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

.131 __________________________________________________________________________________ 65736839......................1 The Accreditation Process.....................101 8......4.....................................4.2 Clearinghouse versus Direct Filing...........103 8.....................3................................4 Member has filed a claim...................121 8...................................................................125 9...............................103 8.........................7 Exercise..........1 The Beginning: Member wants to purchase insurance........................5 Effect of external agencies.............9 Accreditation Agencies..................................................5.............116 8...................3 Clearinghouse Income...2 Appendix B: The world Healthcare market and Healthcare IT spending..........................................2........ 1..............5 National Information Center on Health Services Research and Health Care Technology (NICHSR)..................................115 8.....3....3...........3...120 8.......................................................102 8....................3 Review Questions......................................................4 Agency for Health Care Research and Quality (AHRQ) ................4 Appendix C: Sample Quote Sheet.............................................127 10........................3 Centers for Disease Control and Prevention (CDC)...1 Benefits Of A Clearinghouse.....3...117 8............................ Inc)............105 8.......................................106 8.10 Drug Manufacturers............................................................1 HIPAA.......................................................................6 Health Resources and Services Administration (HRSA).102 8...................0 Page 4 of 132 ..........2 Workflow ..2................................................................4..2 Getting a provider...............4 References................................113 8...123 9.2 DEPARTMENT OF HEALTH AND HUMAN SERVICES (DHSS)..103 ELECTRONIC HEALTH TRANSACTIONS STANDARDS ...........3 Appendix C: The Cash Flux of the US Healthcare Industry..................................................................Healthcare Market Overview ___________________________________________________________________ 8.......................................124 9....4 Government Acts and Regulations.......................................................2 CORBA.............5.........................124 9...................3 Exercise...............127 10.......................................................................................................4 Exercise....................2...114 8...............................................121 9 Summary..........................................................117 8.....................................117 8.......................127 10..............................125 9........124 9..................................................................................125 9..................................................113 8.....1 Appendix A: Total E-Business Services Forecast for Healthcare.........................................5 Clearing Houses..........2..................103 8.............................3.........................................125 10 Appendices.....................................................................................................................5.115 8..........................................................................2...............8 General Agents.............................12 References...........................9..............................................................................................................1 Unit Objectives ........................128 10...................................129 11 Glossary..7 Specialized Adjudication Engines/Companies................11 Review Questions.....................................................................115 8............128 (Source: Gartner Research...........................doc Ver....................103 8...........3 An Enrolled member wants to seek medical services.................5.123 9.............6 Third Party Administrators...........................113 8......................................123 9...............................

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

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

Hartford. E. Managed Care Market Still Top-Heavy in the sense the managed care sector is fairly concentrated.000 in 2000. Pharmaceutical costs are rising about 15 %. Ongoing pressure to reduce healthcare costs will prolong the merger trend in coming years. among others. Group Insurance etc. with the top 10 HMO chains accounting for close to 2/3 of total HMO enrollment in the US. HMOs cut 400. the number continues to climb.5 Million members enrolled in Medical HMO Plans. Retirement and Investment Services.cigna. Aetna.000 members in 1999 and another 327. Property and Casualty. Medical costs rose 7. CT www.com __________________________________________________________________________________ 65736839. More than 35 class-action suits have been filed against managed care companies to date. MN www. The last few years have seen Rising Costs for the MCO (Managed Care Organization).g.Healthcare Market Overview ___________________________________________________________________ labor costs (typically 40 -50 % of hospital operating costs) are steadily rising (specialized skills shortage). which collectively serves 21. including Aetna (affecting 355. Provides both Indemnity and HMO based Health insurance plans 21 million subscribed members in various health plans. Recent times have seen HMOs exiting Medicare Choice plans. Numerous companies have exited Medicare Choice markets following implementation of the BBA in 1997.aetna. The largest privately held chain is the Blue Cross/Blue Shield Association. 10.com Into Health Care. Furthermore Managed Care Consolidation has seen larger companies acquiring smaller.000 members). Individuals. Hartford.0 Page 7 of 132 . undercapitalized players.com Leading provider of health and retirement benefit plans.unitedhealthgroup. HIPAA is going to have sweeping effect on HMO. the rapid expansion of the elderly segment of the population is presenting HMOs with a new set of challenges. 1. resulting in more people covered.3. Aging Population Poses New Challenge for the Healthcare organizations. People older than 65 years (currently 14%) are estimated to rise to 18.2 Trends in Healthcare – Payer Space There has been a rise in Regulations & Lawsuits against payers. on average.6 million Americans. Prescription drug coverage has increased (95% of all members). Large HMOs are notifying the HCFA of their intent to exit Medicare + Choice market in 2001. 1. Plans available across the country United Health Care Minneapolis. These companies cater to small and large Employer Groups.3 million of those are Managed Health Care Members includes 5. Provides both Indemnity and HMO based Health insurance plans 6. Aging of the baby boom generation (born between 1946-1964). CT www.5% in 2025. and also provide coverage for members participating in government programs like Medicare and Medicare.3 members of Prudential Health Care recently acquired. And this has resulted in higher costs.5% in 1999.doc Ver.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. which requires them to re-look at their transactions. 1. Cigna.

5 References AETNA Intranet http://www.doc Ver.gigaweb.jup. no risk).com/ http://www. About 5.8 million self-insured members (fee basis.com/ http://www.000 Medicaid Members In addition to the above companies there are two large Non-profit Managed Care entities: Blue Cross Blue Shield Kaiser Permanente These operate in various states by having separate HMOs set up in each state. operates in many markets.com/ http://www. 1.000 Medicare members and 530.gartnerg2.Healthcare Market Overview ___________________________________________________________________ Primarily into Managed Health Care. 445.0 Page 8 of 132 . 1.com/ http://www. 1.aetna.com/ __________________________________________________________________________________ 65736839.gartner.8 million Fully Insured Managed Care Members.

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

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

Healthcare Overview ___________________________________________________________________ Request Quotes Aetna Sales Quotes Customer Policy maint and billing Under writing Provider Admin Policy Entry Claim/Elig Inq Member Help Desk Provider Claim Policy Providers Claim Medical Service Claim Office Benefit/ Provider Inquiry Claim Routing/ Adjudication EOB Claim Reporting ERA EFT Members To Provider Bank Actuaries Figure 1: Managed care workflow __________________________________________________________________________________ 65736839.doc Ver. 1.0 Page 11 of 132 .

A variant of this is the Company Paid Groups. He can purchase this insurance coverage for himself and his family (also called his dependents). 1. __________________________________________________________________________________ 65736839.4 2. The providers enter into an agreement (contract) with the insurance company. the members have to pay for healthcare coverage). In such a case the employer becomes his plan sponsor and the insurance is known as Group Insurance.0 Page 12 of 132 . A member is a person who purchases insurance from (or enrolls with) an insurance company. a pharmacy or hospitals are all referred to as providers. One of the most popular of these forms is a fixed monthly fee (capitation fee). Members.2 Providers. For insurance company. from the provider’s point of view it’s a choice between a fixed income and a varying income (which may be more. While on one hand capitation ensures a fixed monthly income for the provider. group insurance schemes are able to get better deals for their members than in case of individual insurance. they are feasible only in case of very large organizations. and is a very good illustration of the amount of importance that is attached to health insurance in U. in which the employers pay for the healthcare subscription (in case of normal group insurance. This way. He is free to choose any of the services offered by the insurance company. However. but the trend is towards group insurance due to its basic advantage of reduced cost and enhanced services. Group insurance allows the insurer to spread the risk over a larger number of people. Reduction in this cost to the member is a great advantage with group insurance. In most cases. However. he has to pay for those services. A group has much more bargaining power due to the simple fact that group insurance is less risky for the insurer. 2. it also restricts his earnings. they are able to achieve a balance between providing desirable healthcare coverage to their employees without causing administrative overheads. or to those who do not have a employee sponsored group insurance scheme.4. A Provider is that entity which offers actual medical services to the members. So. Though self-insured schemes are quite popular.1 Healthcare pillars.Healthcare Overview ___________________________________________________________________ 2. Under this agreement they provide medical care at reduced rates to the members. Individual insurance is restricted to people who need to have specific coverage not offered in their group scheme. This is a powerful perk used to retain good staff. Both individual and group insurance. There are other variants of insurance in the market. A doctor. or less. they outsource the administrative part to the insurance companies while retaining the money reimbursement part with themselves. his employer will pay for his insurance coverage. The main advantage with group insurance is the freedom of choice for a member.S. have their advantages and disadvantages.A.4. as the total expenditure remains constant irrespective of the number of members having to seek medical services. while in case of individual insurance the risk is concentrated on a single member and his dependents. these companies do not have the infrastructure to perform as an insurance company.doc Ver. Due to its bargaining power. capitation helps them to forecast their spending. in return they are offered monetary benefits by the insurance company. These monetary benefits are offered in various forms. depending on his popularity with the patients). They offer a great flexibility to the company in providing insurance of choice to the employees. This is known as Individual Insurance. 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. In case of some large corporations like AT&T or IBM the company itself provides insurance to its employees. So. Such groups are known as self-insured groups.

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

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

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

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

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. This unit gave a brief overview of the healthcare industry to the reader.  Actuarial: This involves analyzing the trends. Actuarial decides the factor to be applied to renewal rates of benefits offered in that region. It started with the genesis of healthcare in the U.S.6 Summary.Healthcare Overview ___________________________________________________________________ covered under the policy. future liabilities. Analysis of claims from a particular geographic location may reveal an increase in claims in that region due to reasons related to environment.A and then introduced the five pillars of healthcare. 1. new products introduction etc 2.0 Page 17 of 132 . We shall analyze this figure at the end. contingency matters and prior details to come up with factors to alleviate risks. It’s the area responsible for setting rating algorithm and the pricing factors to be used in rate calculation.g. after a detailed description of all pillars has been given. The details about the pillars and the other topics mentioned in this unit will be presented in the subsequent units. __________________________________________________________________________________ 65736839.doc Ver. In the end the reader was given a brief overview of the managed care workflow. An Explanation of benefits (EOB) is sent to the member describing the payments made and indicates the share that the member has to pay. E. arranging for reinsurance. The workflow shown in figure 1 represented the workflow of a managed care organization. The more accurate and detailed representation of the workflow of the healthcare industry is given the following figure.

4. 3.0 Page 18 of 132 .8 References. 1.com http://trochim. “Future of managed care” by Tufts managed care institute.insurance.doc Ver.human. 2.7 1. __________________________________________________________________________________ 65736839. 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. Review Questions.edu/ “History of managed care” by Tufts managed care institute.yourdoctorinthefamily.com www.      www. 2.Healthcare Overview ___________________________________________________________________ Figure 2: Detailed Workflow 2.cornell.

