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

........................................2 CORBA...........103 8.......4...........114 8............................................................................................................115 8.....................102 8.............................0 Page 4 of 132 ........................................................115 8...............................................................127 10........................................125 9...9..3 Exercise.....................................................................5......125 9...............................................................................................................3.......117 8...............................................3 Clearinghouse Income.........5 Effect of external agencies.....................10 Drug Manufacturers............5.....5 Clearing Houses..2.............................7 Exercise................................. 1.............1 HIPAA.................1 Appendix A: Total E-Business Services Forecast for Healthcare..............3.....................................123 9..............4.....3.2 Getting a provider.124 9.................................................................................................................103 8.............................4 Member has filed a claim..................................124 9..................2 Clearinghouse versus Direct Filing.....................................................1 The Beginning: Member wants to purchase insurance.................129 11 Glossary..........2.....................................................................3 Centers for Disease Control and Prevention (CDC)...................................Healthcare Market Overview ___________________________________________________________________ 8...............106 8...............................................................................121 8...3.........................5..........................5..........................6 Third Party Administrators.......103 8.....................3 Appendix C: The Cash Flux of the US Healthcare Industry.......................................124 9............................127 10......................105 8...125 9.......113 8..........2 DEPARTMENT OF HEALTH AND HUMAN SERVICES (DHSS)..........................................117 8............................113 8....123 9.....3 An Enrolled member wants to seek medical services..... Inc)................................9 Accreditation Agencies...........11 Review Questions...............1 Benefits Of A Clearinghouse.....103 8...................................................................................2 Workflow ........1 Unit Objectives .........4 Government Acts and Regulations...2 Appendix B: The world Healthcare market and Healthcare IT spending..............2.........117 8...........1 The Accreditation Process...............................116 8..120 8.......................5 National Information Center on Health Services Research and Health Care Technology (NICHSR).128 10...........................................................103 ELECTRONIC HEALTH TRANSACTIONS STANDARDS ...............102 8..3............127 10...4................................................12 References..115 8......3.....4 Appendix C: Sample Quote Sheet..................................................................................................................................101 8........................................2...........................................121 9 Summary.....................................113 8.3 Review Questions......8 General Agents........2..123 9.................................................................................4 Agency for Health Care Research and Quality (AHRQ) .....................................................7 Specialized Adjudication Engines/Companies......125 10 Appendices..........................6 Health Resources and Services Administration (HRSA)................doc Ver......................................................................................................................................131 __________________________________________________________________________________ 65736839...........................................4 Exercise........4 References......................................128 (Source: Gartner Research....

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

1. privacy and security. Large corporations want see employee health insurance costs to reduce overheads. The trend is still continuing and the growth is expected to continue. US also leads in the IT development of this market. 1999 . (Refer Appendix C). 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. Proteomics and Bio technology) revolutionize health care. which are going to have a major impact in the way healthcare providers operate presently. But the Healthcare market.  HIPAA (Health Insurance Portability and Accountability Act) This act impacts all segments of healthcare industry with focus on standardization.6 million) represents the largest number of users of long-term healthcare services. However. The last few years have seen a rise in the Assisted Living Centers. which is a core focus for most governments around the world. The last major merger happened in Feb 1. due to increasing health care costs. will seek acquisition by larger chains. The US is the largest player in the Healthcare market and is worth $ 1.doc Ver. As a reciprocative step. skilled nursing providers were slated to receive $83 billion during 9802.when CHRISTUS Health was formed.1 Trends in Healthcare – Provider Space There are two major regulations. and is estimated to grow to a huge USD 4 Trillion by the end of 2003 (Dataquest. it is estimated that about 13% of the overall industry bed capacity are operating in bankruptcy. The past few years has seen a consolidation in the hospital and health sectors. Initially small players focused on local markets dominated the Industry. (Refer Appendix B). At present. In the last few years there has been an increasing number of acquisitions and the industry is moving into the consolidation phase. however as a result of the BBA.310 Billion annually (2001) and is growing at 7%. The world market for Healthcare is USD 3 Trillion presently. will continue to grow as newer technologies and sciences (Genomics. Furthermore. The last few years have seen smaller provider sub segments face financial challenges. 1. also the fastest-growing segment of the U. a decrease of about 11%. __________________________________________________________________________________ 65736839.a whopping number by any standards. Before BBA. Furthermore. These two regulations are:  BBA (Balanced Budget Act) The Balanced Budget Act of 1997 (BBA-1997) is designed to lower Medicare expenditures by about $112 billion over the five-year period 98-02. 70% of the Federal budget of the US. accounting for 43% of the world spending. which are coming into place. Cap on spending by government (BBA) is focusing efforts on cost cutting in this space. In the last few years. The total health care spending (by private and public in the US) is 1.3.but low activity expected. The US Congress is currently debating on a “Patients bill of rights” that will allow the patient to get better care under this system. 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. reaching $30 billion by 2005. struggling independent facilities in rural markets. US is the largest spender in this market. See Appendix A). However.S. there has been a tremendous pressure on the bottom line of these companies. they will now receive $74 billion over the same period. population. the members participating in these plans feel that the HMOs squeeze the patients to maximize their profit.0 Page 6 of 132 . Industry sources project expenditures for senior living of $18 billion in 2000.3 Trillion. This trend has slowed considerably and can be considered to be over for now. Provider Organizations are adopting some Cost Cutting measures. Individuals aged 85 and older (3. Also.Healthcare Market Overview ___________________________________________________________________ Industry.

Plans available across the country United Health Care Minneapolis. Property and Casualty. the number continues to climb.3.5 Million members enrolled in Medical HMO Plans. the rapid expansion of the elderly segment of the population is presenting HMOs with a new set of challenges.6 million Americans.3 million of those are Managed Health Care Members includes 5. 1. Hartford. among others.000 members in 1999 and another 327. Retirement and Investment Services.com Leading provider of health and retirement benefit plans.Healthcare Market Overview ___________________________________________________________________ labor costs (typically 40 -50 % of hospital operating costs) are steadily rising (specialized skills shortage). 10. which requires them to re-look at their transactions. Aging Population Poses New Challenge for the Healthcare organizations. Provides both Indemnity and HMO based Health insurance plans 6. HIPAA is going to have sweeping effect on HMO. on average.g. Prescription drug coverage has increased (95% of all members).doc Ver.cigna.aetna. Ongoing pressure to reduce healthcare costs will prolong the merger trend in coming years. with the top 10 HMO chains accounting for close to 2/3 of total HMO enrollment in the US.com __________________________________________________________________________________ 65736839.5% in 1999. Aging of the baby boom generation (born between 1946-1964). undercapitalized players. Cigna. The largest privately held chain is the Blue Cross/Blue Shield Association. Individuals. CT www. Medical costs rose 7. Numerous companies have exited Medicare Choice markets following implementation of the BBA in 1997. 1. HMOs cut 400. The last few years have seen Rising Costs for the MCO (Managed Care Organization). CT www. E. Pharmaceutical costs are rising about 15 %. MN www.5% in 2025. Recent times have seen HMOs exiting Medicare Choice plans. Aetna. Group Insurance etc. Managed Care Market Still Top-Heavy in the sense the managed care sector is fairly concentrated.0 Page 7 of 132 .000 members). including Aetna (affecting 355. More than 35 class-action suits have been filed against managed care companies to date. These companies cater to small and large Employer Groups. Furthermore Managed Care Consolidation has seen larger companies acquiring smaller. People older than 65 years (currently 14%) are estimated to rise to 18. Hartford.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. resulting in more people covered. Provides both Indemnity and HMO based Health insurance plans 21 million subscribed members in various health plans. Large HMOs are notifying the HCFA of their intent to exit Medicare + Choice market in 2001.000 in 2000.3 members of Prudential Health Care recently acquired. And this has resulted in higher costs.unitedhealthgroup. 1.2 Trends in Healthcare – Payer Space There has been a rise in Regulations & Lawsuits against payers. which collectively serves 21.com Into Health Care. and also provide coverage for members participating in government programs like Medicare and Medicare.

