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

......................125 9............1 Appendix A: Total E-Business Services Forecast for Healthcare...................3 Clearinghouse Income................................................................4.....4 References....114 8.4............1 The Beginning: Member wants to purchase insurance.................................................................123 9................115 8......10 Drug Manufacturers..................................124 9.......................................................................................0 Page 4 of 132 ............127 10..115 8.................2.............................3.......................128 (Source: Gartner Research........121 9 Summary.................................................................5.3 Centers for Disease Control and Prevention (CDC)..........................................................3...........105 8..................117 8............5.................5 National Information Center on Health Services Research and Health Care Technology (NICHSR)...3 Appendix C: The Cash Flux of the US Healthcare Industry...............113 8............................................1 The Accreditation Process...................101 8...........3..117 8.......8 General Agents..........................................1 Benefits Of A Clearinghouse............................3...........................103 8....................................5 Clearing Houses..................125 10 Appendices...... Inc).........................................2 Appendix B: The world Healthcare market and Healthcare IT spending.............116 8........124 9....Healthcare Market Overview ___________________________________________________________________ 8.......................................................................3 An Enrolled member wants to seek medical services.........................................................................doc Ver.................102 8.123 9...................................................................128 10........................................................127 10...7 Specialized Adjudication Engines/Companies...2 Workflow .............................................113 8...................1 Unit Objectives ......................5................6 Health Resources and Services Administration (HRSA)...........5 Effect of external agencies...................................................3..................121 8............................................. 1........2 CORBA.......6 Third Party Administrators.................124 9...........4........................................................................2.....................2.................................................1 HIPAA..........5....................................................................131 __________________________________________________________________________________ 65736839..........................................4 Agency for Health Care Research and Quality (AHRQ) ........4 Government Acts and Regulations..................................................................................................................................................................113 8......................................................12 References.............103 8...............9 Accreditation Agencies.....11 Review Questions............................................2 Getting a provider...............................................................................2..................................3 Review Questions.........123 9..120 8............115 8................9......3 Exercise....................................125 9......117 8...............4 Appendix C: Sample Quote Sheet.................7 Exercise..................2 DEPARTMENT OF HEALTH AND HUMAN SERVICES (DHSS).......................................103 ELECTRONIC HEALTH TRANSACTIONS STANDARDS .....................................................129 11 Glossary............102 8........103 8.....................................4 Member has filed a claim.......................................125 9.........3................106 8.......................4 Exercise......................127 10.........................................................................103 8............2...............................2 Clearinghouse versus Direct Filing..........

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

they will now receive $74 billion over the same period. which is a core focus for most governments around the world. In the last few years there has been an increasing number of acquisitions and the industry is moving into the consolidation phase. Proteomics and Bio technology) revolutionize health care.  HIPAA (Health Insurance Portability and Accountability Act) This act impacts all segments of healthcare industry with focus on standardization.doc Ver. there has been a tremendous pressure on the bottom line of these companies. accounting for 43% of the world spending. The last major merger happened in Feb 1. Also. Cap on spending by government (BBA) is focusing efforts on cost cutting in this space. 1. Provider Organizations are adopting some Cost Cutting measures. the members participating in these plans feel that the HMOs squeeze the patients to maximize their profit.6 million) represents the largest number of users of long-term healthcare services.a whopping number by any standards. Furthermore.Healthcare Market Overview ___________________________________________________________________ Industry.but low activity expected. due to increasing health care costs. will continue to grow as newer technologies and sciences (Genomics.310 Billion annually (2001) and is growing at 7%. also the fastest-growing segment of the U. US also leads in the IT development of this market. which are coming into place. Initially small players focused on local markets dominated the Industry. The world market for Healthcare is USD 3 Trillion presently. Before BBA. This trend has slowed considerably and can be considered to be over for now.1 Trends in Healthcare – Provider Space There are two major regulations. 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. As a reciprocative step.when CHRISTUS Health was formed. 1. a decrease of about 11%. In the last few years.3. will seek acquisition by larger chains. it is estimated that about 13% of the overall industry bed capacity are operating in bankruptcy. 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. The last few years have seen smaller provider sub segments face financial challenges. struggling independent facilities in rural markets. skilled nursing providers were slated to receive $83 billion during 9802. The last few years have seen a rise in the Assisted Living Centers. Large corporations want see employee health insurance costs to reduce overheads. The trend is still continuing and the growth is expected to continue. However. At present. (Refer Appendix C). But the Healthcare market.3 Trillion. reaching $30 billion by 2005.0 Page 6 of 132 . Individuals aged 85 and older (3. 1999 . population. 70% of the Federal budget of the US. However. The US Congress is currently debating on a “Patients bill of rights” that will allow the patient to get better care under this system. privacy and security. however as a result of the BBA. See Appendix A). The US is the largest player in the Healthcare market and is worth $ 1. 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. __________________________________________________________________________________ 65736839. The past few years has seen a consolidation in the hospital and health sectors. US is the largest spender in this market. Industry sources project expenditures for senior living of $18 billion in 2000.S. (Refer Appendix B). The total health care spending (by private and public in the US) is 1. Furthermore. which are going to have a major impact in the way healthcare providers operate presently.

Recent times have seen HMOs exiting Medicare Choice plans.com Leading provider of health and retirement benefit plans. Cigna.5% in 2025. These companies cater to small and large Employer Groups. And this has resulted in higher costs.000 members). CT www.Healthcare Market Overview ___________________________________________________________________ labor costs (typically 40 -50 % of hospital operating costs) are steadily rising (specialized skills shortage). among others. and also provide coverage for members participating in government programs like Medicare and Medicare.5 Million members enrolled in Medical HMO Plans. the number continues to climb. Provides both Indemnity and HMO based Health insurance plans 21 million subscribed members in various health plans. Aging Population Poses New Challenge for the Healthcare organizations. CT www. HIPAA is going to have sweeping effect on HMO.000 in 2000. the rapid expansion of the elderly segment of the population is presenting HMOs with a new set of challenges. Provides both Indemnity and HMO based Health insurance plans 6. Prescription drug coverage has increased (95% of all members).3. Plans available across the country United Health Care Minneapolis. More than 35 class-action suits have been filed against managed care companies to date. Hartford. Ongoing pressure to reduce healthcare costs will prolong the merger trend in coming years. with the top 10 HMO chains accounting for close to 2/3 of total HMO enrollment in the US. 10. People older than 65 years (currently 14%) are estimated to rise to 18. The last few years have seen Rising Costs for the MCO (Managed Care Organization). Retirement and Investment Services. Managed Care Market Still Top-Heavy in the sense the managed care sector is fairly concentrated.com Into Health Care.g. on average. including Aetna (affecting 355. HMOs cut 400. The largest privately held chain is the Blue Cross/Blue Shield Association. which collectively serves 21.3 million of those are Managed Health Care Members includes 5.000 members in 1999 and another 327.com __________________________________________________________________________________ 65736839. resulting in more people covered.doc Ver. which requires them to re-look at their transactions.5% in 1999. Property and Casualty. Medical costs rose 7.6 million Americans.2 Trends in Healthcare – Payer Space There has been a rise in Regulations & Lawsuits against payers. 1. Individuals. Numerous companies have exited Medicare Choice markets following implementation of the BBA in 1997. Furthermore Managed Care Consolidation has seen larger companies acquiring smaller. Hartford. Large HMOs are notifying the HCFA of their intent to exit Medicare + Choice market in 2001.0 Page 7 of 132 . 1. undercapitalized players. Group Insurance etc. 1. MN www. E.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. Aetna.cigna.3 members of Prudential Health Care recently acquired. Aging of the baby boom generation (born between 1946-1964). Pharmaceutical costs are rising about 15 %.aetna.unitedhealthgroup.

doc Ver. no risk). 1.5 References AETNA Intranet http://www. About 5.aetna.com/ http://www.com/ http://www.gartner.8 million self-insured members (fee basis.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. 1. operates in many markets.gartnerg2.com/ http://www.000 Medicare members and 530.Healthcare Market Overview ___________________________________________________________________ Primarily into Managed Health Care.gigaweb.com/ http://www.jup. 1.com/ __________________________________________________________________________________ 65736839.0 Page 8 of 132 .8 million Fully Insured Managed Care Members. 445.

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

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

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

Reduction in this cost to the member is a great advantage with group insurance. While on one hand capitation ensures a fixed monthly income for the provider. These monetary benefits are offered in various forms. For insurance company. So. group insurance schemes are able to get better deals for their members than in case of individual insurance. the members have to pay for healthcare coverage). The providers enter into an agreement (contract) with the insurance company.0 Page 12 of 132 . A doctor. Such groups are known as self-insured groups. it also restricts his earnings. Though self-insured schemes are quite popular. This way. 2. However. in return they are offered monetary benefits by the insurance company. have their advantages and disadvantages. they are feasible only in case of very large organizations.4. One of the most popular of these forms is a fixed monthly fee (capitation fee). In most cases. his employer will pay for his insurance coverage. Both individual and group insurance. Individual insurance is restricted to people who need to have specific coverage not offered in their group scheme. He is free to choose any of the services offered by the insurance company. There are other variants of insurance in the market. Under this agreement they provide medical care at reduced rates to the members. depending on his popularity with the patients). The main advantage with group insurance is the freedom of choice for a member. while in case of individual insurance the risk is concentrated on a single member and his dependents.doc Ver. from the provider’s point of view it’s a choice between a fixed income and a varying income (which may be more. or less. Group insurance allows the insurer to spread the risk over a larger number of people.S. Members.4 2.2 Providers.1 Healthcare pillars. __________________________________________________________________________________ 65736839. A Provider is that entity which offers actual medical services to the members. A variant of this is the Company Paid Groups. they outsource the administrative part to the insurance companies while retaining the money reimbursement part with themselves. They offer a great flexibility to the company in providing insurance of choice to the employees. So. He can purchase this insurance coverage for himself and his family (also called his dependents). 1.Healthcare Overview ___________________________________________________________________ 2. 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. these companies do not have the infrastructure to perform as an insurance company. This is a powerful perk used to retain good staff. capitation helps them to forecast their spending. This is known as Individual Insurance. Due to its bargaining power. they are able to achieve a balance between providing desirable healthcare coverage to their employees without causing administrative overheads. but the trend is towards group insurance due to its basic advantage of reduced cost and enhanced services. or to those who do not have a employee sponsored group insurance scheme. in which the employers pay for the healthcare subscription (in case of normal group insurance. a pharmacy or hospitals are all referred to as providers. as the total expenditure remains constant irrespective of the number of members having to seek medical services. A group has much more bargaining power due to the simple fact that group insurance is less risky for the insurer. he has to pay for those services. and is a very good illustration of the amount of importance that is attached to health insurance in U.4. In such a case the employer becomes his plan sponsor and the insurance is known as Group Insurance.A. However. In case of some large corporations like AT&T or IBM the company itself provides insurance to its employees. A member is a person who purchases insurance from (or enrolls with) an insurance company.

3 Benefits. the insurance company contracts with providers and form a network of such providers. the hospital itself may function as the insurer. whom sets forth the terms and conditions of this agreement is called a Policy. The reduced cost of a managed care plan is the main reason for members preferring them to indemnity plans. This constitutes the Staff Model of managed care. The major line of coverage provided by the insurance company. Then depending on the choice of coverage the member is said to have medical benefits or dental benefits or vision benefits. the insurance company is able to offer healthcare at reduced rates.doc Ver. 2. the insurance company pays a part (usually 80%) of the expenses. the IPA. Staff model is beneficial from the insurance companies point of view. In case of managed care. In case of Indemnity plans. The providers themselves have an increased patient volume and hence offer services at reduced rates. the insurance company may directly employ providers.Healthcare Overview ___________________________________________________________________ Sometimes. Formation of an IPA gives the providers more bargaining powers with the insurance company and assures them of an increased patient volume. The insurance company offers a better deal to its members for using a provider within this network. Thus. they may outsource the administrative functions to an insurance company while keeping the money reimbursement part with themselves. i.0 Page 13 of 132 . The right of a member to receive services from the insurance company as per their mutual agreement. the members visit a provider and pay him for his services. In general. or. There has been a gradual shift in the choice of members from Indemnity (traditional fee-forservice) plans towards Managed Care (prepaid) plans. 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. Though they offer great flexibility to members in their choice of providers. As with self-insured groups. right from providing services to filing claims. If the claim is found to be valid. they file a claim (a request to refund the expenses incurred) with the insurance company. Such a group is called an IPA or an individual practice association. The members pay a fixed monthly fee and need to choose a provider within the network as their primary care physician or a PCP. In some cases. they are very expensive. the member is called a Plan. 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.e. Due to the control over the choice of provider. In turn the insurance company is able to offer a range of providers to the members at a single source. company to the member. The insurance company may provide medical/dental/vision coverage. 2. Benefits can be described in two ways 1. This staff model however is feasible only in case of very large insurance companies.The PCP manages their complete healthcare. This is one of the most stable models of managed healthcare. individual providers form a group. After that. 1. as they are in a better position to regulate the expenses.e. which contracts with the insurance company. In case of certain large hospitals with a significant patient base. These when customized as per the member’s requirements and put down on paper as a legal document forms a policy. __________________________________________________________________________________ 65736839.4. we can say that a plan is the general range of benefits offered by the insurance company.

nowadays there is a major emphasis on automated claims adjudication. The recent trend has been to go for PPO plans. also know as Claim Examiners. 2. This is known as coordination of benefits (COB). On completion of claims adjudication.doc Ver. 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. also claims with any missing information are resolved manually by Adjudication experts. while having the option of Indemnity type coverage at a higher fee. The claim is then adjudicated (or tested for authenticity) as per the company’s business rules and policies. thereby making the process more cost effective. 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.4 Claims. referrals. members may be enrolled with multiple carriers (insurance companies). Apart from speeding up the process. The checks can include. __________________________________________________________________________________ 65736839. It also gives the amounts applicable to him. is a recent addition to the stable of managed care plans. 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. as it offers the best of both Indemnity and Managed care plans. Sometimes. As explained earlier. 1.Healthcare Overview ___________________________________________________________________ The model of managed care as described above is known as a HMO or a health maintenance organization. benefits.The claim is received by the insurance company. it also reduces the necessity for claim examiners. Hence. a Claim is a request filed by the member (or his PCP) for the refund of medical expense incurred by him. 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. providers. 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.EPO or exclusive provider organization.4. Claim is either filed on paper or sent electronically . 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. Members cannot avail services from a provider not contracted with the insurance company. Complex or ambiguous claims. 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.0 Page 14 of 132 . The member is also sent a letter called the explanation of benefits (EOB). It has a major disadvantage that it limits the choice of providers to a network. policy etc. member receives a check for payment of the expenses. 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.