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

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

an insurer provides ID cards to its members.Members ___________________________________________________________________ UNIT . 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. These will be used to show the validity of the policy taken.2. Claim will be validated and the insurer will reimburse the amount to the provider/member.III 3 Members 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 pictorial view of the process is as shown in figure 1. Once enrolled.0 Page 21 of 132 .1 Insurance Business: An Overview. The provider/ member then will file a claim to insurance company. Some employers sponsor healthcare plans to its employees and its dependents. __________________________________________________________________________________ 65736839. Member can go to a service provider (hospital.1 Unit Objective This unit will acquaint the reader with the role played by the member in the Healthcare Industry.doc Ver. 3. doctor) to avail the service. 1.2 Introduction Member is a person who is the actual beneficiary of the healthcare plan.

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 . 1. __________________________________________________________________________________ 65736839. Insurance: An Overall Picture. Fig 2.doc Ver.

Individual insurance often doesn't provide as much coverage as group insurance policies in the same price range. his/her coverage could be canceled altogether. a member is responsible for 100% of the cost. In a group insurance situation. much easier to come by when someone is healthy. group insurance is generally a better option. An unexpected illness or serious injury can put him/her and his/her family in financial peril. the insurer will want to know everything about his/her personal health history. the provisions of the policy are negotiated between the insurer and master policy owner (usually an employer or association). since many insurers use information from the Medical Information Bureau to determine whether an applicant is insurable. Disadvantages of individual coverage Often. But.1 Individual and Group Insurance in detail Individual Insurance Individual members are those who purchase insurance directly from an insurance company. This is generally done through a series of medical questions and/or a physical exam. Although someone may think he/she can do without health insurance. Deductible and co-payment affect the premium. 3. Advantages of individual coverage If available. he/she may find it difficult to obtain coverage. a person may still be able to get a policy with an exclusion rider.doc Ver. is usually available without taking a medical examination or answering health questions. by contrast. a person is directly in control of his/her policy. Group insurance. Before issuing an individual insurance policy. He/She can negotiate to have certain provisions included or excluded. Moreover. ironically. With individual insurance. however.3 3. 1.3. and can often choose his/her deductible amount and co-payment percentage. If he/she is already sick or have a history of health problems. the employer or association pays at least part of the cost of group insurance.2 How to get individual insurance? To get individual insurance. he/she is evaluated in terms of how much risk he/she present to the insurance company. Individual insurance is somewhat more risky for insurers than group insurance. he/she is taking a major risk by choosing not to get coverage. just to make sure that he/she is getting the best coverage for his/her money. individual insurance is generally more difficult to obtain and more costly than group insurance.Members ___________________________________________________________________ 3. individual coverage is infinitely better than being uninsured in the event of illness or injury.3. or get in touch with the insurance agent. For this reason. When an individual apply for insurance. if it is later discovered that he/she withheld information from the insurer. individual insurance is often more expensive to make up for the insurer's increased risk exposure. He/She will probably want to get quotes from several insurance companies before choosing one. The risk potential will determine whether person qualifies for insurance and how much the insurance will cost. Individual insurance coverage is. If the insurer doesn't want to cover a particular health condition.0 Page 23 of 132 . It is unwise to try to hide a pre-existing condition from the insurer. a person can either contact the insurer directly. However. __________________________________________________________________________________ 65736839. because group insurance allows the insurer to spread the risk over a larger number of people. In case of individual insurance. since it is usually more comprehensive and less expensive than individual insurance.

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

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

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

a payment can be made directly on a yearly. they are entitled to claim tax relief on the full premium. 1. thereby reducing their effective rate of BIK to the standard rate of income tax. retention and goodwill. the company can claim healthcare payments under the Corporation Tax shelter. Benefit in the premium amount Some group schemes qualify reduction in the premium amount.Members ___________________________________________________________________ Fast access to the best in modern healthcare Members can choose admission dates to fit in with work and family commitments. quarterly or monthly basis. Ease of Payment Payments can be made by direct debit through company bank account. Plan Sponsor is profited by:  They get the Health Insurance plan at a cheaper rate. SI Groups pay "Service Charges" to insurer for administration / management of medical insurance (adjudicating claims etc. (Examples are the Irish Farmers’ Association. The SI group also has to maintain certain bank balance at all times to ensure the continuance of medical benefits to their employees. Flexible cover options Once employer chooses a particular level of cover.5 Affinity Groups An Affinity scheme is appropriate for members of business organizations. The financial risk is borne by the Plan Sponsor. Tax Relief for employees Employees are liable for Benefit-in-Kind (BIK) taxation on the paid Healthcare premium at their top rate of tax. sports clubs and interest groups.  Their Work will be given higher priority by the insurance company. 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. staff members can select a higher plan and simply have the balance deducted from their salary. professional bodies.) for their employees. Alternatively. the Credit Unions and the Small Firms Association. Benefits to the company Introducing a Healthcare group scheme for employees. In a company-paid scheme. 3. But these figures are much lower than paying premium to cover all the employees. half-yearly.) 3. one can provide his/her company with significant benefits in terms of employee recruitment. Insurance Company is profited by:  Getting a fixed sum of money for adjudication of claims.6 Self Insured Group Plan Sponsors / Companies who pay the Claims' amount of their employees themselves are called SI (Self Insured) Groups.0 Page 27 of 132 .  Risk is moved to the Insurance Company.doc Ver.  They will be given more priority for processing of their claims then others get.3. leading to less stress for them and their employees. as it is helpful in growing their relationship. __________________________________________________________________________________ 65736839.3.

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

Answers: 1. The biggest challenge in setting up an Archer MSA may be finding a company that offers them. 3. 5.  Someone. is not eligible to open an MSA.850 for families). insurers are running into problems with state laws that prohibit such high-deductible plans. Many financial institutions are also still in the development stage with their Archer MSA account products. having additional coverage under a health plan that is not a high deductible. there are exceptions to this rule. Administrative /Management of medical insurance 5. Enlist advantages and disadvantages of individual and group insurance. and The annual out-of-pocket expenses do not exceed $3.doc Ver.600 and $2. 1. are those who purchase insurance in an employer sponsored insurance. Many insurance companies are still developing qualified high-deductible insurance plans and products with a savings component. 4. 3.0 Page 29 of 132 .8 Exercise 1. are those who pay the Claims' amount of their employees are Self Insured Groups. in some states. __________________________________________________________________________________ 65736839. Plan sponsors/ Employers 4. This includes Medicare coverage.200 to $4. A highdeductible plan is defined as one in which:  The deductible is between $1.400 for individuals ($3.800 for families). 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.200 for individuals ($5. are those who purchase insurance directly from an insurance company in case of an individual insurance. 2. For Self-insured groups insurance company may provide the services. Employers 3. However.3. Individual Members 2.

and claim adjudication. Once the enrollment is over.doc Ver.0 Page 30 of 132 . For an employer ID numbers and passwords for its employees will be provided. Required data will be captured and sent to the insurance company electronically. Web-based applications For an individual web based application will facilitate online registration/ enrollment to get enrolled. Member can fill up the forms and send it to the respective postal addresses. Employees are allowed to select the benefits they wanted to opt for.    __________________________________________________________________________________ 65736839. Member will receive membership letter once the enrollment is over.4. Membership letters and other details will be sent to the member once the process is over. There will be online systems set up there.4 3. 3. The data will be received and formatted fed to the systems. Enrollment in the office outlets of the insurance company There will be city-based office outlets set up by the company. Enrollment through the employer based systems Employers do have employees data maintenance systems. Data entry operators will make you enroll online. verifying. product issuance. The enrollment process will then be automated. Employer then validates and sends the information to the insurance companies electronically. Member will provide all necessary data to the insurance company that will include personal information. 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. 1.4. a member can start filling up the claims. Member has to approach the office. and making available all necessary eligibility information for enrollee membership. billing. Collecting and updating the systems with the data completes the enrollment process.2  How is enrollment carried out? Traditional Paper Enrollment Enrollment forms would be available on the web sites or situated office outlets of the company. benefit information that he/she has opted for.Members ___________________________________________________________________ 3. This is the most commonly used approach.

eligibility information. membership number and other details.0 Page 31 of 132 .doc Ver.4.Members ___________________________________________________________________ Enrollment Data Flow is shown in figure 3.    __________________________________________________________________________________ 65736839. membership letters will be sent explaining the benefits he/she has opted. 1. Member has to show his/her identity card when he/she approaches a service provider (doctor. Member Member Member Employer Associations Insurance Company Fig 3: Enrollment Data Flow 3. Membership letters Once the enrollment process is complete. Employer Report A report will be sent to the employer giving the details of its employees enrolled and their details.3  Output of enrollment process ID Cards A person insured under an insurance company is given an identity card. Provider Report Providers are made aware of the new members enrolled under his/her name. Name. pharmacist). hospital. ID card would have details about the member's SSN.

3. 1. Enlist the means of enrollment. Means of enrollment are a. 2.0 Page 32 of 132 . Web-based applications. ID card __________________________________________________________________________________ 65736839. Member needs to show _______ as a token of its membership in the insurance company. Direct enrollment in the field offices c. Electronic data transfer. Electronic data transfer from employers d. 4 Enrollment Process 3.5 Exercise 1.4.Members ___________________________________________________________________ 3. 3. Fig.4. Traditional Paper transfer b. Employers having own member's database provide data to the insurer via _________. 2.4 Enrollment: Overall Picture Please refer to figure 4 for the pictorial view of enrollment process.doc Ver. Answers 1.

If member is eligible. Provider will send subscriber's information only if the member is a dependent. This data will be validated with the database of the insurer to make sure that the person is a valid member. Member when purchases a policy selects the services that we would want to be covered. 1. premium will be decided. Insurers will set-up systems by which eligibility information will be available to the provider. Every service-provider is bound to check the eligibility when a member asks for any kind of service except for indemnity plans. 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). will be given to the system. Taking insurance business into consideration.5. Provider will also provide employer's data if the plan is sponsored by member's employer. Identification number etc. Subscriber's name.  Subscriber's information.Members ___________________________________________________________________ 3.5.  Service related information. The system will crosscheck the eligibility for the service and inform the provider back. a member’s eligibility for a service will be decided upon the benefits that he/she has opted for. member number (Identification number given by insurer). Depending on that various terms like rates. 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. 3. the service will be provided and provider will file the claim for the payment of the service. There are different services that could be covered by the insurer.2 Eligibility Process Provider will query on a member for getting a particular service. So every time a service is given a provider asks the system if member is eligible to get that service or not.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.  Policy Dates. Social Security Number) along with service he/she is asking for. The system will run eligibility checks and returns the data to the provider. Provider gives basic information about the member (Member's identification number. Not all could be applicable for a member.0 Page 33 of 132 . __________________________________________________________________________________ 65736839. Last name will be fed to the online system as input. Provider need not do any eligibility checks when member is having indemnity plans. Again this will be validated against the insurer's database to make sure that the subscriber is a valid member. If the member is not eligible to avail the service the service provided will not be insured. Every employer when signs a contract with the insurer are given identification number. ID number is validated with the insurer's database. These validations are also carried away when the eligibility is validated.doc Ver. So the policy effective date. 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.5 3. Employer Name.  Employers Information.