aetna. operates in many markets.com/ http://www.com/ __________________________________________________________________________________ 65736839. 1.5 References AETNA Intranet http://www. no risk).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. 445.doc Ver.Healthcare Market Overview ___________________________________________________________________ Primarily into Managed Health Care.8 million Fully Insured Managed Care Members.0 Page 8 of 132 . 1.gartner.jup.8 million self-insured members (fee basis. 1.com/ http://www.gartnerg2.com/ http://www. About 5.com/ http://www.000 Medicare members and 530.gigaweb.

President Nixon’s Administration announced a new national health strategy. and monitored quality of care. Michael Shadid started a rural farmers' cooperative health plan in Elk City.II 2 Healthcare Overview 2. provider-oriented insurance organizations. In 1971. During World War II. politicians and interest groups promoted various proposals for reforming the healthcare system. The foundation heard grievances against physicians. Over the initial objections of physicians. 2. during the Great Depression. were all on the agenda. 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. and the Blues would simply pay the bills on a fee-for-service basis.Healthcare Overview ___________________________________________________________________ UNIT . Other local physicians became concerned about their own patient base. Ten years after the war. Issues of cost containment. Physicians were free to practice as they saw fit. prepaid health care remained a minor phenomenon until the 1970s. consumer rights. Kaiser opened his plans to the public.0 Page 9 of 132 . “Provider-oriented” meant that. 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. developed peer review procedures. In 1954. However. In the 1930s. the Kaiser Permanente health plan had a growing network of hospitals and clinics and a half million people enrolled. hospitals began to suffer from patients’ inability to pay their bills. In the late 1960s and early 1970s. Paul Ellwood of Minneapolis. financially stressed hospitals prevailed on state legislatures to legalize the insurance schemes that became known as Blue Cross which were created as non-profit. In some locations prepaid group practice plans were quite successful at attracting members. The foundation accepted capitation (fixed) payments from subscribers. Blue Shield) did not try to tell physicians how to practice medicine. efficient delivery systems and more. In adopting this policy. This plan is considered the earliest example of an independent practice association (IPA) model prepaid health plan.doc Ver. the San Joaquin County (California) Medical Society formed the San Joaquin Medical Foundation in response to competition from Kaiser. Kaiser believed he could reorganize medical care to provide millions of Americans with prepaid and comprehensive services at prices they could afford. These members paid a predetermined fee and Dr. In 1929 Dr. Dr. who argued that the structural incentives of traditional fee-for-service medicine had to be reversed in order to achieve positive reform. and it paid the affiliated independent physicians and hospitals according to a relative value-based fee schedule. 1. Thus early insurance was restricted to Indemnity insurance. When the war ended. coverage for the uninsured. the Administration was influenced by Dr. The HMO Act of 1973 authorized $375 million in federal funds to help develop HMOs. physicians in private practice almost always billed patients directly on a fee-for-service basis. the development of health maintenance organizations (HMOs). access to services for the poor and minorities.1 Unit Objectives This unit will present an overview of the healthcare industry to the reader. Blue Cross (and later. Oklahoma 1929.2 Genesis Of Healthcare Until the early 20th Century. __________________________________________________________________________________ 65736839. Shadid rendered care to his patients.

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

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

Individual insurance is restricted to people who need to have specific coverage not offered in their group scheme. while in case of individual insurance the risk is concentrated on a single member and his dependents. So. Group insurance allows the insurer to spread the risk over a larger number of people. depending on his popularity with the patients). in which the employers pay for the healthcare subscription (in case of normal group insurance. This way.1 Healthcare pillars. This is a powerful perk used to retain good staff. capitation helps them to forecast their spending. have their advantages and disadvantages. it also restricts his earnings. Though self-insured schemes are quite popular. he has to pay for those services. 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. They offer a great flexibility to the company in providing insurance of choice to the employees. they outsource the administrative part to the insurance companies while retaining the money reimbursement part with themselves. they are able to achieve a balance between providing desirable healthcare coverage to their employees without causing administrative overheads. they are feasible only in case of very large organizations.4.4 2. and is a very good illustration of the amount of importance that is attached to health insurance in U. these companies do not have the infrastructure to perform as an insurance company. Such groups are known as self-insured groups.Healthcare Overview ___________________________________________________________________ 2. or to those who do not have a employee sponsored group insurance scheme. One of the most popular of these forms is a fixed monthly fee (capitation fee). So. The main advantage with group insurance is the freedom of choice for a member. 2.0 Page 12 of 132 . but the trend is towards group insurance due to its basic advantage of reduced cost and enhanced services. in return they are offered monetary benefits by the insurance company. 1. However. A group has much more bargaining power due to the simple fact that group insurance is less risky for the insurer.4. A variant of this is the Company Paid Groups. Under this agreement they provide medical care at reduced rates to the members. or less. as the total expenditure remains constant irrespective of the number of members having to seek medical services. A Provider is that entity which offers actual medical services to the members. the members have to pay for healthcare coverage). This is known as Individual Insurance. He is free to choose any of the services offered by the insurance company. __________________________________________________________________________________ 65736839.A. In case of some large corporations like AT&T or IBM the company itself provides insurance to its employees.2 Providers. Members. These monetary benefits are offered in various forms. Reduction in this cost to the member is a great advantage with group insurance. He can purchase this insurance coverage for himself and his family (also called his dependents). While on one hand capitation ensures a fixed monthly income for the provider. In such a case the employer becomes his plan sponsor and the insurance is known as Group Insurance. There are other variants of insurance in the market. a pharmacy or hospitals are all referred to as providers. In most cases. Due to its bargaining power. However. The providers enter into an agreement (contract) with the insurance company. Both individual and group insurance. A doctor. A member is a person who purchases insurance from (or enrolls with) an insurance company. his employer will pay for his insurance coverage. from the provider’s point of view it’s a choice between a fixed income and a varying income (which may be more. group insurance schemes are able to get better deals for their members than in case of individual insurance. For insurance company.S.doc Ver.