Following are some examples of such agencies. 1. Agency for Health Care Research and Quality (AHRQ). 2.6 External Agents.A. 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. Health Care Financing Administration (HCFA) along with others are responsible for regulating the healthcare industry. These rates are based on a variety of factors and involve statistical and mathematical computations. syntax. The role of the actuary is to decide the rates for the various services offered by the insurance company. Usually. as there is stiff competition in the market.4. the underwriter’s function is to approve/ validate the group specific factors added to rates by marketing people and apply mark-up or discount based on their judgment. the nature of claims processing being highly situation specific.S. it is forwarded to the insurance company responsible for payment.Healthcare Overview ___________________________________________________________________ Also. Together they use various methods and strategies to sell the plans to as many customers as possible. Since claim adjudication is a complex process.4. These organizations are known as specialized adjudication companies (Magellan and ADESSO are two such organizations). claims which require very specific processing are sent to these specialized adjudication companies. Center for Disease Control and Prevention (CDC).doc Ver. If a claim is determined to be free of typographical. it is not possible for an insurance company to have a rule engine for adjudication of every type of claim. After that come the Specialized Adjudication Engines/Companies who offer help on adjudication of claims. An insurance company has its own marketing workforce and also a pool of agents (brokers). 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. 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. Sales and Marketing form an important activity in the health insurance industry.In addition. So in case of very specific claims (such as processing of vision claims). 2. __________________________________________________________________________________ 65736839. and logistical content errors. Apart from these regulating agencies. All the services and management activities cannot be carried by the insurance company itself on it's own. the process of adjudication may be outsourced to another organization that has the necessary rule engine in place. Center for Medicare & Medicaid Services (CMS). there are agencies that aid the insurance company on various other fronts. Meanwhile. Government agencies such as Department Of Health And Human Services (DHSS).5 Sales. If errors are detected.0 Page 15 of 132 . This helps reduce the cycle time for claims adjudication. it is returned to the Provider/Member along with an explanation of what was wrong. 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). It requires some help from some external sources or agencies. Clearinghouses perform auditing services on insurance claims. Health care is a highly regulated area in U.

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

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

“Future of managed care” by Tufts managed care institute.      www. 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.edu/ “History of managed care” by Tufts managed care institute.doc Ver. 3. 4.cornell.com http://trochim.7 1.0 Page 18 of 132 .insurance.8 References. 2. __________________________________________________________________________________ 65736839. 2. Review Questions.com www. 1.Healthcare Overview ___________________________________________________________________ Figure 2: Detailed Workflow 2.yourdoctorinthefamily.human.

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

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

Some employers sponsor healthcare plans to its employees and its dependents. The pictorial view of the process is as shown in figure 1. 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.Members ___________________________________________________________________ UNIT . 1. doctor) to avail the service.III 3 Members 3.1 Insurance Business: An Overview.2 Introduction Member is a person who is the actual beneficiary of the healthcare plan.2. Claim will be validated and the insurer will reimburse the amount to the provider/member.0 Page 21 of 132 .1 Unit Objective This unit will acquaint the reader with the role played by the member in the Healthcare Industry.doc Ver. __________________________________________________________________________________ 65736839. Once enrolled. 3. A person purchasing plans can cover himself as a member (commonly referred to as "Subscriber") and his/her family members as dependent members (commonly referred to as "Dependent"). Provider will check the eligibility of the member for that service. The provider/ member then will file a claim to insurance company. These will be used to show the validity of the policy taken. Member can go to a service provider (hospital. an insurer provides ID cards to its members.

doc Ver.Members ___________________________________________________________________ For the pictorial representation of insurance business and the member's interaction with other systems please refer to figure 2.0 Page 22 of 132 . __________________________________________________________________________________ 65736839. 1. Insurance: An Overall Picture. Fig 2.

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

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

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

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

) 3.  Risk is moved to the Insurance Company. professional bodies. the Credit Unions and the Small Firms Association. Insurance Company is profited by:  Getting a fixed sum of money for adjudication of claims. sports clubs and interest groups. Benefit in the premium amount Some group schemes qualify reduction in the premium amount. 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.  Their Work will be given higher priority by the insurance company. thereby reducing their effective rate of BIK to the standard rate of income tax. leading to less stress for them and their employees.Members ___________________________________________________________________ Fast access to the best in modern healthcare Members can choose admission dates to fit in with work and family commitments. as it is helpful in growing their relationship. they are entitled to claim tax relief on the full premium. Plan Sponsor is profited by:  They get the Health Insurance plan at a cheaper rate.) for their employees.5 Affinity Groups An Affinity scheme is appropriate for members of business organizations. a payment can be made directly on a yearly. In a company-paid scheme. __________________________________________________________________________________ 65736839. half-yearly. quarterly or monthly basis. staff members can select a higher plan and simply have the balance deducted from their salary.3. SI Groups pay "Service Charges" to insurer for administration / management of medical insurance (adjudicating claims etc. Flexible cover options Once employer chooses a particular level of cover. the company can claim healthcare payments under the Corporation Tax shelter. one can provide his/her company with significant benefits in terms of employee recruitment.  They will be given more priority for processing of their claims then others get. But these figures are much lower than paying premium to cover all the employees. (Examples are the Irish Farmers’ Association. retention and goodwill. The financial risk is borne by the Plan Sponsor.6 Self Insured Group Plan Sponsors / Companies who pay the Claims' amount of their employees themselves are called SI (Self Insured) Groups. Alternatively. Ease of Payment Payments can be made by direct debit through company bank account.3. The SI group also has to maintain certain bank balance at all times to ensure the continuance of medical benefits to their employees.doc Ver. 3. Benefits to the company Introducing a Healthcare group scheme for employees. 1.0 Page 27 of 132 . Tax Relief for employees Employees are liable for Benefit-in-Kind (BIK) taxation on the paid Healthcare premium at their top rate of tax.

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

For Self-insured groups insurance company may provide the services. 4. 3. 2. is not eligible to open an MSA.600 and $2. Administrative /Management of medical insurance 5. Plan sponsors/ Employers 4.200 to $4. Enlist advantages and disadvantages of individual and group insurance.8 Exercise 1. are those who pay the Claims' amount of their employees are Self Insured Groups. and The annual out-of-pocket expenses do not exceed $3. having additional coverage under a health plan that is not a high deductible. Employers 3. are those who purchase insurance in an employer sponsored insurance. In fact.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. Answers: 1. 1. 5.  Someone. Individual Members 2.doc Ver.850 for families). Many insurance companies are still developing qualified high-deductible insurance plans and products with a savings component. The biggest challenge in setting up an Archer MSA may be finding a company that offers them. This includes Medicare coverage. are those who purchase insurance directly from an insurance company in case of an individual insurance.0 Page 29 of 132 . A highdeductible plan is defined as one in which:  The deductible is between $1. __________________________________________________________________________________ 65736839. in some states.800 for families). Many financial institutions are also still in the development stage with their Archer MSA account products. However. 3.400 for individuals ($3.3.200 for individuals ($5. insurers are running into problems with state laws that prohibit such high-deductible plans. there are exceptions to this rule.

Once the enrollment is over. verifying. Collecting and updating the systems with the data completes the enrollment process. Enrollment in the office outlets of the insurance company There will be city-based office outlets set up by the company.4. Member can fill up the forms and send it to the respective postal addresses. The data will be received and formatted fed to the systems. For an employer ID numbers and passwords for its employees will be provided.Members ___________________________________________________________________ 3. There will be online systems set up there. 3. and claim adjudication. The enrollment process will then be automated.doc Ver. billing. Web-based applications For an individual web based application will facilitate online registration/ enrollment to get enrolled.4 3. and making available all necessary eligibility information for enrollee membership. a member can start filling up the claims. Employer then validates and sends the information to the insurance companies electronically. Member will receive membership letter once the enrollment is over. Data entry operators will make you enroll online.    __________________________________________________________________________________ 65736839. Enrollment through the employer based systems Employers do have employees data maintenance systems. benefit information that he/she has opted for. Employees are allowed to select the benefits they wanted to opt for. Member has to approach the office. Member will provide all necessary data to the insurance company that will include personal information. Required data will be captured and sent to the insurance company electronically. product issuance. This is most commonly used methodology for large employers having more than 300 employees.1 Member’s enrollment What is Enrollment? The enrollment process comprises of collecting.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. Membership letters and other details will be sent to the member once the process is over. 1.4. This is the most commonly used approach.0 Page 30 of 132 .

Employer Report A report will be sent to the employer giving the details of its employees enrolled and their details. ID card would have details about the member's SSN. Name.3  Output of enrollment process ID Cards A person insured under an insurance company is given an identity card.    __________________________________________________________________________________ 65736839.0 Page 31 of 132 . Member has to show his/her identity card when he/she approaches a service provider (doctor. pharmacist). Membership letters Once the enrollment process is complete.Members ___________________________________________________________________ Enrollment Data Flow is shown in figure 3. membership letters will be sent explaining the benefits he/she has opted. hospital.doc Ver. membership number and other details.4. eligibility information. Member Member Member Employer Associations Insurance Company Fig 3: Enrollment Data Flow 3. 1. Provider Report Providers are made aware of the new members enrolled under his/her name.

0 Page 32 of 132 . 1. ID card __________________________________________________________________________________ 65736839. Enlist the means of enrollment. Answers 1.5 Exercise 1. 2. Member needs to show _______ as a token of its membership in the insurance company. 3.doc Ver. Electronic data transfer.4 Enrollment: Overall Picture Please refer to figure 4 for the pictorial view of enrollment process.4. Electronic data transfer from employers d. Web-based applications. Direct enrollment in the field offices c. Traditional Paper transfer b. Means of enrollment are a. Employers having own member's database provide data to the insurer via _________. 2. 4 Enrollment Process 3.Members ___________________________________________________________________ 3.4. 3. Fig.

Depending on that various terms like rates. a member’s eligibility for a service will be decided upon the benefits that he/she has opted for. Every employer when signs a contract with the insurer are given identification number. Provider will send subscriber's information only if the member is a dependent. Member when purchases a policy selects the services that we would want to be covered. Provider need not do any eligibility checks when member is having indemnity plans.Members ___________________________________________________________________ 3. So the policy effective date. will be given to the system. Last name will be fed to the online system as input. 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.doc Ver. So every time a service is given a provider asks the system if member is eligible to get that service or not. 1.5 3. The system will crosscheck the eligibility for the service and inform the provider back. member number (Identification number given by insurer). The system will run eligibility checks and returns the data to the provider. If member is eligible. In case of prescription drugs there is a cap held on the quantity drug to be consumed by the member in a period of time.0 Page 33 of 132 . 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). If the member is not eligible to avail the service the service provided will not be insured. Social Security Number) along with service he/she is asking for.2 Eligibility Process Provider will query on a member for getting a particular service. Again this will be validated against the insurer's database to make sure that the subscriber is a valid member. These validations are also carried away when the eligibility is validated.5. 3. Every service-provider is bound to check the eligibility when a member asks for any kind of service except for indemnity plans. There are different services that could be covered by the insurer. This data will be validated with the database of the insurer to make sure that the person is a valid member. Provider will also provide employer's data if the plan is sponsored by member's employer.1 Member’s and Dependent’s eligibility Eligibility Eligibility is the ability of a person to use any kind of service. termination date will be sent back to the provider. Insurers will set-up systems by which eligibility information will be available to the provider. ID number is validated with the insurer's database.  Employers Information.  Policy Dates. Subscriber's name. __________________________________________________________________________________ 65736839. Not all could be applicable for a member.  Subscriber's information. the service will be provided and provider will file the claim for the payment of the service. Employer Name.5. Taking insurance business into consideration.  Service related information. Identification number etc. premium will be decided. Provider gives basic information about the member (Member's identification number.

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

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

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

Members ___________________________________________________________________ 3. such as co-payment or coinsurance requirements. Review coverage status for medical and/or dental care. 3. Essential security features are incorporated in the applications to prevent the data loss and data disclosure. 3. o Personal Details This includes the name. o Benefits summary Talks about a partial.  Web based applications. Member has to register his/her name in the application and the data would be shared. There could be menu driven recorded message that will provide you information you want. 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.0 Page 37 of 132 .  E-mail Member services e-mail address to which a member can send a mail and ask for the service. where a member can enter personally to login a service request.  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. Web-based application is the most common of all of above modes. contact numbers and other details.6. claim eligibility. like the status of his/her claims. __________________________________________________________________________________ 65736839. There will be webbased application where a member can login and avail the service or can login the service request. o Benefits Snapshot Review primary care physician or primary care dentist selections for the member and the covered dependents.  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. There are several ways this service is provided most common is through phone calls. he can keep track on what is the status of the claim.doc Ver. Members can make various inquiries. Provider inquiry etc. o Claim Status When a member has filed a claim.  Walk in Situated are member service offices.6 Member Services Insurance companies provide plenty of services to make information available to its members. address.1 Means of services  Phone call Designed/Toll free numbers for member services. 1.6. general description of your medical benefits and includes member cost-sharing information.