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

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

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

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

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

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

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

noncancelable policies are offered only to low-risk occupational groups at a high premium. A non-cancelable contract is preferable to a guaranteed renewable contract. For a guaranteed renewable contract company cannot raise your premium on an individual basis. Enlist the services offered for group maintenance. 1.2 Exercise Questions 1. Disability benefits contracts in which policy cannot be canceled but premiums can be raised are _________. which would apply to all individuals in the same insurance classification). Employers can provide coverage for employees too. Disability benefits contracts in which policy cannot be canceled and premium cannot be raised are _________. pay attention to whether the contract is non-cancelable or guaranteed renewable. but the premium can be raised under certain circumstances (the state insurance department must approve the change. Often. 5. Non-cancelable.0 Page 41 of 132 . When the groups are formed in case of a group insurance? 3.9. Guaranteed renewable means that the policy can't be canceled as long as member pays premiums.9. 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. Opting for the guaranteed renewable provision may save as much as 30 percent of the premium cost. The funds paid are not specified for medical expenses . 3. Guaranteed renewable. they must have the permission of state's insurance department. 4. 3. What types of services does the insurer provide? 2.9 Disability Benefits Disability income insurance provides members with an income if they become sick or injured and are unable to work. __________________________________________________________________________________ 65736839. Answers: 4.they can be used in any way the member wishes them to use.doc Ver.1 Member’s concern When a member buys an individual disability insurance policy. so may be premium will be raised only every few years.Members ___________________________________________________________________ 3. 5.

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

1.0 Page 43 of 132 .doc Ver.Members ___________________________________________________________________ __________________________________________________________________________________ 65736839.

organization or institution that provide services to those enrolled into the system i. Hospital etc.doc Ver. Dentists. BACKUP-PROVIDER:   __________________________________________________________________________________ 65736839.IV 4 Provider 4.   SPECIALIST: A specialist is one who has one or more areas of specialization in medical field. PREFERRED PROVIDER: These are those providers who work on contract basis by negotiating the compensation they charge. Group Or Entity: These are group of people who provide services under a common name e.g. the members.  Other way of classifying them based on the type of contract is as follows:  PCP: Primary care physician.e. NON-PREFERRED PROVIDER: These are those providers who are not contracted to furnish services or supplies within ‘PREFERRED’ network. 1.0 Page 44 of 132 .1 Provider types Providers are those people. COMMUNITY PROVIDER: These providers do not have a contract at all with Healthcare organization. physicians etc.Providers ___________________________________________________________________ UNIT . There can be numerous classifications of providers depending upon the facilities provided by them.g. Every member is supposed to approach the PCP first before going to anyone else. 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.  NON-PAR: These are those non-participating providers whose contract with Healthcare organization is terminated.   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. As the name suggests it is the PCP who is in constant touch with the members directly.

which involves clearing provider claims within a fortnight (subject to the provider electronically filing the claim in a prescribe format). E. so as to assure a minimum amount of revenue by way of claims.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. SUPPLIERS: These are those providers who provide medicines and surgical instruments. e.g. • Minimum number of member visits Some HCO(s) guarantee providers. Maternity Home etc. Backup provider provides medical services to the patients of the provider when he is not available. there will be routine visits to the provider's office and a re-credentialing process every two years. EQUIPMENTS: These are those providers who provide medical equipment for executing medical tests such as X-ray labs. Health insurance companies sometimes delegate credentialing to some physician groups. a minimum number of member (or dependent) visits.doc Ver. 1.g.PHO(s).2 FACILTIES: These are those providers who provide facilities such as wards. 4. Pharmacies. Based on nature of service. 4..Providers ___________________________________________________________________ A provider can specify another provider as his/her backup. providers can be classified as following:    4. or an appropriately delegated credentialing process. Once a provider is accepted as a participating provider. path labs etc.3.2 Credentialing Criteria The process requires providers to present documentation of training. Hospital. Provider Participation HCO (Healthcare organizations) usually elicit provider participation (into their network) using some standard marketing strategies.0 Page 45 of 132 . Some HCO(s) have pioneered the E-Pay/E-Cash option. 4. These are specialist networks of providers.1 Provider Contract Process Providers who wish to participate in one of the networks must complete an application and the corporate credentialing process.3. 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. and physician hospital organizations . Some of these are as follows: • Quick settling of claims Most HCO(s) attract specialist providers into their network by promising them quick turnaround of their claims. large HCO(s) provider e-learning options to enrolled providers via virtual communities on the Internet. education and other relevant information. individual practice associations (IPAs). • E Learning Virtual Communities As some of the fringe benefits. ICU’s. which share knowledge and intellectual property via the Internet.

1. In most areas. Specialist contracts and Hospital contracts.3. membership/privileges. Some of the different types of provider contracts include PCP contracts. professional organizations.3. 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. hospitals. physician hospital organizations. per month)  By integrated delivery systems.  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.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 4.4 Types of Contracts All major health insurance companies have several different types of provider contracts based on the type of servicing provider. For example.5 Provider Reimbursement Most health insurance companies incorporate the following payment methods to reimburse providers for services. Quality Review considers: __________________________________________________________________________________ 65736839.doc Ver. specialists. the system uses a three-part quality factor to adjust the physician’s capitation payments. a physician receives payment for a patient whether the physician sees the patient that month or not. DEA registration. mental health companies and similar provider organizations that are compensated by us on a capitated basis or other basis Quality Care Compensation System Under the Quality Care Compensation System.Providers ___________________________________________________________________     Disciplinary history (including licensure. many participating primary care physicians are compensated in accordance with the Quality Care Compensation System* (QCCS) described below.3.0 Page 46 of 132 . independent practice associations (IPAs). 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. Additionally. Under capitation. physicians are paid by capitation. Medicare/Medicaid) Work history Malpractice insurance coverage history Clinical privileges at a hospital hospital 4. 4.

Providers ___________________________________________________________________ Results of member surveys Review of the care (like childhood immunization rates. Encounter date. 4. diabetes and heart failure   4. IPA. A PCP can issue themselves referrals for non-routine services. (E. 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. Referral entry can be done through batch or online processing however inquiry and maintenance is done through online screens. Exercise The legal entity that provides administrative and contract related services for providers are also a type of provider – True or False.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. 3. 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.   __________________________________________________________________________________ 65736839.0 Page 47 of 132 . Some plan has flexibility to visit any provider without any prior authorization in that case referral doesn’t come into picture. A referral once issued has a validity period. Suppliers 4. Insurance Company 4.g. Referral maintenance – through this process one can modify the existing referral entry. PORG etc) 2. The information which needs to be entered are Member number.4 1. Referral is not always required to visit outside PCP. 2. A provider is called as ________ provider if he has a valid contract with the company. details of the provider for whom referral given. True. 1. If some referral has to be cancelled then we can do that through this process.1 Referrals processing  Referral entry – All the referral should be entered in the referral database so that it can be used if required. The inquiry can be done either on the basis of member number or referral number which ever is known. Answers: 1. PAR or Participating 3. details of the provider who is referring.doc Ver. referral validity ‘From’ and ‘To’ date and service code (it specifies the king of service/treatment). Providers who provide medicines and surgical instruments are known as ___________. Contract is an agreement between the provider or group of providers and the _________________. A PCP or an authorized provider provides it when special care is required.5. It depends on the plan taken by the member. 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.

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

The criteria used to select participating providers reflect minimum network composition standards. Pro Net) contracts with the providers. Aetna reimburses the rental network organization for allowing our members to use the network.g. 4. Provider status – Shows current status of the provider.3 Rental networks A rental network is an arrangement in which another organization (e. 4.6.4 Network Hospital Standards Our current hospital contracts require network hospitals to represent and warrant that they are. networks are adequate when there are enough providers available for the member population in a geographic area. Doctors. The local Network Management staff has the ongoing responsibility of ensuring that each network has the proper composition of providers. Provider maintenance should be done everyday in order to keep the provider database up to date all the time.6. licensure or accreditation status. They compare the existing network with adequacy guidelines for the specific service area and identify whether there is a need for new providers. appropriately licensed and accredited by either the American Osteopathic Association (AOA) or the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). All the inquiry or maintenance of providers is done based on provider number. In other words. The status can be retired. After developing a list of providers by type needed to meet customer needs. but may vary to accommodate local supply and regulatory requirements.6.2 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. All facilities are also required by contract to notify us of any change in coverage.doc Ver. Provider name – it is the name of the provider if he is an individual provider. Labs etc.   __________________________________________________________________________________ 65736839.0 Page 49 of 132 .7 Provider maintenance This process involves collecting information on all type of Health Care Providers. If it is any group or hospital then name of that should be stored.7. 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. 4. 1. one the major database is Provider database. deceased etc. and will remain during the term of the contract. and when members have access to the various types of medical services they may need. and provide evidence of such insurance upon request. given to each provider to identify the provider easily. Instead of engaging in direct contracting arrangement with individual providers. which includes hospitals. In the healthcare organization. They must also maintain adequate malpractice and general liability insurance or self-insurance. closed.Providers ___________________________________________________________________ 4. network staff target providers to be recruited and contracted. 4.1 some common information of Providers Some of the common information that needs to be captured for a provider is given below:  Provider number – this is a unique number which is system generated. A provider who is providing healthcare services on current date is an active provider..

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

(E.com/ http://www.ucla.healthinsurance.doc Ver.doctorandpatient. 4.Providers ___________________________________________________________________ Answers: 1. 4. C.edu __________________________________________________________________________________ 65736839.9 1. 2.asp/ http://www. 3.doctorquality.10 References AETNA Intranet http://www. Claims payment schedule 4.com/ http://www. In Indemnity plan referral is not mandatory) 2. False.healthaffairs.com/www/provider.htm/ http://healthcare.0 Page 51 of 132 .org/ http://www.com/healthcareproviderinfo. 4. Provider number 3. 1. Review Questions What are the various criteria for the provider type classification? What are the credentialing Criteria considered by the Insurance Company before making an agreement with the provider? Explain various stages in Provider referral processing? What is the difference between Provider Type and Specialty? What payment methods do insurance companies use to reimburse providers? 5.g.masslegalnurse.healtheon.com/ http://www.