Due to the control over the choice of provider. The major line of coverage provided by the insurance company. or. the insurance company is able to offer healthcare at reduced rates. Staff model is beneficial from the insurance companies point of view. Such a group is called an IPA or an individual practice association. This constitutes the Staff Model of managed care. Formation of an IPA gives the providers more bargaining powers with the insurance company and assures them of an increased patient volume.0 Page 13 of 132 . In case of certain large hospitals with a significant patient base. as they are in a better position to regulate the expenses. 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. the members visit a provider and pay him for his services. In case of Indemnity plans. The right of a member to receive services from the insurance company as per their mutual agreement. In some cases. 2.3 Benefits. This is one of the most stable models of managed healthcare. they file a claim (a request to refund the expenses incurred) with the insurance company. company to the member. As with self-insured groups. the member is called a Plan. These when customized as per the member’s requirements and put down on paper as a legal document forms a policy. This staff model however is feasible only in case of very large insurance companies. Then depending on the choice of coverage the member is said to have medical benefits or dental benefits or vision benefits. After that. 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.e. right from providing services to filing claims.The PCP manages their complete healthcare.4. i. the IPA. If the claim is found to be valid. The providers themselves have an increased patient volume and hence offer services at reduced rates. __________________________________________________________________________________ 65736839. In general. the insurance company pays a part (usually 80%) of the expenses. the insurance company may directly employ providers. The members pay a fixed monthly fee and need to choose a provider within the network as their primary care physician or a PCP. they may outsource the administrative functions to an insurance company while keeping the money reimbursement part with themselves. whom sets forth the terms and conditions of this agreement is called a Policy. which contracts with the insurance company. the insurance company contracts with providers and form a network of such providers. 1. 2. we can say that a plan is the general range of benefits offered by the insurance company. In turn the insurance company is able to offer a range of providers to the members at a single source. Thus. The insurance company may provide medical/dental/vision coverage. In case of managed care.e.Healthcare Overview ___________________________________________________________________ Sometimes. Benefits can be described in two ways 1. they are very expensive. There has been a gradual shift in the choice of members from Indemnity (traditional fee-forservice) plans towards Managed Care (prepaid) plans.doc Ver. The reduced cost of a managed care plan is the main reason for members preferring them to indemnity plans. the hospital itself may function as the insurer. individual providers form a group. Though they offer great flexibility to members in their choice of providers. The insurance company offers a better deal to its members for using a provider within this network.

POS provides the member with the option of having HMO type coverage at a lower fee. a Claim is a request filed by the member (or his PCP) for the refund of medical expense incurred by him. The claim is then adjudicated (or tested for authenticity) as per the company’s business rules and policies. nowadays there is a major emphasis on automated claims adjudication.4 Claims. It has a major disadvantage that it limits the choice of providers to a network. 1. referrals. validated for necessary information and then loaded into a database. The checks can include.doc Ver.EPO or exclusive provider organization. EOB gives the details of the services rendered to him by the providers and the amount of expenses to be borne by the member for the services he has used. it also reduces the necessity for claim examiners. also claims with any missing information are resolved manually by Adjudication experts. also know as Claim Examiners. 2.0 Page 14 of 132 . members may be enrolled with multiple carriers (insurance companies). __________________________________________________________________________________ 65736839. Members cannot avail services from a provider not contracted with the insurance company. The member is also sent a letter called the explanation of benefits (EOB). 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. Complex or ambiguous claims. thereby making the process more cost effective. In such cases the claim is first processed by the primary payer (there are standard rules to determine which insurer is the primary payer) and then sent to the secondary payer. as it offers the best of both Indemnity and Managed care plans. Claims adjudication is a very complex process and requires information of almost all the entities associated with health care such as members. Apart from speeding up the process.Healthcare Overview ___________________________________________________________________ The model of managed care as described above is known as a HMO or a health maintenance organization. It also gives the amounts applicable to him. Hence. 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. benefits. 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.4. while having the option of Indemnity type coverage at a higher fee. member receives a check for payment of the expenses. Claim is either filed on paper or sent electronically . This is known as coordination of benefits (COB). On completion of claims adjudication. The recent trend has been to go for PPO plans. policy etc. Sometimes. a hybrid of HMO and POS plans. is a recent addition to the stable of managed care plans.The claim is received by the insurance company. providers. 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. As explained earlier.

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

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

It’s the area responsible for setting rating algorithm and the pricing factors to be used in rate calculation. __________________________________________________________________________________ 65736839.6 Summary. 1. It started with the genesis of healthcare in the U.0 Page 17 of 132 .Healthcare Overview ___________________________________________________________________ covered under the policy.S.  Actuarial: This involves analyzing the trends. 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. In the end the reader was given a brief overview of the managed care workflow. We shall analyze this figure at the end.doc Ver. E. This unit gave a brief overview of the healthcare industry to the reader. The more accurate and detailed representation of the workflow of the healthcare industry is given the following figure. contingency matters and prior details to come up with factors to alleviate risks. Analysis of claims from a particular geographic location may reveal an increase in claims in that region due to reasons related to environment.g. new products introduction etc 2.A and then introduced the five pillars of healthcare. Actuarial decides the factor to be applied to renewal rates of benefits offered in that region. after a detailed description of all pillars has been given. An Explanation of benefits (EOB) is sent to the member describing the payments made and indicates the share that the member has to pay. future liabilities. The details about the pillars and the other topics mentioned in this unit will be presented in the subsequent units. arranging for reinsurance. The workflow shown in figure 1 represented the workflow of a managed care organization.

human.yourdoctorinthefamily.8 References. __________________________________________________________________________________ 65736839.cornell. “Future of managed care” by Tufts managed care institute. 4. 2. Review Questions.Healthcare Overview ___________________________________________________________________ Figure 2: Detailed Workflow 2.edu/ “History of managed care” by Tufts managed care institute. 2. 1.7 1.0 Page 18 of 132 .      www.com http://trochim. 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.doc Ver.insurance.com www. 3.

Healthcare Overview ___________________________________________________________________  “Managed care overview” by Amit Shukla __________________________________________________________________________________ 65736839.0 Page 19 of 132 . 1.doc Ver.

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

These will be used to show the validity of the policy taken. The pictorial view of the process is as shown in figure 1. Claim will be validated and the insurer will reimburse the amount to the provider/member. doctor) to avail the service. 3. 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 3.2 Introduction Member is a person who is the actual beneficiary of the healthcare plan. Some employers sponsor healthcare plans to its employees and its dependents. 1.Members ___________________________________________________________________ UNIT . Once enrolled. __________________________________________________________________________________ 65736839. Provider will check the eligibility of the member for that service. 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").1 Insurance Business: An Overview.0 Page 21 of 132 . 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.2.III 3 Members 3. The provider/ member then will file a claim to insurance company.doc Ver. an insurer provides ID cards to its members.