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 Add or delete family members at open enrollment. booklets:  __________________________________________________________________________________ 65736839. o Clarification about the benefits Member can get the doubts about the benefits at any point of time.0 Page 38 of 132 . o Provider change facility Member may wish to change the primary care physician or primary care dentist he/she has a facility to do so. 1. web-based applications or the walk in offices situated.  Distribution of ID cards. Some of the cases are:    A marriage or divorce of the employee The death of the employee's spouse or a dependent The birth.doc Ver. There will be company's officials sitting in the offices assisting the member in doing that plus there are designated mail-Ids a member can send a mail to. These forms could be submitted via postal mail to the claims offices (the address is generally specified on the ID cards). 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. Some times the employers update the insurer about these changes.Members ___________________________________________________________________ o Provider directory Provider directory is that enlists the providers those are in the network of the insurer/in contract with the insurer. Log issues and complaints: o Logging provider complaint Member is free to log in any complaint about the service or the provider. 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. can walk in the offices set up by the insurer and do the changes. are made available on the web-sites/applications that might be needed by the member. Internet also helps out by providing enough data on the site. proposed adoption.

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

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

Enlist the services offered for group maintenance.9. 4. 3. pay attention to whether the contract is non-cancelable or guaranteed renewable.2 Exercise Questions 1. Employers can provide coverage for employees too. Disability benefits contracts in which policy cannot be canceled but premiums can be raised are _________. so may be premium will be raised only every few years. 5.1 Member’s concern When a member buys an individual disability insurance policy. When the groups are formed in case of a group insurance? 3. __________________________________________________________________________________ 65736839. Answers: 4.doc Ver. Disability benefits contracts in which policy cannot be canceled and premium cannot be raised are _________.Members ___________________________________________________________________ 3. A non-cancelable contract is preferable to a guaranteed renewable contract. which would apply to all individuals in the same insurance classification). 3. noncancelable policies are offered only to low-risk occupational groups at a high premium.9 Disability Benefits Disability income insurance provides members with an income if they become sick or injured and are unable to work. Opting for the guaranteed renewable provision may save as much as 30 percent of the premium cost.they can be used in any way the member wishes them to use. What types of services does the insurer provide? 2.9. but the premium can be raised under certain circumstances (the state insurance department must approve the change. 5. 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. Guaranteed renewable.0 Page 41 of 132 . For a guaranteed renewable contract company cannot raise your premium on an individual basis. Guaranteed renewable means that the policy can't be canceled as long as member pays premiums. Often. Non-cancelable. they must have the permission of state's insurance department. 1. The funds paid are not specified for medical expenses .

1.Members ___________________________________________________________________ __________________________________________________________________________________ 65736839.doc Ver.0 Page 42 of 132 .

Members ___________________________________________________________________ __________________________________________________________________________________ 65736839. 1.doc Ver.0 Page 43 of 132 .

g.e.0 Page 44 of 132 .g. physicians etc. BACKUP-PROVIDER:   __________________________________________________________________________________ 65736839. Hospital etc.  NON-PAR: These are those non-participating providers whose contract with Healthcare organization is terminated. the members.1 Provider types Providers are those people. organization or institution that provide services to those enrolled into the system i. As the name suggests it is the PCP who is in constant touch with the members directly.Providers ___________________________________________________________________ UNIT .doc Ver. 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. Dentists. 1. 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.   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. 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.   SPECIALIST: A specialist is one who has one or more areas of specialization in medical field. 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. IPA or PORG: (Independent Practice Association or Provider ORGANIZATION) It is the legal entity that provides administrative and contract related services for providers.IV 4 Provider 4.  Other way of classifying them based on the type of contract is as follows:  PCP: Primary care physician.

4. ICU’s. EQUIPMENTS: These are those providers who provide medical equipment for executing medical tests such as X-ray labs. 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 __________________________________________________________________________________ 65736839.3. education and other relevant information. 4. e. SUPPLIERS: These are those providers who provide medicines and surgical instruments.g.3. so as to assure a minimum amount of revenue by way of claims. Pharmacies. which involves clearing provider claims within a fortnight (subject to the provider electronically filing the claim in a prescribe format). • E Learning Virtual Communities As some of the fringe benefits. • Minimum number of member visits Some HCO(s) guarantee providers.doc Ver.1 Provider Contract Process Providers who wish to participate in one of the networks must complete an application and the corporate credentialing process. path labs etc. Provider Participation HCO (Healthcare organizations) usually elicit provider participation (into their network) using some standard marketing strategies.PHO(s).0 Page 45 of 132 . a minimum number of member (or dependent) visits. Maternity Home etc. there will be routine visits to the provider's office and a re-credentialing process every two years.2 FACILTIES: These are those providers who provide facilities such as wards.g. Once a provider is accepted as a participating provider. Based on nature of service. and physician hospital organizations . providers can be classified as following:    4. These are specialist networks of providers. Backup provider provides medical services to the patients of the provider when he is not available. 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. 4.. which share knowledge and intellectual property via the Internet. large HCO(s) provider e-learning options to enrolled providers via virtual communities on the Internet. or an appropriately delegated credentialing process. Hospital.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. individual practice associations (IPAs). Health insurance companies sometimes delegate credentialing to some physician groups.Providers ___________________________________________________________________ A provider can specify another provider as his/her backup. Some HCO(s) have pioneered the E-Pay/E-Cash option.2 Credentialing Criteria The process requires providers to present documentation of training. E. 1.

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 4.3. many participating primary care physicians are compensated in accordance with the Quality Care Compensation System* (QCCS) described below. 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.0 Page 46 of 132 . 4.Providers ___________________________________________________________________     Disciplinary history (including licensure. independent practice associations (IPAs). Additionally. Quality Review considers: __________________________________________________________________________________ 65736839. physicians are paid by capitation. some primary care physicians and other providers in the network are paid in the following ways:  Per individual service (fee-for-service at contracted rates)  Per hospital day  Under other capitation methods (a certain amount per member. hospitals. professional organizations. DEA registration.  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.5 Provider Reimbursement Most health insurance companies incorporate the following payment methods to reimburse providers for services. per month)  By integrated delivery systems. In most areas.3. For example. Under capitation.doc Ver. membership/privileges.4 Types of Contracts All major health insurance companies have several different types of provider contracts based on the type of servicing provider. 1. Some of the different types of provider contracts include PCP contracts. the system uses a three-part quality factor to adjust the physician’s capitation payments. Specialist contracts and Hospital contracts. 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. physician hospital organizations. Medicare/Medicaid) Work history Malpractice insurance coverage history Clinical privileges at a hospital hospital 4. specialists. a physician receives payment for a patient whether the physician sees the patient that month or not.3.

Answers: 1. The information which needs to be entered are Member number. A PCP can issue themselves referrals for non-routine services. A provider is called as ________ provider if he has a valid contract with the company.4 1. True. A referral once issued has a validity period. 2. Referral is not always required to visit outside PCP.doc Ver.g. 1. referral validity ‘From’ and ‘To’ date and service code (it specifies the king of service/treatment). diabetes and heart failure   4. A PCP or an authorized provider provides it when special care is required. 3. IPA.Providers ___________________________________________________________________ Results of member surveys Review of the care (like childhood immunization rates. (E. Some plan has flexibility to visit any provider without any prior authorization in that case referral doesn’t come into picture. If some referral has to be cancelled then we can do that through this process. PORG etc) 2. The inquiry can be done either on the basis of member number or referral number which ever is known.0 Page 47 of 132 . 4. It depends on the plan taken by the member. details of the provider for whom referral given. Referral entry can be done through batch or online processing however inquiry and maintenance is done through online screens. 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.   __________________________________________________________________________________ 65736839.5. details of the provider who is referring.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. 4. PAR or Participating 3.1 Referrals processing  Referral entry – All the referral should be entered in the referral database so that it can be used if required. Exercise The legal entity that provides administrative and contract related services for providers are also a type of provider – True or False. Contract is an agreement between the provider or group of providers and the _________________. 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. Providers who provide medicines and surgical instruments are known as ___________. Suppliers 4. flu shots and cholesterol screenings) members get from their physicians  Number of our members who change their primary care physicians How well the physician provides access to care and manages the care of patients with chronic illnesses like asthma. Insurance Company 4. Referral maintenance – through this process one can modify the existing referral entry. Encounter date.

A Job will scan all referrals within the referral database.g. availability of health care services. o If the procedure/service code indicates that it is an infertility referral (e. specialists. must meet more than two-dozen criteria for admission into our networks. 4.5.doc Ver. laboratories. o If the referral is 18 months or older. 1. the referral will not be purged.  Tough Standards: All providers must meet our comprehensive credentialing standards. 58555.  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.  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. 58551. and the referral has been logically deleted. Primary care physicians. This is possible if the provider is connected to the company’s network directly or through a third party. the referral will not be purged. which will do the actual erase of the referral. it will be written to two output files. local practices.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.1 Quality Provider Networks AUSHC believes members benefit from quality provider networks in the following ways:  Comprehensive: Several providers participate with AUSHC including. Our objective is to establish networks large enough to satisfactorily serve the targeted population to whom they will be available. If the referral meets the purge criteria below. and travel time are taken into consideration when contracting with local providers to join the networks. hospitals. in particular.6 Provider Network A network is a group of contracted providers (doctors.  Electronic referrals – Direct online entry by provider.) who have agreed to treat AUSHC members at negotiated rates and have agreed to abide by patient and quality management programs. 58550. etc.Providers ___________________________________________________________________  Referral purging – This can be done in batch mode. The second is a file that is used by another job. All providers’ performance in monitored regularly. 4. The first will be a detailed dump of the referral that will be written to a purge file. 58552. __________________________________________________________________________________ 65736839.0 Page 48 of 132 . Factors such as population. AUSHC then reimburses that organization for allowing our customers to use the network. the referral will not be purged. A rental network is an arrangement in which another organization (besides AUSHC) contracts with a group of providers. This information will be written to a yearly archive file that is used to recall purged referrals.6. and a visit has been taken within the last 6 months. one of the toughest participation requirements in the country. 58560). 4. and a visit has been taken within the last 30 months. and acute care hospitals. primary care physicians. All referrals over 18 months old are purged. with the following exceptions: o If the date of the referral entry is less than 18 months from the current date.

After developing a list of providers by type needed to meet customer needs.6. They must also maintain adequate malpractice and general liability insurance or self-insurance. A provider who is providing healthcare services on current date is an active provider. Provider status – Shows current status of the provider. If it is any group or hospital then name of that should be stored.6. networks are adequate when there are enough providers available for the member population in a geographic area. The local Network Management staff has the ongoing responsibility of ensuring that each network has the proper composition of providers. 4. In the healthcare organization. Doctors.doc Ver.7 Provider maintenance This process involves collecting information on all type of Health Care Providers.7. 4. Provider name – it is the name of the provider if he is an individual provider. Labs etc. but may vary to accommodate local supply and regulatory requirements. 4. Aetna reimburses the rental network organization for allowing our members to use the network. and provide evidence of such insurance upon request. deceased etc.4 Network Hospital Standards Our current hospital contracts require network hospitals to represent and warrant that they are. Instead of engaging in direct contracting arrangement with individual providers. closed. which includes hospitals.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. The status can be retired. In other words. and when members have access to the various types of medical services they may need.6. The criteria used to select participating providers reflect minimum network composition standards. and will remain during the term of the contract. given to each provider to identify the provider easily. licensure or accreditation status. All the inquiry or maintenance of providers is done based on provider number.   __________________________________________________________________________________ 65736839.0 Page 49 of 132 . one the major database is Provider database.. They compare the existing network with adequacy guidelines for the specific service area and identify whether there is a need for new providers. Provider maintenance should be done everyday in order to keep the provider database up to date all the time. network staff target providers to be recruited and contracted. All facilities are also required by contract to notify us of any change in coverage. 1. 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.g. appropriately licensed and accredited by either the American Osteopathic Association (AOA) or the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). Pro Net) contracts with the providers.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.Providers ___________________________________________________________________ 4.3 Rental networks A rental network is an arrangement in which another organization (e.

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

com/healthcareproviderinfo.asp/ http://www.g.9 1.10 References AETNA Intranet http://www. 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.edu __________________________________________________________________________________ 65736839. 3.ucla. Provider number 3. C. (E.0 Page 51 of 132 . In Indemnity plan referral is not mandatory) 2. 4.com/ http://www. Claims payment schedule 4.masslegalnurse.healthinsurance. 1. 4. False.doc Ver.Providers ___________________________________________________________________ Answers: 1.org/ http://www.healtheon.healthaffairs.com/ http://www.doctorquality.htm/ http://healthcare. 4.doctorandpatient.com/www/provider.com/ http://www. 2.

Providers ___________________________________________________________________ __________________________________________________________________________________ 65736839.0 Page 52 of 132 . 1.doc Ver.