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

as there is stiff competition in the market. As in every other business. Key Producer Compensation – Sometimes the company identifies key producers and gives them bonus if they get more than a fixed number of new subscribers. The banding of the medicare promotion award could be something like this: Program To Date Application Level Payoff per Application   65736839. here buyers being the customer group buying a plan and sellers being the insurance company.V 5 Sales 5.3 Brokers An insurance company generally has a pool of brokers. The various entities involved like Brokers and Underwriters are also discussed. 5. Users within the company need to maintain particulars of brokers and information regarding broker-customer relationship. 5.Sales ___________________________________________________________________ UNIT . The bonus distribution could be something like this: Net Subscribers Produced Override % of Premium 150-750 1% 750-2500 2% 2501+ 3% Cap of $60.1 Unit Objectives This unit aims to familiarize the reader with some aspects of insurance sales and quote creation. Producer Data is frozen at the end of a year. Each Customer group should submit a stipulated minimum number of applications for corresponding broker to qualify for commission. User groups called actuaries and underwriters play key roles in deciding the rates and thus in selling the products even though they do not interact directly with customers. Together they use various methods and strategies to sell the plans to as many customers as possible.00a Page 53 of 150 .2 Introduction Sales and Marketing form an important activity in the health insurance industry.000 per Customer group per calendar year.3. In such cases the Customer and Cash receipts information is maintained and broker commission is calculated from that. This bonus is in addition to commission a producer receives on premium paid by Customer Groups. Medicare Promotion Compensation – Some companies pay bonus to brokers for bringing in new Medicare Applications. Brokers are also called Producers in this context. An insurance company has its own marketing workforce and also a pool of external agents (brokers). A substantial percentage from customer groups’ payments result in distributing some percentage as commission to brokers.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. 5. in health insurance too brokers bring together buyers and sellers against a commission.doc Ver 0. This bonus is one time payment for new application and it depends on number of new application submitted.

They enter data about new/updated plans. (In section 5.  The location / service area of the customer group . These rates need to be approved by the concerned department in some states.e.) These are all mainly data-entry operations.00a Page 54 of 150 .1 Quote Creation What is a quote? A quote is a statement of rates of a particular product. State regulations affect prices.4.the benefits included in a plan are basis of the cost of the plan. a quote is a statement of cost. Admin users usually do product setup. benefits and conditions of a chosen plan. It contains information about: 1. Actuaries also calculate the values of group-specific factors for different locations at different times. statutory information etc 5. Details of coverage (benefits like pcp visit.doc Ver 0. do not take account of any factors specific to any customer-group.4 5. Actuaries come up with rates for each product. for the member(s). inpatient hospitalization etc) 5. benefits and new locations where plans will be offered for sale. Effective Date & Renewal Date (date from which the policy will take effect and date when the policy will be due for renewal.Government regulations often mandate certain kinds of coverage. In context of health insurance. Hence Book Rates are same for any customer group availing a particular plan in the same area and hence the name Community Rates. If not renewed by that time. tax structures etc. Some standard information – like applicable conditions. given by a seller to prospective buyers. They group and combine benefits into plans and maintain data about product-offerings in different service-areas i. Name of Plan 4.4. On the basis of statistical considerations and mathematical calculations and with the aid of rating applications. A highly specialized and trained user group called Actuarials does rate Setup. make certain products saleable in certain area and withdraw some products from some areas as and when required.  The effective date .6 we will study in details how Actuarials arrive at these rates. All these affect the cost of the plan. These rates are called Community rates or Book Rates or Base Rates and they depend only on:  The plan chosen . possibly after relevant customizations. the policy becomes void) 1.Sales ___________________________________________________________________ 1-250 $100 250-500 $125 500-1000 $150 1000-2000 $175 2000+ $200 Cap of $60. 6. (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.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. Service Area – Area in which the members will be based 3. Name of the firm buying the policy 2. In case of a group insurance policy the rates may be banded on basis of age/ gender/ family status).) 65736839.000 per Customer group per calendar year. However.rates are revised from time to time and hence the dae of commencement of coverage affects the rates. Rates (the premium due per member. But they do not apply these factors. 5.

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

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

Enveloping all these there may or may not be a Quote front end . 3. Group-specific 65736839. 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. Answers: 1.which would act as a single interface or gateway for all marketing. managerial and underwriter users to the suitable application. and are also used for renewing contracts.Intranet for use of all internal users and Internet for use by customers to get data online.c .0 Here we see that central to the system are the Admin and the Rating Applications.doc Ver 0.Sales ___________________________________________________________________ Marketing assistants Fig 3. The final say on the rates is with (a) marketing people (b)actuaries (c) underwriters (d)underwriters 3. a . An optional layer above these would be a web-based front end . Underwriters and Marketing assistants use both of these. Product Setup is done by (a) admin users (b)marketing people (c)actuaries 2. The difference between Book Rate and final rate would be due to ______________factors. Admin applications are used by Admin Users for Product Setup. 4. Quoting Engines and Renewal Applications use the data generated by these applications. Quoting Engines generate quotes with customer specific rates.2.00a Page 57 of 150 .same 4. Exercises: 1. Renewal Applications pick up contracts that will be shortly due for renewal.

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

Depending on the geographical factors and state regulations even the 65736839. PMPM of a plan identifies the income of the company per member per month for that plan. parent child and family) and members pay according to the kind of coverage they want. false 2. they have the final say on the rates. Tabular Rating is a rating methodology wherein multiple tier rates are exploded into age/gender bands. The probable frequency of members availing this benefit varies accordingly.Sales ___________________________________________________________________ ii) iii) Trend factor: This takes care of market trends and possible changes in rates over subsequent quarters. (True/ False) Answers 1.6 Underwriters 3.00a Page 59 of 150 . For estimating the values of group specific factors also they use similar considerations. 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. Accordingly underwriters apply factors specific to the industry to adjust the rates.doc Ver 0. and suitable factors are applied to account for these. (True/ False) Q2.false Underwriters form a very important user group in any insurance industry. Retention factor.    Dependant age: A firm may want employees’ dependents to be covered to a higher / lower age than the default coverage. Retention 5. while the latter may be more prone to a heart attack. they get a discount and vice versa. Here each member pays more accurately for the risk he/she adds. Profits are included in the rates by applying _______________ factor. couple. 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. thus generating a table or matrix. Exercises Q1. Q2. PMPM of a plan is the same as Book Rate. If number of claims for a plan is low.  Mutualized : Some customer groups may have outlets/ offices in various locations across the country.g. Class rating is a rating methodology where rates are banded into tiers (single. Prior experience: Underwriters need to analyze the customer-group’s prior history of claims. This would affect the probable usage of relevant benefits. E. 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. Thus. Rates need to be raised or lowered accordingly. Sometimes underwriters have exclusive access to some special factors.Normal profits are hereby built into the rates Thus the actuaries arrive at the Book Rates or the Community Rates for the plans. 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.

Depending upon the strategy. sudden spread of a disease. (True/ False) Underwriters should always estimate risks very conservatively for the company to profit ( True/Fasle) While determining final rates for a cycle.  Misquote: In case of repeat business underwriters need to analyze in retrospect whether some erroneous rates had been quoted in the previous cycle. These may be as varied as unforeseen fluctuations in the economy. some national calamity. Rounding: Underwriters may decide to round off rates to penny. The group underwriter also needs to analyze the overall composition of the group to assure that the total risk is not excessive. Underwriters cannot exercise any discretionary power. dime or quarter. c) Mailing – Sending product information to prospects through postal mails. false 5. underwriters should take into account previous dealings with the same customer group.doc Ver 0. Unusual: Underwriters need to consider various unusual factors to adjust final rates. The sales manager decides the strategy for marketing like which service areas should be targeted. b) Telemarketing – Calling up prospective customers and giving them information about the products. 2. establish appropriate premium rates and write policies those cover these risks. 65736839. recommend acceptance or denial of the risk.Sales ___________________________________________________________________ book rates could vary from place to place. This calls for extreme caution and accurate estimation skills. uniform rate across the organization. Underwriter Judgement: Underwriters reserve rights to adjust rates based on their discretion. or it may have to pay excessive claims if the underwriting actions are too liberal. underwriters need to identify and calculate the risk of loss from policyholders. Undewriters need to take care of this. Their judgement must be shrewd because an insurance company may lose business to competitors if the underwriters appraise risks too conservatively. In such cases the group may request a blended. This can make much difference when a large number of members are involved. should phone follow-up be done after sending mails etc. Exercises 1. some expected change in the customer group’s business and so on. (True/ False) 3. 3.00a Page 60 of 150 . and accordingly adjust the final rates in the current cycle. false 2. how many prospects should be targeted in various region. target prospects are picked up from the database.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.    To sum up. true Answers: 1. what age group of prospect should be targeted for a particular product.

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

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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doc Ver 0. It involves a lot of paperwork and is time consuming. Indemnity insurance is not a good option. Managed care plans originated in the early 1970s. 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. this amount is $600. which are more cost effective. this freedom comes at a very high cost. There is no coverage for any preventive care.e. rest the member will have to pay out of his pocket.00 80% if true emergency. insurer will provide 100% reimbursement of costs.this means that.Benefits ___________________________________________________________________  Filing of claims is the responsibility of the member.   For the entire family to be covered. i. Members have to pay heavy premiums and need to meet deductibles before they can start claiming benefits.Above this. But. For people who cannot afford to spend large amounts on their healthcare. The insurer will reimburse only 80% of the costs. The coinsurance limit is $1000. as explained earlier. Managed Care Plans   6.00a Page 65 of 150 . They prefer to use managed care plans. the maximum amount. which the member may have to pay is $1000.4 Indemnity plans. a routine checkup is not covered. provide great flexibility to members in choosing a provider. 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. 65736839.