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

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

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

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

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

 Their Work will be given higher priority by the insurance company. Tax Relief for employees Employees are liable for Benefit-in-Kind (BIK) taxation on the paid Healthcare premium at their top rate of tax. Ease of Payment Payments can be made by direct debit through company bank account.3. Benefits to the company Introducing a Healthcare group scheme for employees. staff members can select a higher plan and simply have the balance deducted from their salary.3. Benefit in the premium amount Some group schemes qualify reduction in the premium amount. __________________________________________________________________________________ 65736839.0 Page 27 of 132 . SI Groups pay "Service Charges" to insurer for administration / management of medical insurance (adjudicating claims etc. The SI group also has to maintain certain bank balance at all times to ensure the continuance of medical benefits to their employees. a payment can be made directly on a yearly. they are entitled to claim tax relief on the full premium. quarterly or monthly basis. thereby reducing their effective rate of BIK to the standard rate of income tax. 1. (Examples are the Irish Farmers’ Association. sports clubs and interest groups.) for their employees. one can provide his/her company with significant benefits in terms of employee recruitment. 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. 3.6 Self Insured Group Plan Sponsors / Companies who pay the Claims' amount of their employees themselves are called SI (Self Insured) Groups.Members ___________________________________________________________________ Fast access to the best in modern healthcare Members can choose admission dates to fit in with work and family commitments. half-yearly.  They will be given more priority for processing of their claims then others get. In a company-paid scheme. Flexible cover options Once employer chooses a particular level of cover. the company can claim healthcare payments under the Corporation Tax shelter. Plan Sponsor is profited by:  They get the Health Insurance plan at a cheaper rate.5 Affinity Groups An Affinity scheme is appropriate for members of business organizations. The financial risk is borne by the Plan Sponsor. Alternatively. leading to less stress for them and their employees.) 3. retention and goodwill. professional bodies.doc Ver. But these figures are much lower than paying premium to cover all the employees. as it is helpful in growing their relationship. the Credit Unions and the Small Firms Association.  Risk is moved to the Insurance Company. Insurance Company is profited by:  Getting a fixed sum of money for adjudication of claims.

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

850 for families).8 Exercise 1. This includes Medicare coverage. Enlist advantages and disadvantages of individual and group insurance. insurers are running into problems with state laws that prohibit such high-deductible plans. 3. is not eligible to open an MSA. Administrative /Management of medical insurance 5. The biggest challenge in setting up an Archer MSA may be finding a company that offers them. there are exceptions to this rule. However. 4. in some states.  Someone. and The annual out-of-pocket expenses do not exceed $3.doc Ver.800 for families). 2. Plan sponsors/ Employers 4.200 for individuals ($5. are those who pay the Claims' amount of their employees are Self Insured Groups. 1. Answers: 1.600 and $2.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. are those who purchase insurance directly from an insurance company in case of an individual insurance. In fact.3. Individual Members 2.200 to $4.0 Page 29 of 132 . 3. Many financial institutions are also still in the development stage with their Archer MSA account products. A highdeductible plan is defined as one in which:  The deductible is between $1. Many insurance companies are still developing qualified high-deductible insurance plans and products with a savings component. are those who purchase insurance in an employer sponsored insurance. For Self-insured groups insurance company may provide the services. Employers 3. 5. having additional coverage under a health plan that is not a high deductible.400 for individuals ($3. __________________________________________________________________________________ 65736839.

The data will be received and formatted fed to the systems.Members ___________________________________________________________________ 3. verifying. Member will receive membership letter once the enrollment is over. Member can fill up the forms and send it to the respective postal addresses. billing. 3. There will be online systems set up there. Membership letters and other details will be sent to the member once the process is over. For an employer ID numbers and passwords for its employees will be provided.0 Page 30 of 132 . Enrollment in the office outlets of the insurance company There will be city-based office outlets set up by the company.doc Ver. Member has to approach the office.4 3. Once the enrollment is over. Required data will be captured and sent to the insurance company electronically.1 Member’s enrollment What is Enrollment? The enrollment process comprises of collecting. This is most commonly used methodology for large employers having more than 300 employees. and claim adjudication. product issuance. Data entry operators will make you enroll online. benefit information that he/she has opted for. Web-based applications For an individual web based application will facilitate online registration/ enrollment to get enrolled.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. 1.4.4. Member will provide all necessary data to the insurance company that will include personal information.    __________________________________________________________________________________ 65736839. The enrollment process will then be automated. Enrollment through the employer based systems Employers do have employees data maintenance systems. Employees are allowed to select the benefits they wanted to opt for. a member can start filling up the claims. Collecting and updating the systems with the data completes the enrollment process. Employer then validates and sends the information to the insurance companies electronically. This is the most commonly used approach. and making available all necessary eligibility information for enrollee membership.

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

5 Exercise 1.doc Ver. 1. Means of enrollment are a.Members ___________________________________________________________________ 3. Answers 1. Traditional Paper transfer b.4 Enrollment: Overall Picture Please refer to figure 4 for the pictorial view of enrollment process. Electronic data transfer. Employers having own member's database provide data to the insurer via _________. 3. 2. 3.4. Web-based applications.4. 2.0 Page 32 of 132 . Enlist the means of enrollment. ID card __________________________________________________________________________________ 65736839. Electronic data transfer from employers d. 4 Enrollment Process 3. Direct enrollment in the field offices c. Member needs to show _______ as a token of its membership in the insurance company. Fig.

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

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

or a physical disability. (Y/N) Son Bill of age 21 got married and moved out will be a valid dependent of Joe. Providers need not validate the member eligibility before catering any kind of service. cartridges and diskettes. So eligibility checks would be carried away but will not hold back the member from getting the service.6 Answers __________________________________________________________________________________ 65736839. or turns age 23. Provider validates the eligibility of the member for the service asked. mental retardation.5. This includes children who are away at school as well as divorced children living at home and dependent upon member for support.5. moves out of the household.5. automated transmissions that include security features like encryption technology and unique IDs and passwords for user verification and system access. foster children. children who do not live with the member are eligible if member is legally required to support those children. 2.5  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. The service will be provided only if the person is eligible for the same. coverage may be continued. which can get lost or damaged.4 Eligibility Data Transfer Most of the insurance companies transfer the eligibility data electronically. Coverage for children age 23 ends on December 31 of the year in which they turn age 23 If a child is not capable of self-support when (s) he reaches age 23 due to mental illness.  Member having PPO plan A member will fall under a network and can get service from any provider falling in that network.0 Page 35 of 132 . This methodology eliminates the need to submit paper forms or produce and send cumbersome tapes. (Y/N)    3. 3. Exercise 1. legally adopted children. If member is divorced.  Member having POS plan Member is free to go to any provider. 4.Members ___________________________________________________________________ Every member has associated Primary Care Physician (PCP) for medical services and Primary Care Dentist (PCD). Coverage for an enrolled child will end when the child marries. Affidavits of Dependency and legal documentation are required with enrollment forms for these cases. Provider need not do any eligibility checks for member’s eligibility. 3. 3. 1. Stepchildren. If goes to in-network provider the co-pay will be less. These are generally unattended. (Y/N) Daughter July aging 26 passing through a phase of mental illness is treated as a valid dependent. (Y/N) Providing member's eligibility data to the providers is a responsibility of the insurer. 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.  Member having indemnity plan Member is free to go to any provider. But there is no restriction on the choice of the provider.doc Ver.

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

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

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

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

2 Groups Formation When a plan sponsor enrolls its employees. The CONTRACT IS RENEWED for a group and the members are REINSTATED. Payroll Change.8. Mass Id-Card Request (Co-pay Change). Membership details (Effective Date Change. Provider Office Change. membership Termination date changes.0 Page 40 of 132 .8. Third Party Phone Number Change. the breakdown of the employee into groups will be done. Change Membership Termination Date. Family Group to Group Change. __________________________________________________________________________________ 65736839. Suspended). Recalculate Family Contract. Reinstatement. Employment 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. ID-Card Request. Office Effective Date Change. Group Maintenance includes               Office Details changes (Contact Number. Third Party Address Maintenance. Contact Address Changes) Third Party Address Change. Provider Office Change.Members ___________________________________________________________________ 3. 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. 1. Membership Termination. Other maintenance performed on the member data is … Members Maintenance includes       Member's personal information changes (Address Change. Employment Change.doc Ver. Member Name Change. 3.3 Groups Maintenance Member and Groups' maintenance is performed annually. Office Termination Change. Most Groups' renew their Plans every year in January. Mass Id-Card Request. 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. Membership Effective Date Change. groups are created and entered into the systems first then the enrollment for the individual members would be done. Comment.