A substantial percentage from customer groups’ payments result in distributing some percentage as commission to brokers. This bonus is one time payment for new application and it depends on number of new application submitted.000 per Customer group per calendar year.00a Page 53 of 150 . Medicare Promotion Compensation – Some companies pay bonus to brokers for bringing in new Medicare Applications. 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. in health insurance too brokers bring together buyers and sellers against a commission. Each Customer group should submit a stipulated minimum number of applications for corresponding broker to qualify for commission. Brokers are also called Producers in this context. 5.V 5 Sales 5. User groups called actuaries and underwriters play key roles in deciding the rates and thus in selling the products even though they do not interact directly with customers. Key Producer Compensation – Sometimes the company identifies key producers and gives them bonus if they get more than a fixed number of new subscribers. An insurance company has its own marketing workforce and also a pool of external agents (brokers). In such cases the Customer and Cash receipts information is maintained and broker commission is calculated from that. 5.3 Brokers An insurance company generally has a pool of brokers. here buyers being the customer group buying a plan and sellers being the insurance company. as there is stiff competition in the market.Sales ___________________________________________________________________ UNIT . Users within the company need to maintain particulars of brokers and information regarding broker-customer relationship. Producer Data is frozen at the end of a year. This bonus is in addition to commission a producer receives on premium paid by Customer Groups. The banding of the medicare promotion award could be something like this: Program To Date Application Level Payoff per Application   65736839. Together they use various methods and strategies to sell the plans to as many customers as possible.1 Unit Objectives This unit aims to familiarize the reader with some aspects of insurance sales and quote creation.3.2 Introduction Sales and Marketing form an important activity in the health insurance industry.doc Ver 0. 5. As in every other business. The various entities involved like Brokers and Underwriters are also discussed.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.

Actuaries come up with rates for each product.00a Page 54 of 150 .) These are all mainly data-entry operations. These rates need to be approved by the concerned department in some states.the benefits included in a plan are basis of the cost of the plan.4.6 we will study in details how Actuarials arrive at these rates. But they do not apply these factors. (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. a quote is a statement of cost. possibly after relevant customizations. Rates (the premium due per member. Name of Plan 4. do not take account of any factors specific to any customer-group. On the basis of statistical considerations and mathematical calculations and with the aid of rating applications.4 5.e. However. for the member(s). State regulations affect prices. In context of health insurance.4. Service Area – Area in which the members will be based 3. 5. make certain products saleable in certain area and withdraw some products from some areas as and when required.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.1 Quote Creation What is a quote? A quote is a statement of rates of a particular product. In case of a group insurance policy the rates may be banded on basis of age/ gender/ family status).  The effective date .rates are revised from time to time and hence the dae of commencement of coverage affects the rates. 6. Some standard information – like applicable conditions. the policy becomes void) 1. They enter data about new/updated plans. Details of coverage (benefits like pcp visit.Government regulations often mandate certain kinds of coverage.Sales ___________________________________________________________________ 1-250 $100 250-500 $125 500-1000 $150 1000-2000 $175 2000+ $200 Cap of $60.000 per Customer group per calendar year.) 65736839. statutory information etc 5. Effective Date & Renewal Date (date from which the policy will take effect and date when the policy will be due for renewal. inpatient hospitalization etc) 5.  The location / service area of the customer group . If not renewed by that time. Admin users usually do product setup. benefits and conditions of a chosen plan. benefits and new locations where plans will be offered for sale. A highly specialized and trained user group called Actuarials does rate Setup. tax structures etc.doc Ver 0. Name of the firm buying the policy 2. Hence Book Rates are same for any customer group availing a particular plan in the same area and hence the name Community Rates. They group and combine benefits into plans and maintain data about product-offerings in different service-areas i. (In section 5. All these affect the cost of the plan. Actuaries also calculate the values of group-specific factors for different locations at different times. These rates are called Community rates or Book Rates or Base Rates and they depend only on:  The plan chosen . It contains information about: 1. given by a seller to prospective buyers.

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

If rates are acceptable to the customer group they sign on the quote sheet. thus entering into a legally binding contract and members are enrolled for the accepted policy.7). (We will discuss activities of underwriters and special rates in detail in section 5.00a Page 56 of 150 . They can make adjustments according to their discretion. Once they approve the quotes the marketing people present them to the customers. Fig2 below is a pictorial depiction of this workflow: Fig 2 To support these various activities a health insurance company typically has a suite of applications as shown in fig 2: 65736839.doc Ver 0.Sales ___________________________________________________________________ Underwriters have the final say on the rates.

Admin applications are used by Admin Users for Product Setup. Exercises: 1. 3. Group-specific 65736839. and are also used for renewing contracts.Sales ___________________________________________________________________ Marketing assistants Fig 3. An optional layer above these would be a web-based front end . managerial and underwriter users to the suitable application. a . Product Setup is done by (a) admin users (b)marketing people (c)actuaries 2. Answers: 1. Underwriters and Marketing assistants use both of these.2. Enveloping all these there may or may not be a Quote front end .which would act as a single interface or gateway for all marketing. Quoting Engines and Renewal Applications use the data generated by these applications.0 Here we see that central to the system are the Admin and the Rating Applications. The final say on the rates is with (a) marketing people (b)actuaries (c) underwriters (d)underwriters 3.doc Ver 0.c . The difference between Book Rate and final rate would be due to ______________factors. Renewal Applications pick up contracts that will be shortly due for renewal. If two customer-groups in the same service area are buying the same policy at the same time would necessarily have ______________(same /different) Book Rates. Actuaries to calculate the Base Rates of Products use rating applications.same 4.Intranet for use of all internal users and Internet for use by customers to get data online. Quoting Engines generate quotes with customer specific rates. 4.00a Page 57 of 150 .

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

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

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

Meeting mailing informs prospects about meetings and seminars. The responders names do not expire from database. seeds are implanted in each batch of mails dispatched. Telemarketing department gets new prospective customers by calling people.Sales ___________________________________________________________________ The mails to prospects are processed through Code1 Plus software which validates addresses and gives CASS certification. d) Vendors who maintain latest information like addresses of all prospects and update our data files by matching it with theirs. These names stay on the database for one year from the date the names were received from the vendor. These prospective customers are entered into the database by Tel Marketing department. b) Vendors who supply data of all the deaths in a given service area. It also helps to ensure that same set of prospects are not getting selected for marketing too often. US Postal Department gives discount on CASS certified mails. 3. 65736839. b) Meeting mailing: Informing the new prospects about seminars or meetings conducted by Aetna and requesting them to attend the same. Code1 plus software validates addresses.7. False 5. Mailstream system is used to pre-sort the mails to obtain further discounts from postal department. After sending mails. new prospects with phone numbers are loaded to the Dialers. Responders are customers. 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. Tele marketing department retrieves the names from Dialer box for phone follow-ups. History of mailing is maintained for each prospect and each product to ensure that one product is not marketed to the same prospect twice. Seeds are sales department employees and if the mail reaches the seed. To ensure if the mails are delivered. 4. Responders expire from the database after one year. Marketing by mailing involves sending e-mails to prospects. True 4. • • • 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. 2.1 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. 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. Exercises True or False 1.00a Page 61 of 150 . it’s a fair assumption that all the prospects addressed in that batch of mails must have received the mails too. who voluntarily contact healthcare company to get information on it’s products. Answers : 1. True 3. False 2. Postal mails sent by sales department fall in three categories: a) Regional mailing: Mailing is restricted to selected regions or states.

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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There is no coverage for any preventive care. this amount is $600. They prefer to use managed care plans. Managed care plans originated in the early 1970s. But. Indemnity insurance is not a good option. provide great flexibility to members in choosing a provider. The insurer will reimburse only 80% of the costs. Members have to pay heavy premiums and need to meet deductibles before they can start claiming benefits.   For the entire family to be covered. 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. i. insurer will provide 100% reimbursement of costs. For people who cannot afford to spend large amounts on their healthcare. the maximum amount.Benefits ___________________________________________________________________  Filing of claims is the responsibility of the member.4 Indemnity plans. this freedom comes at a very high cost.doc Ver 0. The coinsurance limit is $1000. which are more cost effective. rest the member will have to pay out of his pocket. a routine checkup is not covered.Above this. 65736839. It involves a lot of paperwork and is time consuming.this means that. Managed Care Plans   6.e.00 80% if true emergency. 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. as explained earlier.00a Page 65 of 150 . which the member may have to pay is $1000.

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

Additionally. tight controls can make it more difficult to get specialized care. HMOs often have nominal copayments. This screening process helps to reduce costs both for the HMO and the members. The PCP provides general medical care and must be consulted before members seek care from another physician or specialist.e. Advantages  With most types of insurance (other than HMO). there may be a strict definition of what constitutes an emergency.doc Ver 0. Hence. Instead of deductibles. a provider not contracted by the insurer) without prior permission of the insurer. HMOs generally do not place a limit on the member’s lifetime benefits (i. Besides reducing out-of-pocket costs and paperwork. Additionally. before health problems become severe. Except for emergencies occurring outside the HMO's treatment area. Members cannot use services of any out-of–network provider (i. the total amount of money he can claim during his lifetime) . HMO members pay a fixed monthly fee.  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. but it can also lead to complications if the PCP doesn't provide the referral needed by the member i. there may be a deductible that must be met before the insurer starts picking up the tab. HMO members are required to obtain all treatment from HMO providers. regardless of how much medical care is needed in a given month. Additionally.00a Page 67 of 150 . HMOs encourage members to seek medical treatment early.00 100% None $35. The HMO will not pay for non-emergency care provided by a non-HMO provider. many HMOs offer health education classes and discounted health club memberships. In contrast. members are responsible for paying a percentage of the bill every time they receive medical care. This leads to ‘Low out of pocket costs’.Benefits ___________________________________________________________________ the PCP and the insurer manage their complete healthcare. the focus is on wellness and preventative care.e.e.The HMO will continue to cover his treatment as long as he is a member.   Disadvantages:  An HMO member must choose a primary care physician (PCP).00 copay 100 % 65736839.

The healthcare providers and the PPO sponsor(s) negotiate the price for each type of service in advance. it becomes clear that the cost for the member is much less. However. the insurance company will pay 100% of the providers charges  If compared with the Indemnity plan provided in the earlier section. which are at the higher level of benefit coverage. the provider may submit the bill directly to the insurance company for payment. or by some other type of organization. known as ‘Preferred Benefits’.4. In some cases.  Every time he avails the service of a provider he has to pay $10 irrespective of the kind of services availed. When a member receives care from a participating provider they receive benefits. and the member pays his or her co-payment amount.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. usually 80% payment rate. as PPO members are not required to seek care from PPO physicians. members may receive 90% reimbursement for care obtained from innetwork physicians but only 60% for out-of-network treatment. In order to avoid 65736839. there is a strong financial incentive to do so.00a Page 68 of 150 . In case he has to use the emergency room facilities. known as ‘Non-Preferred Benefits’. However. In return. 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. by one or more employers. The PPO may be sponsored by a particular insurance company.doc Ver 0.00 copay 100%  For all kinds of treatment. 6. a preferred provider organization (PPO) is a managed healthcare system. PPO members usually pay for services as they are rendered. A PPO is actually a group of doctors and/or hospitals that provide medical services only to a specific group or association. When members receive care from a non-participating provider they receive benefits. which are at the lower level of benefit coverage. he will have to pay $35 as $10.  copay. The PPO sponsor (employer or insurance company) generally reimburses the member for the cost of the treatment minus any co-payment. For example. The insurer then pays the covered amount directly to the healthcare provider. usually 100% payment rate.2 Preferred Provider Organization (PPO) Like an HMO. Advantages  Free choice of healthcare provider. there are several important differences between HMOs and PPOs.00 copay $10. PPO physicians provide medical services at discounted rates and may set up utilization control programs to help reduce the cost of medical care.

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

In most cases.00 80%/20% Same as preferred if true emergency. he also must choose a primary care physician who is responsible for all referrals within the POS network. For example. members always retain the right to seek care outside the network at a lower level of coverage. while there is no PCP for out-ofnetwork services. When he uses the out-of-network benefits. But. while the member himself receives his healthcare from in-network providers. Advantages  POS coverage allows a member to increase his freedom of choice. As with HMO coverage. as with HMO coverage.  A typical POS plan will look like this – Plan Feature Calendar Year Deductible Per Confinement Deductible Family Limit Deductible Copay Coinsurance Coinsurance Limit Physicians Emergency room Hospital Other Covered Services Table 4: A sample POS plan In-Network None None None $10. the POS plan is an indemnity plan.00 100% 100% Out-of-network $200. Like a PPO. As in an HMO.Benefits ___________________________________________________________________ network healthcare provider. The member will likely be subject to a deductible and co-payment. 80% / 20% 80% / 20% 65736839. he can mix the types of care he receives.   Disadvantages  There are substantial co-payments and deductibles for out-of-network care. members must choose a primary care physician (PCP) and hence there is a tight control to get specialized care within the network. Usually.00 100% None 100% after $10.00a Page 70 of 150 . POS plan encourages members to use innetwork providers but does not make it mandatory.doc Ver 0.00 copay $25.00 3x deductible None 80% / 20% $1000. Unlike HMO coverage. members pay only a nominal amount for in-network care. else none. co-payment is around $10 per treatment or office visit. members must have paid a specified deductible before coverage begins on out-of-network care. the member’s child could continue to see his pediatrician who is not in the network. No deductible is required for in-network services.00 $200.

with maximum benefits within network and reduced benefits out-of-network. which can be customized according to the members needs. providers. All the plans outlined till now are generic plans. as compared to the POS plan. 65736839. Disadvantages  Members need to choose from the HMO and EPO networks. in general.doc Ver 0. there is no such thing as ‘the best plan’. some insurers will offer an EPO/HMO plan. This provides members with the ease and low cost of the HMO. while providing them with the option to make appointments directly with a larger group of providers (instead of just their primary care provider). For example. A PPO may also make an EPO option available to members. Advantages  Limited out-of-pocket expenses. managed care plans are better suited for the average individual because they end up being more cost effective in the long run. In contrast. this leads to less flexibility in choice of provider.Benefits ___________________________________________________________________  The POS plan is very similar to a PPO plan. The major difference between them is in the in-network option. Indemnity plans.5 Which plan is the best? The first thing to note is that. the PPO plan gives more flexibility for choice of provider. give more freedom than managed care plans in terms of using the healthcare provider of choice. however. Exclusive Provider Organization (EPO)  6. However. These plans offer members great flexibility at the lowest price by combining various plans. and the price is somewhat higher. and employers. Here. also. 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 variation in the various plans can be understood more effectively by referring to the following table. 6. as there are no deductibles and very less copays.4.4 In order to fulfill the diverse needs of participants. The choice of providers is greater than the typical HMO. EPO Plans—a hybrid of POS plans were developed.00a Page 71 of 150 .