These providers agree to provide basic healthcare services to members of the insurer’s plans. doctors. This paved the way for the formation of ‘Managed Care Organizations’ (MCO). This fee is not related to the number of patients actually serviced (this means. He refers members to a specialist for medical care when necessary. a HMO contracts with individual doctors who have a private practice of their own. the PCP will refer the members to a specialist. Following are the common managed care options: 6. Thus. To recap. members are not eligible to claim benefits for services availed from a specialist doctor. Hence. Members are also required to get permission (called a referral) from the insurer before availing services of outof-network providers. This network consists of contracted doctors and hospitals that provide treatment to members of the insurer's HMO plans. This fee paid is also called the ‘Capitation Fee’ and hence the plan is sometimes known as a ‘Capitated Plan’. which means that HMO members pay a fixed monthly fee. the doctors are employees of the HMO itself and the HMO can be seen as a central medical facility. a “PCP”. A member has to choose any one of the doctors in this network as his PCP.4. All the care they receive is provided by. hospitals) that integrate the financing and delivery of health care services. by increasing the patient volumes and regulating the use of providers. They involve an agreement between an insurance company and a group of providers (also known as network of providers). in 1973 the US congress passed the ‘Health Maintenance Act’ and set standards for the industry. or under the direction of. In return for this fee. While. he would still receive his full monthly fee). Members of a HMO receive benefits by utilizing the insurer's HMO network. MCOs’ are a collection of interdependent systems (the insurance company.  Each provider is a given a fixed monthly fee according to the number of patients on his schedule. even if not a single member went to this provider. There are two types of HMOs  Staff Model HMO: In this form of HMO. Without the PCP’s referral.00a Page 66 of 150 . insurance companies are able to provide coverage at reduced levels of cost. Individual Practice Association (IPA): In this form. Members are required to choose a contracted doctor as their Primary Care Physician. pharmacies. right from providing treatment to filing claims on his behalf. from office visits to hospitalization and surgery. Without this permission the member is not eligible to receive any benefits. to make insurance more affordable to the common people. regardless of how much medical care is needed in a given month. The PCP will take care of all needs of the member. as 65736839.1 Health Maintenance Organization (HMO) A HMO is a managed care organization. For services outside the scope of his expertise. HMOs provide medical treatment on a prepaid basis. the “PCP” The PCP takes care of the member’s medical needs that fall under his expertise. most HMOs provide a wide variety of medical services. Members do not have a choice in deciding which doctor they want to get treatment from.Benefits ___________________________________________________________________ In 1970s healthcare costs had sky rocketed. there is a group of providers contracted by the insurer who form a network. the insurer tries to increase their patient volume by offering greater benefits to its members when they use this network.doc Ver 0.

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

there are several important differences between HMOs and PPOs.4. known as ‘Preferred Benefits’. In return. a preferred provider organization (PPO) is a managed healthcare system. he will have to pay $35 as $10. However. PPO members usually pay for services as they are rendered.doc Ver 0. as PPO members are not required to seek care from PPO physicians. known as ‘Non-Preferred Benefits’. the insurance company will pay 100% of the providers charges  If compared with the Indemnity plan provided in the earlier section. usually 80% payment rate.2 Preferred Provider Organization (PPO) Like an HMO. or by some other type of organization. PPO physicians provide medical services at discounted rates and may set up utilization control programs to help reduce the cost of medical care. A PPO is actually a group of doctors and/or hospitals that provide medical services only to a specific group or association.  copay. When members receive care from a non-participating provider they receive benefits.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. which are at the lower level of benefit coverage. 6. members may receive 90% reimbursement for care obtained from innetwork physicians but only 60% for out-of-network treatment.  Every time he avails the service of a provider he has to pay $10 irrespective of the kind of services availed. usually 100% payment rate. The PPO sponsor (employer or insurance company) generally reimburses the member for the cost of the treatment minus any co-payment. which are at the higher level of benefit coverage. However. and the member pays his or her co-payment amount. When a member receives care from a participating provider they receive benefits. In order to avoid 65736839.00a Page 68 of 150 . In case he has to use the emergency room facilities. In some cases.00 copay 100%  For all kinds of treatment. it becomes clear that the cost for the member is much less. by one or more employers. The insurer then pays the covered amount directly to the healthcare provider. The healthcare providers and the PPO sponsor(s) negotiate the price for each type of service in advance. The PPO may be sponsored by a particular insurance company. Advantages  Free choice of healthcare provider. the sponsor(s) attempts to increase patient volume by creating an incentive for employees or policyholders to use the physicians and facilities within the PPO network. there is a strong financial incentive to do so. the provider may submit the bill directly to the insurance company for payment.00 copay $10. For example.

Like an HMO. and members may be required to meet a deductible. the POS plan mirrors an HMO. most PPO members choose to receive their healthcare within the PPO network.  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. members may receive 90% reimbursement for care obtained from in-network providers but only 60% for treatment provided by out-of-network providers. if a member’s longtime family doctor is outside of the PPO network.00 copay $25.4. else none.00 3x deductible None 80% / 20% $1000. Thus. A PPO member has to file claims on his own.00 office visit 100% None 100% after $10. For example. The plan can be visualized as having 2 sides.00 100% 100% Non-preferred Benefit $200. he may choose to continue seeing him. the expenses and paperwork are higher as compared to HMOs. Disadvantages  As mentioned previously. most PPOs have larger copayment amounts than HMOs.doc Ver 0.Benefits ___________________________________________________________________ paying an additional 30% out of their own pockets.00 80%/20% Same as preferred if true emergency.00 $200. Hence. 80% / 20% 80% / 20% Preferred option closely mirrors the HMO option while the non-preferred option approaches the Indemnity option. The benefits are reduced in case of non-preferred option. the member pays no deductible and usually only a minimal co-payment when he uses an in- 65736839.3 Point Of Service (POS) POS plans give two benefit levels.00a Page 69 of 150 .  6. but it will cost more. One side is for in-network services and the other side is for out-of-network services. there is a strong financial incentive to use PPO network physicians. Additionally. When a member uses the in-network benefits.

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

also. with maximum benefits within network and reduced benefits out-of-network. The choice of providers is greater than the typical HMO. Disadvantages  Members need to choose from the HMO and EPO networks. These plans offer members great flexibility at the lowest price by combining various plans. 6.00a Page 71 of 150 . some insurers will offer an EPO/HMO plan.4 In order to fulfill the diverse needs of participants. managed care plans are better suited for the average individual because they end up being more cost effective in the long run.doc Ver 0. and employers. However. The variation in the various plans can be understood more effectively by referring to the following table. The major difference between them is in the in-network option. in general. however. For example. as there are no deductibles and very less copays. which can be customized according to the members needs. Advantages  Limited out-of-pocket expenses. Exclusive Provider Organization (EPO)  6. the PPO plan gives more flexibility for choice of provider. this leads to less flexibility in choice of provider. and the price is somewhat higher. providers. there is no such thing as ‘the best plan’. In contrast. A PPO may also make an EPO option available to members. EPO Plans—a hybrid of POS plans were developed. 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. Here. give more freedom than managed care plans in terms of using the healthcare provider of choice. This provides members with the ease and low cost of the HMO. as compared to the POS plan.Benefits ___________________________________________________________________  The POS plan is very similar to a PPO plan.5 Which plan is the best? The first thing to note is that. 65736839. while providing them with the option to make appointments directly with a larger group of providers (instead of just their primary care provider). All the plans outlined till now are generic plans. Indemnity plans.4.

65736839. 4. if his goal is maximum flexibility and cost is not a major factor.5. Available Not available Required Available Available Not available Required Not required Not required Required 5 5 1 1 4 4 3 3 2 2 Table 5: Comparison of various plans So. Considering the cost for a member. 1.Benefits ___________________________________________________________________ Constraint PCP Deductible Indemnity Not required Required HMO Required Not required PPO Not required (In-network) not required (Out-of-network) required POS Required Same PPO as EPO Required Not required Out Of Network Coverage Referral for specialist visit Cost (1-5) 5 is max Freedom (15) 5 is max. 5. 2. 5. On the other hand.00a Page 72 of 150 . indemnity plans should be preferred. 4. he is probably better off with a managed care plan. 3. Answers Indemnity HMO N Y Indemnity Freedom EPO HMO PPO POS 1.1 Exercise Plan offers the maximum freedom of choice for a member. Plot a graph of ‘cost to member’ (x axis) versus ‘freedom of choice’ (y axis) and place the various plans on it. 2. PPO plan members do not have to choose a PCP (Y/N). 3. the choice ultimately depends on the member’s personal circumstances and preferences. 6.doc Ver 0. If the goal is to minimize costs. which plan is most effective? POS plans do not offer out-of-network coverage (Y/N).

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

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

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

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

Unlike group insurance. Individual insurance is somewhat more risky for insurers than group insurance. Individual health insurance is a type of policy that covers the medical expenses of only one person. all eligible people can be covered by a group policy regardless of age or physical condition. Is used to protect a firm against the loss of income resulting from the disability of a key employee. The policy is typically negotiated between the insurer and the "master" policy owner (employer or association) without any inputs from 65736839. Others include disability income insurance.doc Ver 0. catastrophic PPO and catastrophic EPO coverage. 2. This is generally done through a series of medical questions and/or a physical exam. Medicare has parts. a single policy covers the medical expenses of many different people (a group) instead of covering just one person. 6. Unlike individual insurance. For this reason. Policy extends the Medicare policy by offering additional benefits. 6. In case of Dental insurance. with the sponsoring employer or association paying all or part of the premium. When they apply for individual insurance.6. Key person insurance 5. such as average age and degree of occupational hazard. In general. Employer-sponsored plans and associations are among the most common sources of group health insurance. Medigap 4. 8.00a Page 77 of 150 . where each person's risk potential is evaluated and used to determine insurability. Because only one policy is issued for the entire group. 4. because group insurance allows the insurer to spread the risk over a larger number of people. The premium for group insurance is calculated based on characteristics of the group as a whole. plans are similar to HMO plans The federal government regulates Medicare benefits? (Y/N). 6. 3 (hospital. members purchase individual insurance directly from an insurance company. 3 2. 5.10 Exercise Pharmacy plans usually have tiers of benefits. Y 7. medical. 7.7 Individual Insurance and Group Insurance.Benefits ___________________________________________________________________ The most common example is the Medicare plans which include a clause for catastrophic coverage. Capitation 6. Long Term care covers nursing home care? (Y/N) Who all are eligible for Medicaid benefits? 1. With group health insurance. Answers 1. they are evaluated in terms of how much risk they present to the insurance company. Y 8. the initial cost of establishing group coverage is lower than the cost of issuing a separate policy to each person. the only real disadvantage of group insurance is limited or no freedom to customize the policy to member’s individual needs. individual insurance is generally more difficult to obtain and more costly than group insurance. medicare+choice) 3. 3. All people who cannot afford medical care. Member’s risk potential will determine whether he qualifies for insurance and how much the insurance will cost.