When the groups are formed in case of a group insurance? 3. they must have the permission of state's insurance department. 5.9. 1.1 Member’s concern When a member buys an individual disability insurance policy. 4. Employers can provide coverage for employees too. 3. 3.9 Disability Benefits Disability income insurance provides members with an income if they become sick or injured and are unable to work. __________________________________________________________________________________ 65736839.2 Exercise Questions 1.Members ___________________________________________________________________ 3. What types of services does the insurer provide? 2. Often. Enlist the services offered for group maintenance.they can be used in any way the member wishes them to use. 5. so may be premium will be raised only every few years. Guaranteed renewable means that the policy can't be canceled as long as member pays premiums. Disability benefits contracts in which policy cannot be canceled and premium cannot be raised are _________. Answers: 4.9. noncancelable policies are offered only to low-risk occupational groups at a high premium.0 Page 41 of 132 . which would apply to all individuals in the same insurance classification). Opting for the guaranteed renewable provision may save as much as 30 percent of the premium cost. Disability benefits contracts in which policy cannot be canceled but premiums can be raised are _________. 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. pay attention to whether the contract is non-cancelable or guaranteed renewable. For a guaranteed renewable contract company cannot raise your premium on an individual basis. The funds paid are not specified for medical expenses . Non-cancelable.doc Ver. but the premium can be raised under certain circumstances (the state insurance department must approve the change. A non-cancelable contract is preferable to a guaranteed renewable contract. Guaranteed renewable.

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

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

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

Health insurance companies sometimes delegate credentialing to some physician groups. 1.2 Credentialing Criteria The process requires providers to present documentation of training.g. Based on nature of service. EQUIPMENTS: These are those providers who provide medical equipment for executing medical tests such as X-ray labs.3.3 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. Some HCO(s) have pioneered the E-Pay/E-Cash option.3. Hospital.2 FACILTIES: These are those providers who provide facilities such as wards. Backup provider provides medical services to the patients of the provider when he is not available. E. 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. Maternity Home etc. 4. or an appropriately delegated credentialing process. Provider Participation HCO (Healthcare organizations) usually elicit provider participation (into their network) using some standard marketing strategies. 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 . 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.0 Page 45 of 132 . 4. 4. path labs etc.g. which involves clearing provider claims within a fortnight (subject to the provider electronically filing the claim in a prescribe format). individual practice associations (IPAs).doc Ver. a minimum number of member (or dependent) visits. providers can be classified as following:    4. ICU’s. Once a provider is accepted as a participating provider. Pharmacies. • Minimum number of member visits Some HCO(s) guarantee providers. there will be routine visits to the provider's office and a re-credentialing process every two years. so as to assure a minimum amount of revenue by way of claims. • E Learning Virtual Communities As some of the fringe benefits. e. which share knowledge and intellectual property via the Internet..Providers ___________________________________________________________________ A provider can specify another provider as his/her backup.PHO(s). SUPPLIERS: These are those providers who provide medicines and surgical instruments. education and other relevant information.

independent practice associations (IPAs). many participating primary care physicians are compensated in accordance with the Quality Care Compensation System* (QCCS) described below. Quality Review considers: __________________________________________________________________________________ 65736839.3. a physician receives payment for a patient whether the physician sees the patient that month or not.4 Types of Contracts All major health insurance companies have several different types of provider contracts based on the type of servicing provider. membership/privileges. In most areas.3.doc Ver. physicians are paid by capitation. professional organizations.5 Provider Reimbursement Most health insurance companies incorporate the following payment methods to reimburse providers for services. 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. DEA registration. physician hospital organizations.  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. the system uses a three-part quality factor to adjust the physician’s capitation payments. 1.3 Verification of Provider Credentialing Information Health insurance companies verify the information about providers through a variety of sources:  State medical boards  National Technical Information Service tape  American Medical Association master file  American Osteopathic Association directories  American Boards of Medical Specialties  National Practitioners Data Bank  Malpractice carrier  Court records  Office of Inspector General reports  Hospital providers 4. 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.Providers ___________________________________________________________________     Disciplinary history (including licensure. Under capitation. Medicare/Medicaid) Work history Malpractice insurance coverage history Clinical privileges at a hospital hospital 4. For example. hospitals.3. specialists.0 Page 46 of 132 . 4. per month)  By integrated delivery systems. Specialist contracts and Hospital contracts. 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. Some of the different types of provider contracts include PCP contracts.

Insurance Company 4. It depends on the plan taken by the member. 4. Contract is an agreement between the provider or group of providers and the _________________.doc Ver. 3. Exercise The legal entity that provides administrative and contract related services for providers are also a type of provider – True or False.Providers ___________________________________________________________________ Results of member surveys Review of the care (like childhood immunization rates.   __________________________________________________________________________________ 65736839. 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.g. referral validity ‘From’ and ‘To’ date and service code (it specifies the king of service/treatment). The inquiry can be done either on the basis of member number or referral number which ever is known. A provider is called as ________ provider if he has a valid contract with the company. Providers who provide medicines and surgical instruments are known as ___________.0 Page 47 of 132 . Referral maintenance – through this process one can modify the existing referral entry. Referral is not always required to visit outside PCP. details of the provider who is referring.4 1. A referral once issued has a validity period. A PCP or an authorized provider provides it when special care is required. 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.5. (E. PORG etc) 2. Some plan has flexibility to visit any provider without any prior authorization in that case referral doesn’t come into picture. The information which needs to be entered are Member number. 2. True. IPA. details of the provider for whom referral given.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. Encounter date. 1. Suppliers 4. 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. 4. diabetes and heart failure   4. Answers: 1. A PCP can issue themselves referrals for non-routine services. PAR or Participating 3. 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.