3. 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. he is probably better off with a managed care plan. 4. 5. the choice ultimately depends on the member’s personal circumstances and preferences.1 Exercise Plan offers the maximum freedom of choice for a member. On the other hand. indemnity plans should be preferred. 6. If the goal is to minimize costs. PPO plan members do not have to choose a PCP (Y/N). 65736839. Answers Indemnity HMO N Y Indemnity Freedom EPO HMO PPO POS 1. Considering the cost for a member. 1. 2.5. 3. Plot a graph of ‘cost to member’ (x axis) versus ‘freedom of choice’ (y axis) and place the various plans on it. if his goal is maximum flexibility and cost is not a major factor.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. which plan is most effective? POS plans do not offer out-of-network coverage (Y/N). 2. 5.00a Page 72 of 150 .doc Ver 0. 4.

Reasonable and customary charges generally don't include the cost of glasses and contact lenses. Dental plans are of three types based on the mode of treatment and payment. With some employer-sponsored vision plans. 6.1 Vision Plans Vision insurance provides coverage for services relating to the care and treatment of eyes.00a Page 73 of 150 . This keeps the cost of dental care much lower than medical care. The regular dental visits allow problems to be diagnosed early and corrected without involved diagnostic testing or treatment. 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. 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 basic difference between a Medical and Dental disease is that a medical disease can be unpredictable and catastrophic while most dental diseases are preventable.Benefits ___________________________________________________________________ Cost Figure 3: Variation of Freedom with Cost 6. insurers provide the following plans: 6. insurers offer a wide variety of specific plans. Most of these plans in some or other will belong to the two main categories listed above.6 Other Plans In addition to the common Indemnity and Managed care plans listed above.2 Dental Plans Dental insurance provides coverage for services relating to the care and treatment of teeth and gums.doc Ver 0. 65736839. while others may limit coverage to reasonable and customary charges incurred during routine eye exams.6. Regular dental checkups and cleaning will be sufficient to maintain dental health. and then file a claim for reimbursement. Depending on the specific plan. Or the member may be required to cover the charges out-of-pocket at the time of service.6. It typically covers services delivered by an optometrist or ophthalmologist. 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. It depends on the specific plan.

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

or psychiatric hospital. Although the Social Security Administration processes Medicare applications and claims. and ambulance service.6.Benefits ___________________________________________________________________ 3. Members may purchase a supplemental medical insurance policy called Medigap.Medicare Part A (hospital insurance) and Medicare Part B (medical insurance). They are in addition to the fee-for-service options available under Medicare Parts A and B.doc Ver 0.00a Page 75 of 150 .  Part C expands the kinds of private health-care plans that may offer Medicare benefits to include managed care plans. regardless of their medical condition.  Part B covers other medical care.S. Medigap is specifically designed to fill some of the gaps in Medicare coverage. the costs associated with an overnight stay in a hospital. All ten must cover certain services. In addition. physical therapy or rehabilitation services. Only ten standardized plans can be offered as Medigap plans. Some also provide coverage for deductibles and services that are not covered by Medicare such as prescription drugs and preventive care.6. Medigap policies pay most. skilled nursing facility. at a doctor's office. they are standardized and regulated by federal and state law. and nursing service s). A third part.4 Medicare Plans Medicare is a government-sponsored program that provides health insurance to retired individuals. if not all. a division of the U.e. and private fee-forservice plans. Department of Health and Human Services. Medicare Part C (Medicare+Choice) is a program that allows members to choose from several types of health-care plans:  Part A covers services associated with inpatient hospital care (i. or as an outpatient at a hospital or other health-care facility. 65736839.5 Medigap Medicare does not cover all health-care costs during retirement. Medicare coinsurance amounts. However. whether it was received while member was an inpatient at a hospital. such as charges for the hospital room. the HCFA sets standards and policies. meals. Also covered are laboratory tests. Medicare coverage consists of two main parts . has overall responsibility for administering the Medicare program. There is no variation in the types of medigap policies provided by various insurance companies. 6. Part A also covers hospice care and home health care.. Three tier plans  Lowest copay for Generic drugs  Medium copay for branded drugs  Highest copay for Non formulary drugs 6. Medigap policies are sold through private insurance companies. people may be eligible if they are disabled or have endstage terminal disease. Physician care. Most people become eligible for Medicare upon reaching age 65. medical savings accounts. The Health Care Financing Administration (HCFA).

and (4) oversees its own program. optometrist services and eyeglasses. each state (1) determines its own eligibility requirements. however. and long-term nursing home care.6 Medicaid Medicaid is a health insurance program for people with low income. members pay a set premium that offsets the risk of a much larger out-of-pocket expense.doc Ver 0. disabled. Some of the most frequently covered optional services are clinic services. occupational therapy.9 Catastrophic Coverage Plans Catastrophic coverage is not a separate entity by itself but forms a part of an existing plan. 6. adult day care. Long-term care. For jointly owned businesses. prescribed drugs. as well as young and middle-aged people who have been injured or have suffered a debilitating illness.they can be used in any way the member wishes them to use. which is usually very high. (2) prescribes the amount. and are reestablishing a customer or client base. and types of services. Employers can provide coverage for employees too.6.6. and speech therapy. medical transportation. Medicaid pays for a number of medical costs. 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. 6.Benefits ___________________________________________________________________ 6. services for the mentally retarded in intermediate care facilities. The treatments covered by long term care insurance usually include four general types of care: in home care. assisted living and nursing home living. As with other insurance policies. However the maximum lifetime limit of benefits is high enough to cover the cost of catastrophic illness. (3) chooses the rate of reimbursement for services. States may elect to provide other services for which federal matching funds are available. Within these guidelines. prosthetic devices. Recovery benefits that pay after members return to work full-time. including hospital bills. physician services. duration.00a Page 76 of 150 . or blind individuals (or to needy. a disability buy-out policy disburses funds for one partner or business entity to buy a disabled partner's share of the company. 6. offers the assistance people need if they have a chronic illness or disability that leaves them unable to care for themselves. dependent children) who cannot afford the necessary medical care. The funds paid are not specified for medical expenses .7 Long Term Care Most of plans discussed till now are the kind. home health care.8 Disability Income Insurance Disability income insurance provides members with an income if they become sick or injured and are unable to work.6. This may be used to help the aged. They pay hospital and medical expenses above a certain deductible. Each state administers its own Medicaid programs based on broad federal guidelines and regulations. Most of the plans seen till now can be customized to include coverage for catastrophic illnesses. It is a joint federalstate program to provide medical assistance to aged. which pay for hospital bills and doctor visits.6. 65736839.

with the sponsoring employer or association paying all or part of the premium. Medicare has parts.Benefits ___________________________________________________________________ The most common example is the Medicare plans which include a clause for catastrophic coverage. the only real disadvantage of group insurance is limited or no freedom to customize the policy to member’s individual needs. members purchase individual insurance directly from an insurance company. The premium for group insurance is calculated based on characteristics of the group as a whole. Member’s risk potential will determine whether he qualifies for insurance and how much the insurance will cost.6. medicare+choice) 3. Because only one policy is issued for the entire group. 6. 3. 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. Others include disability income insurance. When they apply for individual insurance. In general. medical. Medigap 4. Individual health insurance is a type of policy that covers the medical expenses of only one person. 8.00a Page 77 of 150 . 5. a single policy covers the medical expenses of many different people (a group) instead of covering just one person. Y 8. the initial cost of establishing group coverage is lower than the cost of issuing a separate policy to each person. Y 7. 3 (hospital. such as average age and degree of occupational hazard. because group insurance allows the insurer to spread the risk over a larger number of people. Long Term care covers nursing home care? (Y/N) Who all are eligible for Medicaid benefits? 1. Unlike individual insurance. 3 2.10 Exercise Pharmacy plans usually have tiers of benefits. 4. 6. Employer-sponsored plans and associations are among the most common sources of group health insurance. Policy extends the Medicare policy by offering additional benefits. Answers 1. 2. For this reason. catastrophic PPO and catastrophic EPO coverage. With group health insurance. they are evaluated in terms of how much risk they present to the insurance company. All people who cannot afford medical care. In case of Dental insurance. Capitation 6. Is used to protect a firm against the loss of income resulting from the disability of a key employee. 7. Key person insurance 5. Unlike group insurance.7 Individual Insurance and Group Insurance.doc Ver 0. individual insurance is generally more difficult to obtain and more costly than group insurance. This is generally done through a series of medical questions and/or a physical exam. where each person's risk potential is evaluated and used to determine insurability. The policy is typically negotiated between the insurer and the "master" policy owner (employer or association) without any inputs from 65736839. plans are similar to HMO plans The federal government regulates Medicare benefits? (Y/N). 6.

00a Page 78 of 150 . or in certain other situations. 6. In 1996. These events can occur when least expected. the person will have to pay the premium for COBRA coverage.8. 6. the Health Insurance Portability and Accountability Act (HIPAA) expanded on COBRA. A person can continue his health insurance for 18 months under COBRA. leaving them without health benefits. In addition.S.  Increase the tax deductibility of medical insurance premiums for the selfemployed. As an employee.8. So the federal government has provided certain laws to help people cope with the situations mentioned above.1 Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) If a person and his dependents are covered by an employer-sponsored health insurance plan.A count on their employer for health insurance coverage. 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. The two most important of these are – 6. The major provisions of HIPAA do the following:  Allow workers to move from one employer to another without fear of losing group health insurance.S. COBRA entitles him to continue coverage under circumstances that would otherwise cause him to lose this benefit. However. The specific policy provisions are all determined in advance.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. his employer is not required to pay any part of it. if his employment has been terminated or if his work hours have been reduced.  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.8 Laws and Legislations Most people in U. death. he is entitled to COBRA coverage only if his employment has been terminated or downsized. he can continue the coverage for 36 months.Benefits ___________________________________________________________________ the member.A.  Require health insurance companies that serve small groups (2-50 employees) to accept every small employer that applies for coverage. 65736839. as are the deductible amount and co-payment percentage. his dependents may be eligible for COBRA benefits if they are no longer entitled to employer-sponsored benefits due to divorce. If a person is entitled to COBRA coverage for other qualifying reasons.doc Ver 0. Most employers are required to offer COBRA coverage.

4.com 3. 4. 65736839. 6. in case.10 References 1.  Coinsurance is the insurance provided by two insurance companies to one individual.00a Page 79 of 150 . “A to Z of Health Insurance” – By Prashant Burse. 6.com http://www.  In case of a joint business venture.   Deductible is usually zero for most HMO plans.9 1. 5. http://www.insurance. 3. Copay is what the member pays to the insurance company for treatment. 2. 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.  Review Questions.yourhealthplans. the other partner is no longer able to perform his duties. which plan is most cost effective and why? State whether true of false – Private insurance companies provide Medicare plans. Long-term care is covered under Medicare.   Medicaid policy is the most expensive type of Indemnity plan. 2.doc Ver 0. Abhishek Virginkar and Saurabh Kulkarni. “Managed Care – An Overview ” – By Amit Shukla.Benefits ___________________________________________________________________ 6. each partner can take out an insurance policy to cover the expenses.

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

Paper claims are received on standard forms. validated for basic information necessary and then loaded into the Claims database. If the primary physician deems fit he may refer the member to a specialist. Claims that fail the edits are routed back to the provider for corrections. 7.1 Claim generation and submission to Providers Members enrolled in Insurance Company’s healthcare programs visit health services providers such as a primary physician. All HMO electronic claims from the Envoy submitter will be directed to a system (pre-receipts) before sending them to core Receipts System. desired cheques are cut by AP (Accounts Payable). They do not bill Insurance Company for services provided. Manual intervention is required for further processing such claims. These claims are then adjudicated using Insurance Company’s business rules and policies. This specific combination depends on plan to which the member has subscribed. The Receipts system is required to receive a transaction in CCFMQ format. The UCK is passed along with each transaction to the appropriate adjudication engine. to decide the payment to be made to providers or denials if any.1. The HMO Reformat will be responsible for reading a CCFMQ record 65736839. The claims will be in a Common Claim Format (CCF) as opposed to the UB92 & NSF format that Receipts system used to receive.00a Page 81 of 150 . This pre-receipts system will identify each claim with a Universal Claim Key (UCK). Electronic forms are routed through a third party (Envoy).1 Claims Intake Process Claims are received from health services providers either as paper documents or in electronic form. The users have the ability to modify the claims online. as well as for catering to general claims enquiries. The claim may be filed either on a standard paper form or electronically. The referral acts as an authorization for the member to visit a specialist. specialist. also claims with any missing information. who are Primary Care Physicians and are Capitated Providers.doc Ver 0. for a combination of fixed number of visits and fixed duration. They are scanned to capture image copies that are then translated to electronic form. Feedback is sent to Claims system again which is used to store the completed claims history in Claims database/files. This PCP files a claim with Insurance Company for non-capitated or specialist services he might have provided to the member.VII 7 Claims 7.Claims ___________________________________________________________________ UNIT . A record of this referral is maintained in the system. This means that they get a fixed fee on a monthly or bi-monthly basis. Complex or ambiguous claims. Claims Online/Pend systems are used for this purpose. Edits within the pre-receipts system are enhanced to include HMO claims. On completion of claims adjudication. this process is known as HMO REFORMAT. Receipts system performs basic edits on these claims and loads it to the Claims database. are put in a ‘PEND’ status. hospital or pharmacy to receive healthcare. Generally these visits by member are made to PCPs. The claims are received by the Integrated Receipt system. Each visit that a member makes to a provider is called an encounter.