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

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

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Claims ___________________________________________________________________ UNIT .1. A record of this referral is maintained in the system. The HMO Reformat will be responsible for reading a CCFMQ record 65736839.1 Claim generation and submission to Providers Members enrolled in Insurance Company’s healthcare programs visit health services providers such as a primary physician. These claims are then adjudicated using Insurance Company’s business rules and policies. Receipts system performs basic edits on these claims and loads it to the Claims database. 7.1 Claims Intake Process Claims are received from health services providers either as paper documents or in electronic form. Manual intervention is required for further processing such claims. On completion of claims adjudication. for a combination of fixed number of visits and fixed duration. hospital or pharmacy to receive healthcare. The users have the ability to modify the claims online. The claims are received by the Integrated Receipt system. also claims with any missing information. They are scanned to capture image copies that are then translated to electronic form. The claims will be in a Common Claim Format (CCF) as opposed to the UB92 & NSF format that Receipts system used to receive. Electronic forms are routed through a third party (Envoy).00a Page 81 of 150 . are put in a ‘PEND’ status. who are Primary Care Physicians and are Capitated Providers. The claim may be filed either on a standard paper form or electronically.doc Ver 0. This PCP files a claim with Insurance Company for non-capitated or specialist services he might have provided to the member. desired cheques are cut by AP (Accounts Payable). validated for basic information necessary and then loaded into the Claims database. The referral acts as an authorization for the member to visit a specialist. This pre-receipts system will identify each claim with a Universal Claim Key (UCK). this process is known as HMO REFORMAT. Paper claims are received on standard forms. Feedback is sent to Claims system again which is used to store the completed claims history in Claims database/files. Each visit that a member makes to a provider is called an encounter. They do not bill Insurance Company for services provided. as well as for catering to general claims enquiries. to decide the payment to be made to providers or denials if any. All HMO electronic claims from the Envoy submitter will be directed to a system (pre-receipts) before sending them to core Receipts System. If the primary physician deems fit he may refer the member to a specialist. This means that they get a fixed fee on a monthly or bi-monthly basis. Claims Online/Pend systems are used for this purpose. Edits within the pre-receipts system are enhanced to include HMO claims.VII 7 Claims 7. The UCK is passed along with each transaction to the appropriate adjudication engine. Claims that fail the edits are routed back to the provider for corrections. The Receipts system is required to receive a transaction in CCFMQ format. Generally these visits by member are made to PCPs. Complex or ambiguous claims. This specific combination depends on plan to which the member has subscribed. specialist.

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

o Provider name and address is validated. o Provider no is validated.Claims ___________________________________________________________________ 7.00a Page 83 of 150 .e. o Determination of whether this claim is a fraudulent specific member claim.doc Ver 0. DOS > suspense or term date). Determine if the claim is timely filed    65736839.2. o Provider Specialty is validated . The paid amount need not be equal to the billed amount Claim adjudication process can be divided into three processes as below which can be further subdivided 7. o Check is done for whether Provider is suspended. o Determination of whether member is suspended or terminated ( i. The provider information is validated. o Par status of Provider is validated . o Date of Service of the Claim is compared with the current date.Capitation of the Provider is validated . o Provider type is evaluated i. 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.e if the provider is hospital type or a specialist etc.1  Claim Preparation and determining eligibility The member information is validated. Determination of whether the claim is too old.

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

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

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

 

7.2.2

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

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

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

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

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Reporting o A host of reports to provide summary and detail information and statistics Claims History o Claims history records generated and used for future Claims adjudication and used for reporting and financial reconciliation of Self-Insured groups. thereby giving him/her an opportunity to seek reimbursement from the member’s primary insurer. Letters o Letters are sent to the member and/or provider giving information as to why :  A claim was denied  A claim is delayed  Is still Under review  Waiting for Additional information  Extra Payment done . Claims database updates o Processed Claims stored for maintaining History. This provision prevents double or over-payment by the carriers.Penalties etc that a Healthcare company liable to pay in certain cases  Any Other Information required . they will:  Notify the provider that they have discovered that another insurer is the primary carrier.doc Ver 0.  Provide the name and address of the primary carrier and the patient’s name and address and any other pertinent information.   7. the process followed is . Referral updates o Referrals are updated for no of visits after the claim has been processed properly.4  Claim adjudication outputs Check extract o Adjudicated claims that are passed to Accounts payable for check printing.  Inform the provider that he/she can write or call the person signing the notification if there is additional information that would alter the proposed process. o o 7.3  Update Claim Accumulator updates o This involves updating of Various accumulators for Copay . o Denial letters are sent if :  other insurance paid in full  experimental procedure not covered  Cosmetic surgery not covered    65736839.2.  Inform the provider that he/she can return their previous payment or elect to have them debit his/her account after 60 days. after a provider has been paid. deductible . Healthcare company discovers that another insurer is the primary carrier. a.00a Page 88 of 150 . The insurance industry has established standard rules to determine which insurer is primary payor.Claims ___________________________________________________________________ Cross/Blue Shield).2. coinsurance etc depending upon the processing of the claim. If.

doc Ver 0.00a Page 89 of 150 . no change Explanation of benefits – (covered in other section) 65736839.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 .

are paid extra for the quality of services they provide. 7.3. Otherwise claims without proper referral get denied.1. Procedures are in place which detect such duplicate claims and avoid the repayments. Hospitals send the survey results to Insurance company. provider has tendency to file the same claim again. Once the service is provided to a member.3 Copay Adjustments If the claim filed required member to pay some copay amount. Over a specific period of time. based on some algorithms.3 7. administration in the hospital etc.3.3. 7.4 COB Adjustments If Coordination of benefit applies for any member. 7. 7.1 Claim Payments Provider Payments Inputs for any provider payment. then all his claims are bound to get denied if filed for services covered under capitation.7 Provision for Advance Payment Some providers.3. both with a few exception.2 Provider as Specialist If a provider is giving services to member as a Specialist. in most of the general scenarios. which should be covering the visit and specific services for the member. would come in the form of claims filed by the providers.Claims ___________________________________________________________________ 7.1.1. then the insurance company will pay the provider adjudicated amount less the copay amount as described by member’s plan. a survey is conducted where in the member fills in a form to comment about the quality of service provided by the hospital. then provider receives payment from primary and secondary insurance companies. Mostly all the In-patient type of services and none of the Out-patient type of services are eligible for this incentive.6 Provision for Advance Payment Some insurance companys also have a facility to pay the providers some lumpsum amount in advance. 7. the physicians fill in the data such as quality of operating rooms. These routines (which are black box to the insurance company’s system).1.1. If the provider is non-capitated. then the claims filed would require specific referral already in place.1.  Efficiency of Care 65736839. It becomes mandatory to identify all the types of services that will become eligible for consideration under quality incentive. When members have encounters with provider.3.1 Capitated Provider If provider is a Capitated Provider.3. This data is then passed through ‘United States Quality Algorithms (USQA)’ routines. In the physician surveys. He has to file claims with all the involved insurance companies.5 Duplicate Claims In case of late payments by insurance company. 7.3. these amounts are then adjusted during adjudication against the claims filed by provider. Higher these points. 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.00a Page 91 of 150 . these providers will file claim for the services rendered to the member. Principle categories for this payment are as follow:  Quality of Care It measures the quality of care based on physician and member surveys. 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.3. especially the big providers like Hospitals. This incentive to be paid is decided as fixed % of the contractual amount between Insurance company and the provider. then claim gets adjudicated against Insurance Company’s business policies and rules as imposed by federal/state laws. 7.1. assign points / marks.doc Ver 0. the higher will be the incentive.

longer the stay. system assigns points.3. then higher will be the costs that hospital incurs and hence the claim amount. 7. as defined in the plan adopted by member.00a Page 92 of 150 . through USQA routines.3 Deductible Applies Member pays to the provider Out-of-Network and files a claim with the Insurance company. For each of these measures.Claims ___________________________________________________________________ It measures the efficiency of the care based on length of stay for surgery. Based on the answers.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. then the insurance company will reimburse all the amount paid towards copay back to member. In this case insurance company pays directly to member.doc Ver 0. higher the adverse conditions.2 Member Re-imbursement Following are various scenarios when member is eligible for re-imbursement by The Insurance Company.4 Co-insurance Applies In this case. the payment is made. 7. If a member spends more time in hospital for a service. 7.3.1 Copay Limit Reached If member has already reached the copay limit mentioned on his plan and in the next encounter he still pays the copay. lower will be the payments as it is hospital’s responsibility to see that fewer adverse events arise. Higher the points. higher will be the payments.2. adverse events and C-section rates. lower will be the payments. part or full payment made by him to provider. the lesser will be the incentives paid.3.2.2. the provider is informed by the Insurance Company regarding the reasons and split of payments. whether denied or paid.3.1. Also. medicine and OB/GYN. If the member has not reached the Deductible limit. So.3.4 Claim Adjustments These are the various types of adjustments that can be made to the claim. For this category: higher the points. When provider’s claim is adjudicated. 7.  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. 65736839. Under such circumstances. a fixed % of adjudicated claim amount is paid back to the member.2. 7. insurance company intimates provider of the extra payment made and provider is required to repay to the company accordingly. then Insurance Company will then deny such a claim. 7.8 Payment to Insurance Company It may happen that provider claims are incorrectly adjudicated and provider is overpaid.3. points are assigned and based on the points. 7.

The claim does not undergo adjudication. Provider over-payment letter is generated one claim per letter. In the process.2 Minus Debit Adjustment In case of overpayment to providers. a letter is sent to the provider notifying of over-payment.4. The original claims are overridden with new payment codes.00a Page 93 of 150 . there has to be a claim for which a check is created. i.3 Manual Check Adjustment Sometimes a check is required to be created manually if there is a need to adjust amount of payment. Only in this scenario a stop can be issued on the check.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.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.4. A new set of claims are generated which have amount equal to negative of the amounts of the original claims.4. The manual check request paperwork is then sent to Claims system. 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. 7. minus debit option is used to create an equal amount negative check. 7.5 Stop Adjustment The Claim is completed but the check is still open (check information has been sent to the bank but not been encashed yet). Claim gets completed without adjudication. cash date for check is recorded and necessary deductions are applied to claim. 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. Further claims of the provider are not paid till the all the amount on the negative claim has been recovered. This is to account for the payment being made using the manual check.Claims ___________________________________________________________________ 7.doc Ver 0. New negative claims created with negative dollar amount.e. 65736839. If provider does not agree to cut and send check to refund over-payment.4. The check status is also changed from open (blank) to Void (V). the original claims remain untouched. Original completed claim remains unchanged. Such a check is created by entering data into the system manually. 7. 7. Deduction may be split across multiple claims. The check status is changed from open (blank) to Stopped (S). It is completed and stored. when stop payment is done. On receipt of the manual check paperwork a Manual claim is entered.4. When provider agrees and refunds over-payment (provider will cut check and send in).