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

  __________________________________________________________________________________ 65736839. All facilities are also required by contract to notify us of any change in coverage.1 some common information of Providers Some of the common information that needs to be captured for a provider is given below:  Provider number – this is a unique number which is system generated. The local Network Management staff has the ongoing responsibility of ensuring that each network has the proper composition of providers. All the inquiry or maintenance of providers is done based on provider number.6. Pro Net) contracts with the providers. They must also maintain adequate malpractice and general liability insurance or self-insurance. which includes hospitals. They compare the existing network with adequacy guidelines for the specific service area and identify whether there is a need for new providers. A provider who is providing healthcare services on current date is an active provider. In other words. but may vary to accommodate local supply and regulatory requirements. and when members have access to the various types of medical services they may need. Doctors. Instead of engaging in direct contracting arrangement with individual providers. network staff target providers to be recruited and contracted. In the healthcare organization.g. closed. 4.2 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.4 Network Hospital Standards Our current hospital contracts require network hospitals to represent and warrant that they are.doc Ver. Labs etc.7 Provider maintenance This process involves collecting information on all type of Health Care Providers. one the major database is Provider database.0 Page 49 of 132 . and will remain during the term of the contract. licensure or accreditation status. given to each provider to identify the provider easily.Providers ___________________________________________________________________ 4. The status can be retired.6. 4. If it is any group or hospital then name of that should be stored.. 1. appropriately licensed and accredited by either the American Osteopathic Association (AOA) or the Joint Commission on Accreditation of Healthcare Organizations (JCAHO).6. A PPO network must be complete enough to provide members’ access to a participating provider for a core of essential medical/dental services. After developing a list of providers by type needed to meet customer needs. networks are adequate when there are enough providers available for the member population in a geographic area. Aetna reimburses the rental network organization for allowing our members to use the network.7. Provider maintenance should be done everyday in order to keep the provider database up to date all the time. and provide evidence of such insurance upon request. deceased etc.3 Rental networks A rental network is an arrangement in which another organization (e. Provider name – it is the name of the provider if he is an individual provider. Almost all the system uses this database to get any information about any provider. 4. The criteria used to select participating providers reflect minimum network composition standards. Provider status – Shows current status of the provider. 4.

2.g. If there are no levels 10. The addresses of rest of the nine SLs are stored as 01. 3.    o   Claims payment schedule – It is the interval of claim payment to the provider. is ____________. 4. Dentist. Provider can have maximum of ten Service Locations (SLs). d) None of the above. which is different from all his SL addresses. E. Provider Specialty .  4. A provider can have more than one billing addresses. 14 or 15 billing address.The area in which a provider specializes is called his SPEC or specialty. but the company needs to put their details as well. There are some plans available in which the member can visit any provider irrespective to his contract with the company. Radiology center. only then the payment is made to the principle service address. Effective and termination date . There would be providers in the database. Contract info – this information tell whether the provider is in contract with the company or not. If a provider wishes to have a billing address. Psychologist. Provider network is adequate when: a) There are enough providers available for the member population in a geographic area.doc Ver. b) Members have access to the various types of medical services they may need. A unique number given to each provider. Midwife. Exercise Referral is mandatory to visit a specialist irrespective of insurance plan/policy – True or False. Clinical Social worker. 1.09 Service addresses. 14 & 15 – If a provider wishes to have separate addresses for capitation and claims payment. __________________________________________________________________________________ 65736839. he can specify level 14 billing address for payment of capitation and level 15 billing address for payment of claims. which ease in maintenance of that provider record. o This is CAP and Claims billing address. If a provider has more than one service locations.0 Page 50 of 132 . Nutritionist.The address at which the payment of claims is made to a provider is called the billing address.All information maintained are time sensitive. ____________________ is the interval of claim payment to the provider. transportation etc. If the code for billing address is o It’s the principle service address. Providers will participate with an organization for a certain period and may discontinue. one of their addresses is identified as principle billing address. It can be weekly. – Physician. to process their claims.8 1. Both claims and capitation payments go to this address only if provider has not specified level 14 and level 15 addresses.Providers ___________________________________________________________________ Provider type – Provider type is categorization of the providers depending on the type of healthcare services they provide. 02…. bi-weekly or monthly. c) Both of the above. Nurse Practitioner. Billing Address . which are not in contract with the company. he specifies a level 10 billing address.

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

doc Ver. 1.0 Page 52 of 132 .Providers ___________________________________________________________________ __________________________________________________________________________________ 65736839.

In such cases the Customer and Cash receipts information is maintained and broker commission is calculated from that. 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. as there is stiff competition in the market. Each Customer group should submit a stipulated minimum number of applications for corresponding broker to qualify for commission.1 Unit Objectives This unit aims to familiarize the reader with some aspects of insurance sales and quote creation. A substantial percentage from customer groups’ payments result in distributing some percentage as commission to brokers.3 Brokers An insurance company generally has a pool of brokers. Key Producer Compensation – Sometimes the company identifies key producers and gives them bonus if they get more than a fixed number of new subscribers. This bonus is one time payment for new application and it depends on number of new application submitted.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.Sales ___________________________________________________________________ UNIT . Users within the company need to maintain particulars of brokers and information regarding broker-customer relationship. 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. The banding of the medicare promotion award could be something like this: Program To Date Application Level Payoff per Application   65736839. The bonus distribution could be something like this: Net Subscribers Produced Override % of Premium 150-750 1% 750-2500 2% 2501+ 3% Cap of $60. As in every other business. in health insurance too brokers bring together buyers and sellers against a commission. 5. Brokers are also called Producers in this context. The various entities involved like Brokers and Underwriters are also discussed. 5. Together they use various methods and strategies to sell the plans to as many customers as possible.V 5 Sales 5.doc Ver 0. Producer Data is frozen at the end of a year. here buyers being the customer group buying a plan and sellers being the insurance company.3.2 Introduction Sales and Marketing form an important activity in the health insurance industry. 5.000 per Customer group per calendar year.00a Page 53 of 150 . An insurance company has its own marketing workforce and also a pool of external agents (brokers).

Effective Date & Renewal Date (date from which the policy will take effect and date when the policy will be due for renewal.Sales ___________________________________________________________________ 1-250 $100 250-500 $125 500-1000 $150 1000-2000 $175 2000+ $200 Cap of $60. Hence Book Rates are same for any customer group availing a particular plan in the same area and hence the name Community Rates. A highly specialized and trained user group called Actuarials does rate Setup.4.e.  The effective date . They enter data about new/updated plans. 6. Actuaries come up with rates for each product. State regulations affect prices.) These are all mainly data-entry operations. benefits and conditions of a chosen plan. If not renewed by that time. possibly after relevant customizations. make certain products saleable in certain area and withdraw some products from some areas as and when required.4 5.000 per Customer group per calendar year.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. In context of health insurance. Rates (the premium due per member. These rates are called Community rates or Book Rates or Base Rates and they depend only on:  The plan chosen .00a Page 54 of 150 . Name of Plan 4. given by a seller to prospective buyers.Government regulations often mandate certain kinds of coverage. a quote is a statement of cost. 5. However. inpatient hospitalization etc) 5. tax structures etc.the benefits included in a plan are basis of the cost of the plan. Service Area – Area in which the members will be based 3. (In section 5. statutory information etc 5.6 we will study in details how Actuarials arrive at these rates. do not take account of any factors specific to any customer-group.doc Ver 0. Admin users usually do product setup. Name of the firm buying the policy 2. the policy becomes void) 1. for the member(s).rates are revised from time to time and hence the dae of commencement of coverage affects the rates. But they do not apply these factors. They group and combine benefits into plans and maintain data about product-offerings in different service-areas i. (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. benefits and new locations where plans will be offered for sale. It contains information about: 1.  The location / service area of the customer group . Some standard information – like applicable conditions. These rates need to be approved by the concerned department in some states.4. Details of coverage (benefits like pcp visit.1 Quote Creation What is a quote? A quote is a statement of rates of a particular product. On the basis of statistical considerations and mathematical calculations and with the aid of rating applications. In case of a group insurance policy the rates may be banded on basis of age/ gender/ family status).) 65736839. All these affect the cost of the plan. Actuaries also calculate the values of group-specific factors for different locations at different times.