If a claim is split in the Conversion. The Load is responsible for passing the UCK to the HMO Adjudication system. Some paper claims cannot be loaded into Receipt System usually due to non-standard formats. The Reformat will also be responsible for passing the UCK along to the HMO system on each transaction.00a DENIALS Page 82 of 150 ACCOUNTS PAYABLE Check to Provider/ Member . Users enter these claims online. Due to limitations of the HMO Adjudication. When Hospital claims are processed Revenue codes are grouped and rolled and then translated into Benefit codes. At the completion of all Receipts system edits. These claim forms are captured on microfilm. directly into the Claims Online Adjudication system.1. The last process within the Receipt System is the Load to the HMO database.Claims ___________________________________________________________________ as input and produce a UB92 Hospital transaction format or a NSF1500 Specialist transaction format as output. Receipts system Conversion. in order to determine if a claim will be Accepted or Rejected. Encounter PROVIDER MEMBER EDI Claim 7.2 ENVOY Claims Intake : DiagrammaticIKFI Paper Claim EDI Referral Prereceipts REFERRAL SYSTEM Receipts Verification 65736839. This process will evaluate each edit flag. This response status serves as the initial response for all HMO claims. Each benefit code represents a detail line. The modifications consist of inquiring on the UCK database table or file and generation of the event response for pre-Receipts system. claims will flow into the Generate Response process. subject to existing Receipts system edits. The generation of a status response is required to be sent back to Pre-receipts system at this point. The Conversion process handles Hospital and Specialist claims differently. The response for claims that have been rejected also represents a final response.doc Check Information CLAIMS SYSTEM Ver 0. 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. modifications are made to establish the UCK segment number. The newly reformatted claims will follow the existing Receipts system path for electronic claims.

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

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

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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 Inform the provider that he/she can return their previous payment or elect to have them debit his/her account after 60 days. If.4  Claim adjudication outputs Check extract o Adjudicated claims that are passed to Accounts payable for check printing.Penalties etc that a Healthcare company liable to pay in certain cases  Any Other Information required . deductible . coinsurance etc depending upon the processing of the claim. the process followed is .Claims ___________________________________________________________________ Cross/Blue Shield). 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. o o 7.  Provide the name and address of the primary carrier and the patient’s name and address and any other pertinent information. 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 . Healthcare company discovers that another insurer is the primary carrier. they will:  Notify the provider that they have discovered that another insurer is the primary carrier. Referral updates o Referrals are updated for no of visits after the claim has been processed properly. o Denial letters are sent if :  other insurance paid in full  experimental procedure not covered  Cosmetic surgery not covered    65736839.3  Update Claim Accumulator updates o This involves updating of Various accumulators for Copay .doc Ver 0. This provision prevents double or over-payment by the carriers. The insurance industry has established standard rules to determine which insurer is primary payor. a.2.00a Page 88 of 150 .2.  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. Claims database updates o Processed Claims stored for maintaining History. after a provider has been paid. thereby giving him/her an opportunity to seek reimbursement from the member’s primary insurer.   7.

no change Explanation of benefits – (covered in other section) 65736839.00a Page 89 of 150 .doc Ver 0.Claims ___________________________________________________________________   Decision re-reviewed.

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 .

in most of the general scenarios.3.3. Principle categories for this payment are as follow:  Quality of Care It measures the quality of care based on physician and member surveys.3 7. 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. provider has tendency to file the same claim again.3. then provider receives payment from primary and secondary insurance companies. then the insurance company will pay the provider adjudicated amount less the copay amount as described by member’s plan. both with a few exception. Mostly all the In-patient type of services and none of the Out-patient type of services are eligible for this incentive. the physicians fill in the data such as quality of operating rooms. would come in the form of claims filed by the providers. assign points / marks. these amounts are then adjusted during adjudication against the claims filed by provider.1.Claims ___________________________________________________________________ 7. which should be covering the visit and specific services for the member. These routines (which are black box to the insurance company’s system).1. When members have encounters with provider. the higher will be the incentive.1 Claim Payments Provider Payments Inputs for any provider payment.1.1. 7. Hospitals send the survey results to Insurance company.00a Page 91 of 150 .3.  Efficiency of Care 65736839.1.1.1 Capitated Provider If provider is a Capitated Provider.3. If the provider is non-capitated.3. Procedures are in place which detect such duplicate claims and avoid the repayments.3. based on some algorithms.3. It becomes mandatory to identify all the types of services that will become eligible for consideration under quality incentive. Higher these points.3 Copay Adjustments If the claim filed required member to pay some copay amount. Once the service is provided to a member. This incentive to be paid is decided as fixed % of the contractual amount between Insurance company and the provider. He has to file claims with all the involved insurance companies.7 Provision for Advance Payment Some providers. especially the big providers like Hospitals. 7. these providers will file claim for the services rendered to the member.6 Provision for Advance Payment Some insurance companys also have a facility to pay the providers some lumpsum amount in advance. administration in the hospital etc.4 COB Adjustments If Coordination of benefit applies for any member. 7. 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. are paid extra for the quality of services they provide.5 Duplicate Claims In case of late payments by insurance company. then claim gets adjudicated against Insurance Company’s business policies and rules as imposed by federal/state laws.doc Ver 0. 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. In the physician surveys. then all his claims are bound to get denied if filed for services covered under capitation. 7. then the claims filed would require specific referral already in place. 7. Over a specific period of time.2 Provider as Specialist If a provider is giving services to member as a Specialist. This data is then passed through ‘United States Quality Algorithms (USQA)’ routines. 7.

For this category: higher the points. then higher will be the costs that hospital incurs and hence the claim amount.3.3. In this case insurance company pays directly to member. the lesser will be the incentives paid. then Insurance Company will then deny such a claim.2.doc Ver 0.3 Deductible Applies Member pays to the provider Out-of-Network and files a claim with the Insurance company. insurance company intimates provider of the extra payment made and provider is required to repay to the company accordingly.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.00a Page 92 of 150 . 7. 7. longer the stay.  Commitment to Managed Care Principles The negotiators have the providers fill in a questionnaire that contains the questions such as: o if the provider sends the data to Insurance Company electronically o if there exists long term contract between hospital and Insurance Company o if nurses from the hospital participate in training programs conducted by Insurance Company The provider has to fill in either Yes or No to each of these questions.1. as defined in the plan adopted by member. part or full payment made by him to provider.2 Member Re-imbursement Following are various scenarios when member is eligible for re-imbursement by The Insurance Company.3.3. 7. 7.2. lower will be the payments. Also.2. a fixed % of adjudicated claim amount is paid back to the member. 7. the payment is made.8 Payment to Insurance Company It may happen that provider claims are incorrectly adjudicated and provider is overpaid. higher the adverse conditions. For each of these measures.2.3. Based on the answers. 65736839. 7. lower will be the payments as it is hospital’s responsibility to see that fewer adverse events arise. then the insurance company will reimburse all the amount paid towards copay back to member. the provider is informed by the Insurance Company regarding the reasons and split of payments. higher will be the payments. medicine and OB/GYN. Under such circumstances. 7. When provider’s claim is adjudicated. If a member spends more time in hospital for a service. system assigns points. through USQA routines.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.4 Co-insurance Applies In this case. points are assigned and based on the points. adverse events and C-section rates. Higher the points.3. So. whether denied or paid.4 Claim Adjustments These are the various types of adjustments that can be made to the claim. If the member has not reached the Deductible limit.Claims ___________________________________________________________________ It measures the efficiency of the care based on length of stay for surgery.

Claim gets completed without adjudication. 7. 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.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).3 Manual Check Adjustment Sometimes a check is required to be created manually if there is a need to adjust amount of payment. when stop payment is done. i. On receipt of the manual check paperwork a Manual claim is entered.1 Refund Adjustment This type of adjustment takes place when a Health Services Provider overpays the provider. A connection is established between the manual check and the claim entered. Original completed claim remains unchanged. The claim does not undergo adjudication. In the process.2 Minus Debit Adjustment In case of overpayment to providers. New negative claims created with negative dollar amount. The check status is changed from open (blank) to Stopped (S). It is completed and stored. cash date for check is recorded and necessary deductions are applied to claim. 65736839. Such a check is created by entering data into the system manually. 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.4. Only in this scenario a stop can be issued on the check. minus debit option is used to create an equal amount negative check. If provider does not agree to cut and send check to refund over-payment. The check status is also changed from open (blank) to Void (V).4. A new set of claims are generated which have amount equal to negative of the amounts of the original claims. The manual check request paperwork is then sent to Claims system. Further claims of the provider are not paid till the all the amount on the negative claim has been recovered. Deduction may be split across multiple claims. there has to be a claim for which a check is created. a letter is sent to the provider notifying of over-payment.doc Ver 0.Claims ___________________________________________________________________ 7. The original claims are overridden with new payment codes. 7.4 Void Adjustment The Claim is completed but the check is still in open status (Check information has still not been sent to the bank) only in this scenario a void can be issued on the check. the original claims remain untouched.4.00a Page 93 of 150 . 7. When provider agrees and refunds over-payment (provider will cut check and send in).4.e. This is to account for the payment being made using the manual check. Provider over-payment letter is generated one claim per letter. 7.4.

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

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. The Explanation of Benefits provides members a statement of claim payments. coinsurance. 7. Medicare submissions are sent to CMS (Center for Medicare and Medicaid services).g. While the Medicaid submissions go directly to the state.6 Claims accepted. The list of claims in the wait status for more information. dedicated to accumulating specific type of data over a specific period. It also gives the cap amounts applicable to him.1 What are Accumulators? Accumulators are generally database records.7. etc are applicable and not for all type of claims. When requesting payment from a secondary payer it is extremely important that the EOB/remittance information be provided from the primary payer.7.1 Accumulators 7.7 7. It is not a bill but an explanation of the benefits. for indemnity or fee for service claim where deductible. It gives the member a detailed explanation of these amounts.00a Page 95 of 150 . 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. 65736839.      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.doc Ver 0. which acts as an intermediary between Health Care Company and the Federal government. Claims rejected and reasons for the same. The encounters have to be submitted in a fixed format called the Uniform Billing Code1992 form.  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. 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.

during predefined period. deductible paid by member in a specific later portion of the effective year. So.3.7. o Members pays remaining deductible (part or full. 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).5 Family Dollars Insurance company’s disbursement to member or the provider. o Plan provision says Carry over deductible is applicable for last 30 days of the plan year.2 Function/Purpose of Accumulators The main use of accumulators is during the claims adjudication process. member + family Co-insurance is also accumulated separately for member as well as member and all his/her dependents. the corresponding accumulators are updated with those amounts for the latest instance under consideration. it accumulates $ 350.doc Ver 0.3 What is accumulated? 7.7. member + family These accumulators include combined figures of co-insurance and deductibles.3.7. It comes into picture when deductible limit is met. depending upon how many visits covered for a specific service to same provider.7.1 Copay – for member.7.4 Visits – for member Visits of the member to provider are accumulated. will be considered as deductible paid towards next year.3.7.7.1 Periodic Accumulators These accumulators will cover up the amounts for period as mentioned in the effective plan for the member.7. 7. 65736839. 7. 7.4. o Accumulator for yr. say partial/full/some percentage of billed. in case member chooses to continue.2 Co-insurance – for member. 7. When the same has been decided. Carry over Deductible Updates Some plans provide for the provision that.00a Page 96 of 150 . Some plans provide for facility of carry over deductible.3. Say.3. 7. o Member’s deductible limit is say $ 500.2 7.member. This reduces burden on member and acts as incentive for member to continue with the co-insurance company.3 Deductible .7. member + family Copay is accumulated separately for member as well as member and all his/her dependents.for member.Claims ___________________________________________________________________ 7.4 Types of Accumulator  7. Accumulators records are updated accordingly in such cases. Example: o If a member XYZ has plan year 01-Jan-2001 to 31-Dec-2001.6 Out of Pocket . member no more pays copay to provider.3.7.7. accumulators for the next period will get updated for the deductibles paid. member + family Co-insurance is also accumulated separately for member as well as member and all his/her dependents. 2001 will go on accumulating the data till end of Nov-2001. the amount of money that is going to be paid to/from a member is decided based on the accumulator amounts. say $100) during the last 30 days of plan year. (Details will come down the line in the document) 7. Once the maximum limit set by plan is met. this figure may be used to decide the method of payment. In a general scenario. 7. In this case.

3. 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. 2. 7. because of this facility. If member chooses to continue.8 Overall Claims system diagram : Figure 3: Claims overview 7.7.doc Ver 0. Review Questions.00a Page 97 of 150 . he now needs to pay $100 less towards deductible in the next plan year. 7. $100 will get updated in these accumulators.2 Lifetime Accumulators These accumulators will sum up the amounts for the life time for a member. 4.9 1. 5.Claims ___________________________________________________________________ o o Then new accumulators will be generated as if paid for the next year 2002.4.