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

which acts as an intermediary between Health Care Company and the Federal government. 7.00a Page 95 of 150 .1 What are Accumulators? Accumulators are generally database records. It is not a bill but an explanation of the benefits. The encounters have to be submitted in a fixed format called the Uniform Billing Code1992 form. In case of multiple MC (primary and secondary) the primary MC coordinates the benefits between the two MC and sends a COB (Coordination of benefits) to the member.Claims ___________________________________________________________________  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 list of claims in the wait status for more information.g.7 7. for indemnity or fee for service claim where deductible.1 Accumulators 7.7. When requesting payment from a secondary payer it is extremely important that the EOB/remittance information be provided from the primary payer. The Explanation of Benefits provides members a statement of claim payments. 65736839.doc Ver 0.6 Claims accepted. Claims rejected and reasons for the same.  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.      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. dedicated to accumulating specific type of data over a specific period. coinsurance. etc are applicable and not for all type of claims. 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. Medicare submissions are sent to CMS (Center for Medicare and Medicaid services). While the Medicaid submissions go directly to the state.7. It gives the member a detailed explanation of these amounts. It also gives the cap amounts applicable to him.

7. say partial/full/some percentage of billed. (Details will come down the line in the document) 7. 7.7.3. during predefined period. In this case. 65736839. 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). in case member chooses to continue.3.00a Page 96 of 150 .2 7. will be considered as deductible paid towards next year.member. Some plans provide for facility of carry over deductible. When the same has been decided.for member. o Members pays remaining deductible (part or full. Once the maximum limit set by plan is met. member + family Co-insurance is also accumulated separately for member as well as member and all his/her dependents.3 Deductible .1 Copay – for member. In a general scenario. member + family These accumulators include combined figures of co-insurance and deductibles. deductible paid by member in a specific later portion of the effective year. 2001 will go on accumulating the data till end of Nov-2001. 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.7.7.1 Periodic Accumulators These accumulators will cover up the amounts for period as mentioned in the effective plan for the member. o Accumulator for yr. Carry over Deductible Updates Some plans provide for the provision that. o Member’s deductible limit is say $ 500.3. Example: o If a member XYZ has plan year 01-Jan-2001 to 31-Dec-2001.7.7.5 Family Dollars Insurance company’s disbursement to member or the provider. the amount of money that is going to be paid to/from a member is decided based on the accumulator amounts.Claims ___________________________________________________________________ 7. 7.2 Function/Purpose of Accumulators The main use of accumulators is during the claims adjudication process. depending upon how many visits covered for a specific service to same provider.3 What is accumulated? 7. say $100) during the last 30 days of plan year. 7. accumulators for the next period will get updated for the deductibles paid.7.4 Types of Accumulator  7. this figure may be used to decide the method of payment. It comes into picture when deductible limit is met.4 Visits – for member Visits of the member to provider are accumulated.7.3. 7.7.7. Say. member no more pays copay to provider.7.7. member + family Copay is accumulated separately for member as well as member and all his/her dependents.doc Ver 0. Accumulators records are updated accordingly in such cases. o Plan provision says Carry over deductible is applicable for last 30 days of the plan year. This reduces burden on member and acts as incentive for member to continue with the co-insurance company.3. So. 7.6 Out of Pocket . it accumulates $ 350.3.2 Co-insurance – for member.4.

because of this facility.9 1. he now needs to pay $100 less towards deductible in the next plan year. 7.4. $100 will get updated in these accumulators.8 Overall Claims system diagram : Figure 3: Claims overview 7. 7. If member chooses to continue. 4. 2.doc Ver 0. 5.Claims ___________________________________________________________________ o o Then new accumulators will be generated as if paid for the next year 2002.7. Why are letters required? What are different types of letters? What are the various types of Claim adjustments? What does Government reporting consist of? What are the various criteria for deciding the payment of a claim? What is the significance of maintaining Claims history? 65736839. 3.00a Page 97 of 150 .2 Lifetime Accumulators These accumulators will sum up the amounts for the life time for a member. Review Questions.

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

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2 Introduction In Heath Care Industry. development of coverage policies. intermediate care facilities for the mentally retarded.  establishes policies for paying health care providers. a program that is expected to cover many of the approximately 10 million uninsured children in the United States.1 Government Agencies Centers for Medicare & Medicaid Services (CMS) The Centers for Medicare & Medicaid Services (CMS) is a federal agency within the U. helps millions of Americans and a small company get and keep health insurance coverage. Approximately 158.doc Ver 0.1 Unit Objectives This unit will acquaint the reader with the role played by the external agents in the Healthcare Industry. treatment.VIII 8 External Agents 8.00a Page 100 of 150 . and makes available to beneficiaries. Medicare and SCHIP programs are properly run by its contractors and state agencies.  conducts research on the effectiveness of various methods of health care management. It requires some help from some external sources or agencies.two national health care programs that benefit about 75 million Americans. providers. researchers and State surveyors information about these activities and nursing home quality.3. CMS spends over $360 billion a year buying health care services for beneficiaries of Medicare.S. Department of Health and Human Services. all the services and management activities cannot be carried by the insurance payer itself on it's own. This unit deals with the various different agencies in a Health Care Industry and the role played by them. CMS runs the Medicare and Medicaid programs . And CMS. And with the Health Resources and Services Administration. CMS also regulates all laboratory testing (except research) performed on humans in the United States. Medicaid and SCHIP. and quality-of-care improvement. CMS:  assures that the Medicaid. CMS runs the State Children's Health Insurance Program (SCHIP).3 8. 65736839. and financing. 8. 8.External Agents ___________________________________________________________________ UNIT . CMS also performs a number of quality-focused activities. CMS maintains oversight of the survey and certification of nursing homes and continuing care providers (including home health agencies.000 laboratory entities fall within CMS's regulatory responsibility. and  assesses the quality of health care facilities and services and taking enforcement actions as appropriate. with the Departments of Labor and Treasury. and hospitals). and helps eliminate discrimination based on health status for people buying health insurance. including regulation of laboratory testing (CLIA).

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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fines up to $25K for multiple violations of the same standard in a calendar year -. and procedures Building "chain of trust" agreements with service organization Redesigning a compliant technical information infrastructure Purchasing new. ARE THERE PENALTIES? HIPAA calls for severe civil and criminal penalties for noncompliance. and universities. including Developing new policies. Required compliance responses aren't standard."user-based. Compliance is required for the Privacy Rule on April 14.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/or "context-based" access . employers. For example. health plans. processes. information systems Developing new internal communications Training and enforcement Now. 2002.External Agents ___________________________________________________________________   Improved efficiency in healthcare delivery by standardizing electronic data interchange. The Transactions Rule was published on August 17. HIPAA calls for:    Standardization of electronic patient health." past. service organizations. Steps will include:            Building initial organizational awareness of HIPAA Comprehensive assessing of the organization's information security systems. So the compliance date for that rule is October 16. Effective compliance will require organization-wide implementation. 2003.00a Page 104 of 150 ." Many of the rules and standards are still 65736839. 2000. 2001. even 1-physician offices." "role-based.doc Ver 0. 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. Normally. Let's try to make "Administrative Simplification" simple! HIPAA's "Administrative Simplification" provision is composed of four parts. 2000. present or future.specifics that. an organization with a computer network will be required to implement one or more security authentication access mechanisms . each of which have generated a variety of "rules" and "standards. administrative and financial data Unique health identifiers for individuals. The Privacy Rule was published on December 28. because organizations aren't. cause more confusion than clarity. information systems vendors. WHO IS AFFECTED? All healthcare organizations. the effective date is 60 days after a rule is published. life insurers. including: -. This includes all health care providers. health plans and health care providers Security standards protecting the confidentiality and integrity of "individually identifiable health information. billing agencies. public health authorities. but due to minor glitch didn't become effective until April 14. or adapting. we'll explore the next level of HIPAA .depending on its network environment. HOW WILL WE BE AFFECTED? Broadly and deeply. employers. More specifically. for many of us. clearinghouses. and Protection of confidentiality and security of health data through setting and enforcing standards.

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

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

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

A plan. at its discretion. except for COBRA continuation coverage. Qualified beneficiaries have the right to elect to continue coverage that is identical to the coverage provided under the plan. may provide longer periods of continuation coverage. create rights and obligations for employers. and in certain cases. and plan administrators and qualified beneficiaries. The type of qualifying event will determine who the qualified beneficiaries are and the required amount of time that a plan must offer the health coverage to them under COBRA. the retired employee's spouse and dependent children. a retired employee. Qualifying Events "Qualifying events" are certain types of events that would cause. 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. Employers and plan administrators have an obligation to 65736839.00a Page 108 of 150 .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.External Agents ___________________________________________________________________ and dependent children. The qualifying events contained in the law. an individual to lose health coverage.

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

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

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

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

COBRA 3. we make no guarantees. Answers: 1. True 8.doc Ver 0.External Agents ___________________________________________________________________ Conclusion Rising medical costs have transformed health benefits from a privilege to a household necessity for most Americans. A Clearinghouse collapses the wait cycle into an average of 5-21 days. False 2.5 Clearing Houses A HealthCare Transaction Clearinghouse performs auditing services on insurance claims. Exercise HIPAA Means Health Insurance Portability & Affordability Act. syntax. it is returned to the HealthCare Provider along with an explanation of what was wrong.1 Benefits Of A Clearinghouse  Cash Flow If a HealthCare Provider were to send claims through the mail. it is forwarded to the insurance company responsible for payment. Workers need to be aware of changes in health care laws to preserve their benefit rights. ______ Contains provisions giving certain former employees the right to temporary continuation of health coverage at group rates. 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. Say True or False. The Department of Labor maintains this article to enhance public access to the Department's information. COBRA creates an opportunity for persons to retain this important benefit. 65736839. If a claim is determined to be free of typographical. 8. The HealthCare Provider may then correct the related errors and resubmit for another pass. down from 4-8 weeks on paper claims. Improved efficiency in healthcare delivery by standardizing electronic data interchange is a main feature in HIPAA. many weeks would pass before he would receive mail notification that errors were holding up payment release on his submitted claims. While we try to keep the information timely and accurate. and logistical content errors. 3.00a Page 113 of 150 . 2. A good starting point is reading your plan booklet. Most of the specific rules on COBRA benefits can be found there or with the person who manages your health benefits plan. 8. Net result: Improved cash flow. This process may be repeated until the claim passes the inspection. This is a service that is continually under development.4.5.3 1. Say True or False. If errors are detected. We will make an effort to correct errors brought to our attention.