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

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

doc Ver 0. 3. An optional layer above these would be a web-based front end . Group-specific 65736839.which would act as a single interface or gateway for all marketing. Product Setup is done by (a) admin users (b)marketing people (c)actuaries 2.c . a . Underwriters and Marketing assistants use both of these. 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.same 4. Exercises: 1. 4. Quoting Engines and Renewal Applications use the data generated by these applications. Answers: 1.Intranet for use of all internal users and Internet for use by customers to get data online. Admin applications are used by Admin Users for Product Setup.Sales ___________________________________________________________________ Marketing assistants Fig 3. and are also used for renewing contracts. Quoting Engines generate quotes with customer specific rates.2. Enveloping all these there may or may not be a Quote front end .0 Here we see that central to the system are the Admin and the Rating Applications. The final say on the rates is with (a) marketing people (b)actuaries (c) underwriters (d)underwriters 3. managerial and underwriter users to the suitable application. Actuaries to calculate the Base Rates of Products use rating applications.00a Page 57 of 150 . Renewal Applications pick up contracts that will be shortly due for renewal. The difference between Book Rate and final rate would be due to ______________factors.

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

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

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

These prospective customers are entered into the database by Tel Marketing department. 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. Answers : 1. Marketing by mailing involves sending e-mails to prospects. Responders expire from the database after one year. d) Vendors who maintain latest information like addresses of all prospects and update our data files by matching it with theirs. False 5. it’s a fair assumption that all the prospects addressed in that batch of mails must have received the mails too. b) Meeting mailing: Informing the new prospects about seminars or meetings conducted by Aetna and requesting them to attend the same. After sending mails.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. True 3. c) Member mailing: Involves mailing to existing customers of Aetna. These names stay on the database for one year from the date the names were received from the vendor. Telemarketing department gets new prospective customers by calling people. c) Vendors who supply data of prospects who do not want telemarketing ie they do not want to be called and informed about new products. 4. To ensure if the mails are delivered. new prospects with phone numbers are loaded to the Dialers. Mailstream system is used to pre-sort the mails to obtain further discounts from postal department.Sales ___________________________________________________________________ The mails to prospects are processed through Code1 Plus software which validates addresses and gives CASS certification. Postal mails sent by sales department fall in three categories: a) Regional mailing: Mailing is restricted to selected regions or states. Exercises True or False 1. • • • 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.doc Ver 0. Meeting mailing informs prospects about meetings and seminars.00a Page 61 of 150 . Their expiry date is one year from the date on which it was entered. 2.7. It also helps to ensure that same set of prospects are not getting selected for marketing too often. 65736839. Seeds are sales department employees and if the mail reaches the seed. The responders names do not expire from database. Tele marketing department retrieves the names from Dialer box for phone follow-ups. Responders are customers. US Postal Department gives discount on CASS certified mails. 3. Code1 plus software validates addresses. False 2. seeds are implanted in each batch of mails dispatched. who voluntarily contact healthcare company to get information on it’s products. True 4.

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

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

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

However. For example. In order to avoid 65736839. the insurance company will pay 100% of the providers charges  If compared with the Indemnity plan provided in the earlier section. However.  Every time he avails the service of a provider he has to pay $10 irrespective of the kind of services availed. there are several important differences between HMOs and PPOs. there is a strong financial incentive to do so. which are at the higher level of benefit coverage. members may receive 90% reimbursement for care obtained from innetwork physicians but only 60% for out-of-network treatment.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. In some cases.4. or by some other type of organization.doc Ver 0. known as ‘Non-Preferred Benefits’. it becomes clear that the cost for the member is much less. the provider may submit the bill directly to the insurance company for payment. Advantages  Free choice of healthcare provider. a preferred provider organization (PPO) is a managed healthcare system. he will have to pay $35 as $10. which are at the lower level of benefit coverage. as PPO members are not required to seek care from PPO physicians. PPO members usually pay for services as they are rendered. The insurer then pays the covered amount directly to the healthcare provider. The PPO sponsor (employer or insurance company) generally reimburses the member for the cost of the treatment minus any co-payment. by one or more employers.00 copay 100%  For all kinds of treatment. The PPO may be sponsored by a particular insurance company. 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. usually 80% payment rate. When members receive care from a non-participating provider they receive benefits. A PPO is actually a group of doctors and/or hospitals that provide medical services only to a specific group or association.00 copay $10. In case he has to use the emergency room facilities.2 Preferred Provider Organization (PPO) Like an HMO.  copay. and the member pays his or her co-payment amount. In return. The healthcare providers and the PPO sponsor(s) negotiate the price for each type of service in advance. PPO physicians provide medical services at discounted rates and may set up utilization control programs to help reduce the cost of medical care. usually 100% payment rate. known as ‘Preferred Benefits’. 6.00a Page 68 of 150 . When a member receives care from a participating provider they receive benefits.

the POS plan mirrors an HMO.doc Ver 0. if a member’s longtime family doctor is outside of the PPO network. and members may be required to meet a deductible.00a Page 69 of 150 .3 Point Of Service (POS) POS plans give two benefit levels. A PPO member has to file claims on his own. When a member uses the in-network benefits. else none. there is a strong financial incentive to use PPO network physicians. 80% / 20% 80% / 20% Preferred option closely mirrors the HMO option while the non-preferred option approaches the Indemnity option. most PPOs have larger copayment amounts than HMOs.00 office visit 100% None 100% after $10.  A typical PPO plan will look like this – Plan Feature Calendar Year Deductible Per Confinement deductible Family Limit Deductible Copay Coinsurance Coinsurance Limit Physicians Emergency room Hospital Other Covered Services Table 3: A sample PPO plan  Preferred Benefit None None None $10.00 copay $25. he may choose to continue seeing him. Disadvantages  As mentioned previously.00 $200. the expenses and paperwork are higher as compared to HMOs.Benefits ___________________________________________________________________ paying an additional 30% out of their own pockets. the member pays no deductible and usually only a minimal co-payment when he uses an in- 65736839.4.  6. One side is for in-network services and the other side is for out-of-network services. The plan can be visualized as having 2 sides. members may receive 90% reimbursement for care obtained from in-network providers but only 60% for treatment provided by out-of-network providers. Hence. most PPO members choose to receive their healthcare within the PPO network. The benefits are reduced in case of non-preferred option.00 100% 100% Non-preferred Benefit $200.00 80%/20% Same as preferred if true emergency.00 3x deductible None 80% / 20% $1000. Thus. For example. Additionally. but it will cost more. Like an HMO.

while there is no PCP for out-ofnetwork services. else none. For example. 80% / 20% 80% / 20% 65736839.  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. No deductible is required for in-network services. POS plan encourages members to use innetwork providers but does not make it mandatory.Benefits ___________________________________________________________________ network healthcare provider.   Disadvantages  There are substantial co-payments and deductibles for out-of-network care.00 100% 100% Out-of-network $200. Unlike HMO coverage. co-payment is around $10 per treatment or office visit.00 $200. Usually. the POS plan is an indemnity plan.00 80%/20% Same as preferred if true emergency. he can mix the types of care he receives. members must have paid a specified deductible before coverage begins on out-of-network care.00a Page 70 of 150 . Like a PPO. he also must choose a primary care physician who is responsible for all referrals within the POS network. When he uses the out-of-network benefits. As with HMO coverage. But.00 copay $25.00 3x deductible None 80% / 20% $1000. the member’s child could continue to see his pediatrician who is not in the network.00 100% None 100% after $10. members pay only a nominal amount for in-network care. As in an HMO. The member will likely be subject to a deductible and co-payment. while the member himself receives his healthcare from in-network providers. as with HMO coverage.doc Ver 0. Advantages  POS coverage allows a member to increase his freedom of choice. members must choose a primary care physician (PCP) and hence there is a tight control to get specialized care within the network. members always retain the right to seek care outside the network at a lower level of coverage. In most cases.