10 References http://www.DOC (System appreciation document for Claims maintainance project) SA_AETEDR2.  Pre-certification penalty is in excess of any deductible and/or coinsurance applicable to the claim. EOB is letter sent after adjudication.    State whether true of false – COB deals with claim payment.Claims ___________________________________________________________________ 6. 7. Accumulators are updated for denied claims. Copay is not the member’s responsibility.   Member encounters have to be submitted to the government in a fixed format.com/ Aetna Batch driver file (CLPRD.ehealthinsurance.doc Ver 0.DOC (System appreciation document) and other docs from Encounter data reporting project 65736839. Claim adjustments can be done before Claim adjudication.DRIVER) SA_AETHMOM2.00a Page 98 of 150 .CLDJABDJ.

00a Page 99 of 150 .doc Ver 0.Claims ___________________________________________________________________ 65736839.

CMS also regulates all laboratory testing (except research) performed on humans in the United States.VIII 8 External Agents 8.doc Ver 0.1 Unit Objectives This unit will acquaint the reader with the role played by the external agents in the Healthcare Industry. a program that is expected to cover many of the approximately 10 million uninsured children in the United States. development of coverage policies.2 Introduction In Heath Care Industry. CMS spends over $360 billion a year buying health care services for beneficiaries of Medicare.  conducts research on the effectiveness of various methods of health care management.two national health care programs that benefit about 75 million Americans. CMS:  assures that the Medicaid. Medicaid and SCHIP. This unit deals with the various different agencies in a Health Care Industry and the role played by them. helps millions of Americans and a small company get and keep health insurance coverage.3 8. And with the Health Resources and Services Administration. and helps eliminate discrimination based on health status for people buying health insurance. CMS runs the Medicare and Medicaid programs . and  assesses the quality of health care facilities and services and taking enforcement actions as appropriate. treatment. intermediate care facilities for the mentally retarded.000 laboratory entities fall within CMS's regulatory responsibility. Medicare and SCHIP programs are properly run by its contractors and state agencies. with the Departments of Labor and Treasury. and makes available to beneficiaries. And CMS. all the services and management activities cannot be carried by the insurance payer itself on it's own. 8.00a Page 100 of 150 .  establishes policies for paying health care providers.External Agents ___________________________________________________________________ UNIT . including regulation of laboratory testing (CLIA).1 Government Agencies Centers for Medicare & Medicaid Services (CMS) The Centers for Medicare & Medicaid Services (CMS) is a federal agency within the U. It requires some help from some external sources or agencies. and financing. and quality-of-care improvement.3. 65736839. CMS maintains oversight of the survey and certification of nursing homes and continuing care providers (including home health agencies. Approximately 158. and hospitals).S. 8. Department of Health and Human Services. researchers and State surveyors information about these activities and nursing home quality. providers. CMS runs the State Children's Health Insurance Program (SCHIP). 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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Required compliance responses aren't standard. 2002. 2000. WHO IS AFFECTED? All healthcare organizations. The Transactions Rule was published on August 17. So the compliance date for that rule is October 16. and procedures Building "chain of trust" agreements with service organization Redesigning a compliant technical information infrastructure Purchasing new. public health authorities.External Agents ___________________________________________________________________   Improved efficiency in healthcare delivery by standardizing electronic data interchange. including: -. employers. employers. Compliance is required for the Privacy Rule on April 14. cause more confusion than clarity. 2000. information systems Developing new internal communications Training and enforcement Now. health plans and health care providers Security standards protecting the confidentiality and integrity of "individually identifiable health information. life insurers."user-based. Steps will include:            Building initial organizational awareness of HIPAA Comprehensive assessing of the organization's information security systems.00a Page 104 of 150 . Effective compliance will require organization-wide implementation. billing agencies." Many of the rules and standards are still 65736839. This includes all health care providers. For example. an organization with a computer network will be required to implement one or more security authentication access mechanisms .fines up to $25K for multiple violations of the same standard in a calendar year -. the effective date is 60 days after a rule is published.specifics that. health plans. clearinghouses. ARE THERE PENALTIES? HIPAA calls for severe civil and criminal penalties for noncompliance. present or future. each of which have generated a variety of "rules" and "standards.doc Ver 0. processes. because organizations aren't. we'll explore the next level of HIPAA . 2001. information systems vendors. administrative and financial data Unique health identifiers for individuals. including Developing new policies. for many of us. or adapting.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. and universities. 2003. HIPAA calls for:    Standardization of electronic patient health. The Privacy Rule was published on December 28. More specifically.depending on its network environment. Let's try to make "Administrative Simplification" simple! HIPAA's "Administrative Simplification" provision is composed of four parts. Normally. service organizations." and/or "context-based" access . 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." "role-based. and Protection of confidentiality and security of health data through setting and enforcing standards. even 1-physician offices. but due to minor glitch didn't become effective until April 14. HOW WILL WE BE AFFECTED? Broadly and deeply." past.

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

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

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

may provide longer periods of continuation coverage. an individual to lose health coverage. except for COBRA continuation coverage. the retired employee's spouse and dependent children. a retired employee. at its discretion. Qualifying Events "Qualifying events" are certain types of events that would cause. Employers and plan administrators have an obligation to 65736839. 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 qualifying events contained in the law. create rights and obligations for employers. 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 1.00a Page 108 of 150 . and in certain cases. 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.doc Ver 0. 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. A plan. and plan administrators and qualified beneficiaries.

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

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

doc Ver 0. In this case. Paying for COBRA Coverage Beneficiaries may be required to pay the entire premium for coverage. it must be offered to you. Certain qualifying events. Some plans allow beneficiaries to convert group health coverage to an individual policy. Duration of Coverage COBRA establishes required periods of coverage for continuation health benefits.00a Page 111 of 150 . COBRA does not prohibit plans from offering continuation health coverage that goes beyond the COBRA periods. The plan must allow you to pay premiums on a monthly basis if you ask to do so. however. the 18-month period is expanded to 29 months. Beneficiaries also may change coverage during periods of open enrollment by the plan. may permit a beneficiary to receive a maximum of 36 months of coverage. 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. For disabled beneficiaries receiving an additional 11 months of coverage after the initial 18 months. 65736839. the premium for those additional months may be increased to 150% of the plan's total cost of coverage. may provide longer periods of coverage beyond those required by COBRA. 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. or a second qualifying event during the initial period of coverage. Premiums reflect the total cost of group health coverage. however. The premium is generally not at a group rate. the option must be given for the beneficiary to enroll in a conversion health plan within 180 days before COBRA coverage ends. 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. plus two percent for administrative costs. including both the portion paid by employees and any portion paid by the employer before the qualifying event. is not available if the beneficiary ends COBRA coverage before reaching the maximum period of entitlement. If this option is available from the plan under COBRA. The premium cannot exceed 102 percent of the cost to the plan for similarly situated individuals who have not incurred a qualifying event. Although COBRA specifies certain maximum required periods of time that continued health coverage must be offered to qualified beneficiaries.External Agents ___________________________________________________________________ A change in the benefits under the plan for active employees may apply to qualified beneficiaries. 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. A plan. The conversion option.

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

syntax. Say True or False. A Clearinghouse collapses the wait cycle into an average of 5-21 days. This is a service that is continually under development. Answers: 1. While we try to keep the information timely and accurate. 8.3 1. 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. Workers need to be aware of changes in health care laws to preserve their benefit rights. Improved efficiency in healthcare delivery by standardizing electronic data interchange is a main feature in HIPAA. it is forwarded to the insurance company responsible for payment. We will make an effort to correct errors brought to our attention. Net result: Improved cash flow. it is returned to the HealthCare Provider along with an explanation of what was wrong. 65736839.doc Ver 0.00a Page 113 of 150 . ______ Contains provisions giving certain former employees the right to temporary continuation of health coverage at group rates.External Agents ___________________________________________________________________ Conclusion Rising medical costs have transformed health benefits from a privilege to a household necessity for most Americans. many weeks would pass before he would receive mail notification that errors were holding up payment release on his submitted claims. Exercise HIPAA Means Health Insurance Portability & Affordability Act. If a claim is determined to be free of typographical.5 Clearing Houses A HealthCare Transaction Clearinghouse performs auditing services on insurance claims. and logistical content errors. 8. we make no guarantees.5. If errors are detected. The HealthCare Provider may then correct the related errors and resubmit for another pass.4. A good starting point is reading your plan booklet. COBRA creates an opportunity for persons to retain this important benefit. Most of the specific rules on COBRA benefits can be found there or with the person who manages your health benefits plan. COBRA 3.1 Benefits Of A Clearinghouse  Cash Flow If a HealthCare Provider were to send claims through the mail. 3. The Department of Labor maintains this article to enhance public access to the Department's information. Say True or False. True 8. down from 4-8 weeks on paper claims. This process may be repeated until the claim passes the inspection. False 2.

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

The following chart will illustrate all the groups Clearinghouse Types  Type 1 Type 2 Type 3 Biased processing. Exercise List down the Benefits of a Clearinghouse.4 1. Insurance companies typically do not charge anything to receive claims. dental.00a Page 115 of 150 . Insurance Claims. all clearinghouses are not created equal. close affiliation with leading Type 2 clearinghouses. "Administrator" means any person who adjusts or settles claims on.   It may be helpful. Primary income is derived from the submitting HealthCare Provider. close affiliation with insurance companies Unbiased. to understand how clearinghouses make their money. "Administrator" does not include any of the following: 65736839. standard working relationship with insurance companies Unbiased.doc Ver 0. Cash Flow. but render unique and superior audits resulting in improved services at a lower cost to the HealthCare Provider.External Agents ___________________________________________________________________ As indicated. most income derives from insurance companies and is formally referred to as "rebates". Unbiased and "rebate" free. Rebates. thus avoiding the typical enormous overhead of Type 2 clearinghouses.3 Clearinghouse Income  Type 1 Biased. Type 3 clearinghouses utilize Type 2 gateways for transporting claims. 8. to whom services are rendered. 2. Type 3 clearinghouses "lease" Type 2 gateways to insurance companies at volume driven rates.  Type 2  Type 3 8. Type 2 clearinghouses followed up by negotiating rebates as well. As Type 1 clearinghouses developed "rebate" income. imply that something was initially received.5. 2.6 Third Party Administrators Third Party Administrator is an entity required to make or responsible for making payment on behalf of a group health plan. residents of this state in connection with life. however. Typically competitive in cost and superior in service. Guaranteed Delivery & Connectivity. 8. health. They typically fall into one of three possible group types.5. Answers: 1. A HealthCare Transaction Clearinghouse performs auditing services on ___________ _______. or disability insurance or self-insurance programs.

 Fail to disclose in written form the method of collecting and holding any plan sponsor's funds. 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. including any minimum attachment point factors.7 Specialized Adjudication Engines/Companies Adjudicator A powerful engine that links to the existing software equipped with simple Boolean rules. No person shall solicit a plan or sponsor of a plan to act as an administrator for. provided the state of domicile recognizes and grants licenses to administrators of this state who have obtained licenses under such sections. upon application. Levels of the specific excess insurance stop-loss deductible. at least once annually. 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.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. health.00a Page 116 of 150 . or provide administrative services to. Features: Repricing 65736839. 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.   Administrators may be tested and shall be licensed by the superintendent of insurance in accordance with rules adopted by the superintendent. 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.doc Ver 0. that enables to conquer the mysticism of Claims Adjudication. 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. and any ownership relationship of five per cent or more between the administrator and such insurance payers. 8. dental. to the plan sponsor all of the following: All fixed plan costs. identifying what each fixed cost includes.16 of the Revised Code.  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. 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.01 to 3959. The names of all insurance payers providing protection for the plan sponsor's plans. be licensed without testing. Any person that administers an insured plan or a self-insured plan that provides life. or disability benefits exclusively for the person's own members or employees. The aggregate excess insurance stop-loss attachment point factors.  Fail to disclose in written solicitation material and on an on-going basis. Any person who administers or operates the workers' compensation program of a selfinsuring employer under of the Revised Code.

