.979 363.S.804 109.5 515. Dollars) Healthcare 1998 1999 2000 2001 2002 2003 CAGR (%) 53.917 29.2 835.964 151.403 1.050.551 45. by Region.408 69.756 50.5 45.819.843.628 289.834 10.477 141.122 17.259 194.752 140.doc Ver 0.523 442.081 81.479 9.285 816.749 5.606. 65736839. Japan and Australia. there are Insurance-based systems in which providers are subcontracted by the government.612 1. In Germany/ France.6 43.3 Source: Dataquest (January 2000) 10.314 25.1.090.144 13.5% in Europe.877 1.867 161.164 417.00a Page 127 of 150 .086 14.805 646.437 266.800 20.8 Asia/Pacific Canada Europe Japan Latin America Rest of World United States Total Healthcare Worldwide 42.113 500.393 411.Appendix ___________________________________________________________________ 10 Appendices 10.741.444 184. 1998-2003 (Millions of U.268.979 3.1 Appendix A: Total E-Business Services Forecast for Healthcare Total E-Business Services Forecast for Healthcare.2 Appendix B: The world Healthcare market and Healthcare IT spending The US healthcare market is predominantly privately run.988 210.020 293.

doc Ver 0. a core focus for most governments around the world will continue to grow as newer technologies and sciences (Genomics.Appendix ___________________________________________________________________ Worldwide. (Source: Gartner Research. investment in IT in healthcare is at a low of 3% as compared to an overall average of 6% and 12% for Financial services. but the profit angle is increasingly focused on. Proteomics and Bio technology) revolutionize health care. Other countries spend less on healthcare than the US does because single payer systems tend to have efficiencies in purchasing. (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. Inc) 10. less choice to patients and administration efficiencies. Inc) 65736839.00a Page 128 of 150 . Healthcare market.

doc Ver 0.00 $264. 70% of the Federal budget of the US. The total health care spending (by private and public in the US) is 1.3 Trillion. Service Area is determined by the location of the subscriber's primary care doctor. (Source: Gartner Research.70 $413. 65736839.00a Page 129 of 150 .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. account for 43% of the world spending.Appendix ___________________________________________________________________ US is the largest spender in this market.a whopping number by any standards.4 Appendix C: Sample Quote Sheet Page 1 XXXX Proposal For July 26.60 $227. 2001 ABCDEF Inc Effective Date 10/01/2001 Renewal Date 10/01/2001 Service Area Colorado . Rates will vary for other service areas.30 The foregoing rates apply in the Service Area specified above. Inc) 10.US also leads in the IT development of this market.

spouse or children and employee/family and (c) 4 tier which is an average rate for employee only.e.Groups with 10 or more eligible employees have the right to see what the premium would be quoted either of two ways. There are two different rate structures available depending on the employer case size. and an unmarried child of any age who is medically certified as disabled and dependent upon the parent. an unmarried child under nineteen (19) years of age.which is intended to facilitate comparison of health plans. Any changes in benefit level or conditions stated above may require a change in rates. 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.doc Ver 0. an unmarried child who is a full-time student under twenty-four (24) years of age and who is financially dependent upon the parent.Groups with under 10 employees may only elect an age banded rate structure. upon oral or written request.Appendix ___________________________________________________________________ Quote Conditions Assumed Dependent Eligibility Dependent means a spouse. 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).(b) 3 tier whichis an average rate for employee only. to any person who is interested in coverage under or who is covered by a health benefit plan of the carrier. (a) 2 tier which is average rate for employee only and employee/family. employee/children and employee/family. There are three different rate tiers available when electing the composite rate structure..within three(3) business days. This proposal is subject to change at any time prior to the acceptance by AUSHC of Employer's offer.employee/spouse. Rates are pending approval by state regulators and are subject to adjustment based on regulatory determinations. 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.employee. 07/26/2001 1:48:14 PM 7011882 LIFRAM12 65736839.The carrier also must provide the form. Benefit Waiting Period (BWP) Standard BWP is 3 months minimum.The form must be provided automatically within three (3) business days to a potential policyholder who has expressed interest in a particular plan. i. 6 months maximum or match the incumbent carrier's BWP up to 6 months maximum.00a Page 130 of 150 .

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

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

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