Typically. HealthCare Providers. 8. The industry is riddled with organizations that are exceptionally difficult to decipher. Filing a claim to an insurance company direct is almost reminiscent of allowing the IRS to file your tax return. But clearinghouses can typically access hundreds of insurance companies through a single port of entry from the office of the HealthCare Provider. Some clearinghouses charge $0. a clearinghouse has nothing to gain by delaying submissions or other operational errors. Insurance companies tend to "pick" on some HealthCare Providers and not on others.30. A clearinghouse serves as a liaison to the HealthCare Provider. Some clearinghouses though.000 . direct filing to insurance companies offers potentially hard to detect disadvantages to U. since the software may reject certain coding combinations during data entry.External Agents ___________________________________________________________________  Guaranteed Delivery Insurance Companies often claim not having received claims that HealthCare Providers send through the mail. Topic Audit Logic Unbiased Processing Clearly.50 per claim. Then rejection occurs. Instant notification back to the Provider. HealthCare Providers using the free or low cost software distributed by some insurance companies are subject to biased auditing without knowing so. 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. others nothing. A clearinghouse has everything to gain by HealthCare Providers getting paid quickly and collecting as much of a submitted claim value as possible. When the claim travels electronically through a clearinghouse.00a Page 114 of 150 .S.  Connectivity Some insurance companies offer direct filing software. have strong ties with insurance companies that result in biased editing.000 combinations of errors. In many cases claims just "sit there" until a tracer or formal complaint is received. Insurance companies have everything to gain by delaying payment to HealthCare Providers. Coding is crucial in determining the income of a HealthCare Provider.doc Ver 0. but most are not reported back to the HealthCare Provider.5.2 Clearinghouse versus Direct Filing Using A Clearinghouse Routinely check for as many as 10. This may go unnoticed by incompetent or negligent staff inside the office of the HealthCare Provider. these instances are greatly reduced. Direct Filing Same. 65736839. Today's HealthCare Clearinghouse market is very confusing.

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

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

and program descriptions and plans for departments such as quality management and credentialing.9. 8. enroll.9.9 8.00a Page 117 of 150 . contracts. a comprehensive database that contains procedures. but is not limited to. 8. consultation. organizational charts. The applicant's documentation usually consists of. the system allows you to insert additional files with the information needed. formal policies and procedures. the remaining three phases of the accreditation process cover a period of approximately three to six months.doc Ver 0. 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.1. and preserve the integrity of brokerclient relationships. supporting brokers in plan development. This system comes equipped with "AccuChecker for Windows". which consists of completing the application forms and supplying supporting documentation. like for example Workers Compensation cases.External Agents ___________________________________________________________________ Validates eligibility of patients. As a full-service agency. purchase. They are the people who work behind the scenes to reduce administrative hassles. they provide valuable services. in an effort to maximize cost containment and fairness in adjudicating claims. sample template letters. "AccuChecker for Windows" has the 2001 tables of procedures and ICD-9 codes. diagnoses and the Medicare fee schedule. 65736839. computing the amount approved according to established fee Schedules and provider's contractual agreement Gives you the tools to automate correspondence with patients and providers AccuChecker is one such Adjudication Engine. also uses the HFCA published guidelines for medical procedures. usually takes several months.1 Accreditation Agencies The Accreditation Process Organizations applying for accreditation participate in a process that entails a rigorous review occurring in four phases. These phases include the following: 8.8 General Agents They provide end-to-end connectivity that allows brokers and their clients to shop. The initial phase "Building the Application". as well as plan management and customer service. procedures. the applicant usually must provide additional documentation clarifying any pending issues. the leading accreditation organization for traditional health insurers). case installation and communication. position descriptions. including licensing and appointment with insurance payer. resolve complex service issues.1 Desktop Review In the desktop review process. Once the application and base fee are received by URAC (The American Accreditation Healthcare Commission/Utilization Review Accreditation Commission (URAC). If you process claims that require different fee schedules. one or more full-time URAC reviewers analyze the applicant's documentation in relation to the URAC standards. negotiation. serve and renew policies. After receiving a desktop review summary.

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

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

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

gov/ http://www. 23. 2.alliance-edi.insurance.hipaadvisory. 4. List down some of the features of Adjudicators.com http://www.nlm.gov http://www. 8.com http://www.os.com http://www.iix.nih.accuchecker.healtheon.gov/ http://www.com http://www.com http://www.com http://www. 13. 18.doc Ver 0.insurance. 10. 25.gov/ http://www.com http://www. 16.alliance-edi.com http://www.hcfa. 3. What is the role of Drug Manufacturers in a Healthcare Industry? What are the four parts of Administrative Simplification in HIPAA? 8.accuchecker.com http://www.11 Review Questions 1. 7.com http://www.hrsa. 21.com http://www. Explain the role of Third party Administrators.com http://www. yourhealthplanonline.com http://www.com 65736839.yourhealthplans.External Agents ___________________________________________________________________ 8.com http://www.gov/nichsr/nichsr. 12.iix. 6. 19. 20.html http://www.horizon-healthcare. 22. 24.cdc. 15. 11. 17.12 References 5.healthinsurance. 14.00a Page 121 of 150 .dhhs.yourhealthplans.com http://www.dhhs.horizon-healthcare. http://www. 9.

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

Summary ___________________________________________________________________ UNIT . 9.doc Ver 0.IX 9 Summary 9.1 Unit Objectives This unit will summarize the contents of this course material by presenting a detailed description of healthcare industry workflow.00a Page 123 of 150 . Figure 4: Detailed Workflow This diagram can be broken down into following stages – 65736839.2 Workflow The detailed workflow for the healthcare industry can be represented as shown in the Following figure.

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

Claims adjudication requires a lot of information about various entities such as members.4 References. Hence the insurance companies try to reduce the time for adjudication by going automatic claim adjudication systems. policy that are stored in their respective databases. the primary payer takes care of the COB or coordination of benefits.2.3 Review Questions. He is also sent an EOB detailing the payments made and the reasons for those. which has since then dominated the market.00a Page 125 of 150 . they are sent to the insurance company. In short claims adjudication requires lot of database interaction and is the most complex of all processes. 65736839. In case of the member having coverage with multiple carries. then the member is paid for his expenses. providers.2. If the claim requires very specialized processing (and if the rule engine for that is not available with the insurance company).5 Effect of external agencies Health insurance is a highly regulated area in the U. as otherwise these claims would have to be adjudicated manually. If the claims are found to be free of such errors.doc Ver 0. The company validates the claims based on various factors (as were detailed out in the unit on claims). The government controlled Medicare and Medicaid are amongst the most important healthcare plans available.Summary ___________________________________________________________________ 9. 9. As a matter of fact. In case the claims have incomplete information or the information is ambiguous. 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. The federal spending on healthcare also has been on a steady rise. There is usually a rule engine (a software) in place for adjudication. which paved the way for the managed care model. Accreditation agencies such as URAC (The American Accreditation Healthcare Commission/Utilization Review Accreditation Commission) play an important role in ensuring that only qualified providers are able to sell their services in the market.S. NA 9. the claim examiners do the adjudication manually.4 Member has filed a claim In most cases the claim is first validated for typographical and information errors by clearinghouses. The turn around time take to process the claims is also an important consideration for members and providers. then the claim adjudication is outsourced to a company specializing in adjudication of such claims. If the claim is found to be a valid one. plays an important role in shaping the way the industry functions. it was the path breaking HMO act of 1973. This helps reduce the burden on the insurance company and speeds up the process.A. The federal government too. The information about the entire processing is usually stored in a database for further reference. Incorrect claims are returned back to the member (or his PCP whoever has file the claim). 9. There are several government agencies that help in regulation of the healthcare industry.

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

2 Appendix B: The world Healthcare market and Healthcare IT spending The US healthcare market is predominantly privately run.523 442.S.086 14.187 40.749 5.144 13.Appendix ___________________________________________________________________ 10 Appendices 10.819.122 17.668 44.988 210.285 816.979 363.3 Source: Dataquest (January 2000) 10. 65736839.8 46.834 10.050.081 81. Whereas they are Tax based systems (all providers are government owned) are in vogue in UK/Australia.00a Page 127 of 150 .917 29.612 1.867 161. Japan and Australia. In Germany/ France. by Region.doc Ver 0.020 293.437 266.018 91.756 50.5% in Europe.393 411.164 417.477 141.5 45. there are Insurance-based systems in which providers are subcontracted by the government.979 3.408 69.113 500.8 Asia/Pacific Canada Europe Japan Latin America Rest of World United States Total Healthcare Worldwide 42.628 289.682 258.674 32. 1998-2003 (Millions of U.843.6 43.551 45.850 48.314 25.964 151.403 1.505 54.201 2.804 109.741.444 184.1 Appendix A: Total E-Business Services Forecast for Healthcare Total E-Business Services Forecast for Healthcare.140 5.805 646. Other countries spend less on IT as a % of revenues.1.800 20. Dollars) Healthcare 1998 1999 2000 2001 2002 2003 CAGR (%) 53.752 140.1 1.090.479 9.829 31.606.402 66.259 194.5 515.931 1.268.877 1.2 835.146 592.

(Source: Gartner Research.Appendix ___________________________________________________________________ Worldwide. Inc) 10. Inc) 65736839. a core focus for most governments around the world will continue to grow as newer technologies and sciences (Genomics.doc Ver 0.00a Page 128 of 150 . but the profit angle is increasingly focused on. investment in IT in healthcare is at a low of 3% as compared to an overall average of 6% and 12% for Financial services. (Source: Gartner Research. Proteomics and Bio technology) revolutionize health care. less choice to patients and administration efficiencies.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. Healthcare market. Other countries spend less on healthcare than the US does because single payer systems tend to have efficiencies in purchasing.

US also leads in the IT development of this market.30 The foregoing rates apply in the Service Area specified above. Rates will vary for other service areas. (Source: Gartner Research.3 Trillion.a whopping number by any standards.4 Appendix C: Sample Quote Sheet Page 1 XXXX Proposal For July 26. 70% of the Federal budget of the US. 65736839. Inc) 10. account for 43% of the world spending.00 $264.60 $227. 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 $114.70 $413. 2001 ABCDEF Inc Effective Date 10/01/2001 Renewal Date 10/01/2001 Service Area Colorado .00a Page 129 of 150 .Appendix ___________________________________________________________________ US is the largest spender in this market.doc Ver 0. Service Area is determined by the location of the subscriber's primary care doctor.

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

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

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

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