External Agents ___________________________________________________________________ Validates eligibility of patients. supporting brokers in plan development. As a full-service agency.doc Ver 0. procedures. one or more full-time URAC reviewers analyze the applicant's documentation in relation to the URAC standards. enroll.1 Accreditation Agencies The Accreditation Process Organizations applying for accreditation participate in a process that entails a rigorous review occurring in four phases.00a Page 117 of 150 . 8. The applicant's documentation usually consists of.1. diagnoses and the Medicare fee schedule. the remaining three phases of the accreditation process cover a period of approximately three to six months. These phases include the following: 8.9. This system comes equipped with "AccuChecker for Windows". sample template letters. in an effort to maximize cost containment and fairness in adjudicating claims.1 Desktop Review In the desktop review process. like for example Workers Compensation cases. purchase. and preserve the integrity of brokerclient relationships. consultation. 8. After receiving a desktop review summary. which consists of completing the application forms and supplying supporting documentation. as well as plan management and customer service. negotiation. and program descriptions and plans for departments such as quality management and credentialing. a comprehensive database that contains procedures. the leading accreditation organization for traditional health insurers). case installation and communication. formal policies and procedures. also uses the HFCA published guidelines for medical procedures. resolve complex service issues. the applicant usually must provide additional documentation clarifying any pending issues. If you process claims that require different fee schedules. "AccuChecker for Windows" has the 2001 tables of procedures and ICD-9 codes. 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. Once the application and base fee are received by URAC (The American Accreditation Healthcare Commission/Utilization Review Accreditation Commission (URAC). including licensing and appointment with insurance payer. organizational charts. the system allows you to insert additional files with the information needed. 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.9.8 General Agents They provide end-to-end connectivity that allows brokers and their clients to shop. they provide valuable services. position descriptions. serve and renew policies. contracts. The initial phase "Building the Application". 65736839. usually takes several months.9 8. but is not limited to. They are the people who work behind the scenes to reduce administrative hassles.

g. management is interviewed about the organization's programs and staff is observed performing its duties. During the onsite visit. Conditional accreditation may also be awarded to companies determined to be "start-ups". audits are conducted and personnel and credentialing files analyzed. carried out by the same team that performed the desktop review. When these follow-up activities are complete.External Agents ___________________________________________________________________ 8.1. the accreditation review team conducts an onsite review to verify compliance with the standards. 8.. If an accredited company is unable to comply with URAC Standards.2 Onsite Review After the desktop review is complete. Each accredited site is given its own certificate. After reviewing the summary and considering the Accreditation Committee's recommendation. Complaints against an Accredited Company 65736839. but incomplete implementation of certain policies and procedures. which has the authority to grant accreditation.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. Follow-up activities for organizations receiving conditional accreditation or corrective action may include submission of additional or revised documentation and another onsite review. e. Conditional accreditation may be awarded to applicants who have appropriate documentation. 8. In addition. 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.1. Organizations that are unable to meet URAC standards may be placed on corrective action status.4 Accreditation Status Applicants who successfully meet all requirements are awarded a full two-year accreditation. This will help the applicant differentiate its various products in the health care market and target a variety of current and potential clients.9. During this review. attesting to the program the organization is accredited for. the Executive Committee makes a final accreditation determination. An accreditation recommendation is then forwarded to URAC's Executive Committee.9.1. or choose to withdraw. Accredited organizations also provide copies of accreditation certificates to regulators in states where URAC accreditation is deemed.9. a follow-up executive summary is submitted to URAC's committees for a possible change to full accreditation. Education and quality management programs are reviewed in detail as well. its accreditation will likely be rescinded.00a Page 118 of 150 . URAC reviewers also share "best practices" and provide other helpful guidance. The committee review process begins with a written summary documenting the findings of the desktop and onsite reviews. denied accreditation. Ongoing Compliance with the Standards Accredited organizations must continue to remain in compliance with the applicable standards throughout the accreditation cycle. Accreditation Certificates A certificate of accreditation is awarded to accredited organizations.doc Ver 0. and an accreditation certificate is issued to each company site that participated in the accreditation review. This summary is submitted to URAC's Accreditation Committee for evaluation with discussion with the review team as needed.

online formal application which contains questions specifically related to the Standards. URAC will send the primary contact person a letter and/or email confirming receipt of the preapplication. 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. Web Site Accreditation Process The Web site accreditation process has some notable differences from the other accreditation programs. 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. Sanctions may range from a letter of reprimand to revocation of accreditation. URAC first requires applicants to submit a “pre-applications” including payment information and general information about the company and it’s Web site. with the sponsoring employer or association paying all or part of the premium. onsite visits are not "required" during the application process and a telephone interview of corporate officials is conducted instead.doc Ver 0. providers or regulators. After an investigation of each complaint. URAC may sanction an accredited company. The application process is divided into two distinct phases: 1) the pre-application. URAC reserves the right to conduct an onsite review if the telephone interview and formal application are inconclusive. members purchase individual insurance directly from an insurance company. Complaints may originate from consumers. and 2) the formal application. Unlike group insurance. onsite review. This is generally done through a series of medical questions and/or a physical exam. Individual insurance is somewhat more risky for insurers than group insurance. and presentation of the application to the URAC committees. individual insurance is generally more difficult to obtain and more costly than group insurance. depending on the nature and frequency of the violations. With group health insurance. Member’s risk potential will determine whether he qualifies for insurance and how much the insurance will cost. Accreditation Cycle and Reaccreditation URAC accreditation is granted for two years starting the first day of the month following URAC's Executive Committee approval. they are evaluated in terms of how much risk they present to the insurance company. In certain circumstances. because group insurance allows the insurer to spread the risk over a larger number of people. Employer-sponsored plans and associations are among the most common sources of group health insurance. 65736839. URAC will initiate the formal application process. Once the pre-pay is processed. Because only one policy is issued for the entire group. Unlike other URAC accreditation programs. Once completed. the initial cost of establishing group coverage is lower than the cost of issuing a separate policy to each person.00a Page 119 of 150 . a single policy covers the medical expenses of many different people (a group) instead of covering just one person. 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. which may or may not include an onsite visit. Individual health insurance is a type of policy that covers the medical expenses of only one person. For this reason. When they apply for individual insurance.External Agents ___________________________________________________________________ URAC has a grievance procedure for investigation of complaints about an accredited company. 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 only real disadvantage of group insurance is limited or no freedom to customize the policy to member’s individual needs. his claim is adjudicated online by the Real time Adjudication System. Health Insurance sets up a contract with each of them. based on the manufacturer. 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. for all the products they wish to add to preferred drug list. The premium for group insurance is calculated based on characteristics of the group as a whole. such as average age and degree of occupational hazard.00a Page 120 of 150 . but if he buys drug outside the preferred drug network. where each person's risk potential is evaluated and used to determine insurability. product indicator etc. The Volume Discount System runs on a quarterly basis. 65736839. client. A member can take a plan. The invoice amounts and the details are communicated to the manufacturing companies. Whenever a member goes to buy a drug from a pharmacy. as are the deductible amount and co-payment percentage. The contract details of every manufacturer are set up through some process like Volume Discount on-line processes. Doctors as well as pharmacies are provided with the preferred drug list (usually on-line). he has to pay higher Co-pay. In the invoicing stage. In general. A member has to pay standard Co-pay when he buys a preferred drug. Invoices for the dollar amounts payable by each manufacturer is prepared. either electronically or through postal mails. An extraction job runs on this database every quarter and pulls out those claims for which there are rebate contracts set up. the relevant details are entered through Volume Discount Allocation system.doc Ver 0. which is an independently managed US wide database for drugs. 8.10 Drug Manufacturers Health Insurance group identifies potential drug manufactures. along with the business rules from the contracts and summary files are obtained which form the input to the invoicing stage. Once the claim is adjudicated. group. a set of jobs does the actual rebate amount calculations. who to promote the sales. want to put their products on preferred drug list/network. all eligible people can be covered by a group policy regardless of age or physical condition. This process also generates detailed utilization information to support rebates invoiced. 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). Actual rebate value is decided when the contract is set up and varies over a wide range depending on the contract and manufacturer. The specific policy provisions are all determined in advance. Doctors can prescribe a drug outside this preferred list. it is entered in the database. but this plan attracts higher premium. The drug information is obtained from First Data Bank. The policy is typically negotiated between the insurer and the "master" policy owner (employer or association) without any input from the member.External Agents ___________________________________________________________________ Unlike individual insurance. Various inclusion/exclusion rules are applied. 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. 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. which allows him to buy outside the preferred network for same Co-pay. Once the rebate checks arrive. contract.

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

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

9.Summary ___________________________________________________________________ UNIT .00a Page 123 of 150 .IX 9 Summary 9.doc Ver 0.2 Workflow The detailed workflow for the healthcare industry can be represented as shown in the Following figure. Figure 4: Detailed Workflow This diagram can be broken down into following stages – 65736839.1 Unit Objectives This unit will summarize the contents of this course material by presenting a detailed description of healthcare industry workflow.

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

The federal spending on healthcare also has been on a steady rise. The government controlled Medicare and Medicaid are amongst the most important healthcare plans available. This helps reduce the burden on the insurance company and speeds up the process. providers. If the claim requires very specialized processing (and if the rule engine for that is not available with the insurance company). then the claim adjudication is outsourced to a company specializing in adjudication of such claims. If the claims are found to be free of such errors. Incorrect claims are returned back to the member (or his PCP whoever has file the claim). 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.3 Review Questions.4 References. In case the claims have incomplete information or the information is ambiguous. There are several government agencies that help in regulation of the healthcare industry. the claim examiners do the adjudication manually. which paved the way for the managed care model. The federal government too. it was the path breaking HMO act of 1973. then the member is paid for his expenses. which has since then dominated the market.doc Ver 0. 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. There is usually a rule engine (a software) in place for adjudication. they are sent to the insurance company. 65736839. 9.2. Hence the insurance companies try to reduce the time for adjudication by going automatic claim adjudication systems. as otherwise these claims would have to be adjudicated manually. plays an important role in shaping the way the industry functions.S.2.00a Page 125 of 150 . policy that are stored in their respective databases.A.5 Effect of external agencies Health insurance is a highly regulated area in the U. 9. NA 9. The company validates the claims based on various factors (as were detailed out in the unit on claims). In short claims adjudication requires lot of database interaction and is the most complex of all processes. Claims adjudication requires a lot of information about various entities such as members. If the claim is found to be a valid one. the primary payer takes care of the COB or coordination of benefits.Summary ___________________________________________________________________ 9.4 Member has filed a claim In most cases the claim is first validated for typographical and information errors by clearinghouses. The information about the entire processing is usually stored in a database for further reference. As a matter of fact. He is also sent an EOB detailing the payments made and the reasons for those. In case of the member having coverage with multiple carries. The turn around time take to process the claims is also an important consideration for members and providers.

doc Ver 0.00a Page 126 of 150 .Summary ___________________________________________________________________ 65736839.

850 48. 1998-2003 (Millions of U.800 20. by Region. there are Insurance-based systems in which providers are subcontracted by the government.756 50.5 45.408 69.doc Ver 0.090.752 140.259 194.804 109.523 442.829 31.402 66.00a Page 127 of 150 .834 10.187 40.050.8 46.551 45.612 1.140 5.444 184.668 44.819.931 1.144 13.393 411. Whereas they are Tax based systems (all providers are government owned) are in vogue in UK/Australia.979 3.018 91.479 9.2 Appendix B: The world Healthcare market and Healthcare IT spending The US healthcare market is predominantly privately run.1 Appendix A: Total E-Business Services Forecast for Healthcare Total E-Business Services Forecast for Healthcare.1.2 835.867 161. Japan and Australia.164 417.5 515.314 25.988 210.437 266.146 592.6 43.201 2.843.Appendix ___________________________________________________________________ 10 Appendices 10.805 646.917 29.477 141.122 17. Dollars) Healthcare 1998 1999 2000 2001 2002 2003 CAGR (%) 53.3 Source: Dataquest (January 2000) 10.674 32.682 258.741. 65736839.403 1.1 1.020 293.628 289.285 816.979 363.5% in Europe.749 5. In Germany/ France.113 500.8 Asia/Pacific Canada Europe Japan Latin America Rest of World United States Total Healthcare Worldwide 42.964 151.081 81.268.S.505 54. Other countries spend less on IT as a % of revenues.606.086 14.877 1.

Inc) 10. (Source: Gartner Research. Healthcare market. Other countries spend less on healthcare than the US does because single payer systems tend to have efficiencies in purchasing. Proteomics and Bio technology) revolutionize health care. a core focus for most governments around the world will continue to grow as newer technologies and sciences (Genomics. but the profit angle is increasingly focused on. less choice to patients and administration efficiencies. (Source: Gartner Research.doc Ver 0.3 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. investment in IT in healthcare is at a low of 3% as compared to an overall average of 6% and 12% for Financial services. Inc) 65736839.00a Page 128 of 150 .Appendix ___________________________________________________________________ Worldwide.

Service Area is determined by the location of the subscriber's primary care doctor. 70% of the Federal budget of the US.a whopping number by any standards.70 $413.00a Page 129 of 150 .doc Ver 0.30 The foregoing rates apply in the Service Area specified above. 2001 ABCDEF Inc Effective Date 10/01/2001 Renewal Date 10/01/2001 Service Area Colorado .Appendix ___________________________________________________________________ US is the largest spender in this market. The total health care spending (by private and public in the US) is 1.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. 65736839.US also leads in the IT development of this market.4 Appendix C: Sample Quote Sheet Page 1 XXXX Proposal For July 26.00 $264. Rates will vary for other service areas. (Source: Gartner Research. account for 43% of the world spending. Inc) 10.3 Trillion.60 $227.

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. Benefit Waiting Period (BWP) Standard BWP is 3 months minimum.which is intended to facilitate comparison of health plans. an unmarried child who is a full-time student under twenty-four (24) years of age and who is financially dependent upon the parent..doc Ver 0.00a Page 130 of 150 . (a) 2 tier which is average rate for employee only and employee/family. Rates are pending approval by state regulators and are subject to adjustment based on regulatory determinations.The carrier also must provide the form. Any changes in benefit level or conditions stated above may require a change in rates. 07/26/2001 1:48:14 PM 7011882 LIFRAM12 65736839.e. 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. There are two different rate structures available depending on the employer case size. 6 months maximum or match the incumbent carrier's BWP up to 6 months maximum. This proposal is subject to change at any time prior to the acceptance by AUSHC of Employer's offer.Appendix ___________________________________________________________________ Quote Conditions Assumed Dependent Eligibility Dependent means a spouse.within three(3) business days.employee/spouse. to any person who is interested in coverage under or who is covered by a health benefit plan of the carrier. employee/children and employee/family.The form must be provided automatically within three (3) business days to a potential policyholder who has expressed interest in a particular plan. There are three different rate tiers available when electing the composite rate structure. 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). i. and an unmarried child of any age who is medically certified as disabled and dependent upon the parent.employee.(b) 3 tier whichis an average rate for employee only. an unmarried child under nineteen (19) years of age.Groups with 10 or more eligible employees have the right to see what the premium would be quoted either of two ways.Groups with under 10 employees may only elect an age banded rate structure. upon oral or written request. spouse or children and employee/family and (c) 4 tier which is an average rate for employee only.

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

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

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