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

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

00a Page 73 of 150 . 65736839. 6. Most of these plans in some or other will belong to the two main categories listed above. Or the member may be required to cover the charges out-of-pocket at the time of service. This keeps the cost of dental care much lower than medical care. Depending on the specific plan. 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.doc Ver 0.6. Regular dental checkups and cleaning will be sufficient to maintain dental health. The plans discussed till now were medical plans and did not cover:        Work related injuries Treatment provided by relatives Cosmetic surgery Government health services Vision benefits Dental benefits Over the counter medicines and non-prescription drugs To cover these. some or all of the following services may be covered:     Yearly eye exams Glasses (with an annual limit) Contact lenses and fitting (with an annual limit) Glaucoma screening Some vision plans may provide more extensive coverage (such as certain eye surgeries). insurers provide the following plans: 6. It typically covers services delivered by an optometrist or ophthalmologist. With some employer-sponsored vision plans. The regular dental visits allow problems to be diagnosed early and corrected without involved diagnostic testing or treatment. Dental plans are of three types based on the mode of treatment and payment. insurers offer a wide variety of specific plans. while others may limit coverage to reasonable and customary charges incurred during routine eye exams.6 Other Plans In addition to the common Indemnity and Managed care plans listed above. 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.2 Dental Plans Dental insurance provides coverage for services relating to the care and treatment of teeth and gums.6.1 Vision Plans Vision insurance provides coverage for services relating to the care and treatment of eyes. and then file a claim for reimbursement. Reasonable and customary charges generally don't include the cost of glasses and contact lenses. It depends on the specific plan.Benefits ___________________________________________________________________ Cost Figure 3: Variation of Freedom with Cost 6.

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

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

as well as young and middle-aged people who have been injured or have suffered a debilitating illness. prescribed drugs. The treatments covered by long term care insurance usually include four general types of care: in home care. optometrist services and eyeglasses. States may elect to provide other services for which federal matching funds are available.Benefits ___________________________________________________________________ 6. which is usually very high. including hospital bills. 6. or blind individuals (or to needy. disabled. Medicaid pays for a number of medical costs. which pay for hospital bills and doctor visits. and are reestablishing a customer or client base.9 Catastrophic Coverage Plans Catastrophic coverage is not a separate entity by itself but forms a part of an existing plan. They pay hospital and medical expenses above a certain deductible. Employers can provide coverage for employees too. However the maximum lifetime limit of benefits is high enough to cover the cost of catastrophic illness. duration. home health care. and types of services. For jointly owned businesses. adult day care. a disability buy-out policy disburses funds for one partner or business entity to buy a disabled partner's share of the company.6. This may be used to help the aged. (2) prescribes the amount. 65736839. Most of the plans seen till now can be customized to include coverage for catastrophic illnesses. Long-term care. Some of the most frequently covered optional services are clinic services. The funds paid are not specified for medical expenses . It is a joint federalstate program to provide medical assistance to aged. As with other insurance policies. however. each state (1) determines its own eligibility requirements.6.7 Long Term Care Most of plans discussed till now are the kind. physician services. Within these guidelines. Each state administers its own Medicaid programs based on broad federal guidelines and regulations. Recovery benefits that pay after members return to work full-time.8 Disability Income Insurance Disability income insurance provides members with an income if they become sick or injured and are unable to work. prosthetic devices. offers the assistance people need if they have a chronic illness or disability that leaves them unable to care for themselves. services for the mentally retarded in intermediate care facilities. medical transportation.doc Ver 0.6 Medicaid Medicaid is a health insurance program for people with low income. occupational therapy. (3) chooses the rate of reimbursement for services. assisted living and nursing home living.6. and (4) oversees its own program. dependent children) who cannot afford the necessary medical care.6. and long-term nursing home care. 6. 6.they can be used in any way the member wishes them to use.00a Page 76 of 150 . 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. and speech therapy. members pay a set premium that offsets the risk of a much larger out-of-pocket expense.

5. such as average age and degree of occupational hazard. Others include disability income insurance. Unlike group insurance. 4. This is generally done through a series of medical questions and/or a physical exam. Member’s risk potential will determine whether he qualifies for insurance and how much the insurance will cost. Individual insurance is somewhat more risky for insurers than group insurance.7 Individual Insurance and Group Insurance. 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. 3. Individual health insurance is a type of policy that covers the medical expenses of only one person. because group insurance allows the insurer to spread the risk over a larger number of people. In case of Dental insurance. medical. Policy extends the Medicare policy by offering additional benefits. Answers 1. 6. Medigap 4. 3 2. 3 (hospital.10 Exercise Pharmacy plans usually have tiers of benefits. 6. The premium for group insurance is calculated based on characteristics of the group as a whole. Long Term care covers nursing home care? (Y/N) Who all are eligible for Medicaid benefits? 1.Benefits ___________________________________________________________________ The most common example is the Medicare plans which include a clause for catastrophic coverage. members purchase individual insurance directly from an insurance company. with the sponsoring employer or association paying all or part of the premium. In general.6. 2. 7. the initial cost of establishing group coverage is lower than the cost of issuing a separate policy to each person. When they apply for individual insurance. Employer-sponsored plans and associations are among the most common sources of group health insurance. Key person insurance 5. All people who cannot afford medical care. Y 7. catastrophic PPO and catastrophic EPO coverage. Y 8. medicare+choice) 3. 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. Unlike individual insurance.00a Page 77 of 150 . 8. For this reason. a single policy covers the medical expenses of many different people (a group) instead of covering just one person. With group health insurance. Medicare has parts. Because only one policy is issued for the entire group. Capitation 6.doc Ver 0. they are evaluated in terms of how much risk they present to the insurance company. where each person's risk potential is evaluated and used to determine insurability. plans are similar to HMO plans The federal government regulates Medicare benefits? (Y/N). all eligible people can be covered by a group policy regardless of age or physical condition. 6.

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

Abhishek Virginkar and Saurabh Kulkarni. 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. in case.   Medicaid policy is the most expensive type of Indemnity plan. 4.9 1. 5. “A to Z of Health Insurance” – By Prashant Burse. Copay is what the member pays to the insurance company for treatment.com 3. http://www. each partner can take out an insurance policy to cover the expenses.  In case of a joint business venture. Long-term care is covered under Medicare. 6.  Coinsurance is the insurance provided by two insurance companies to one individual. “Managed Care – An Overview ” – By Amit Shukla.Benefits ___________________________________________________________________ 6. 4. 3.yourhealthplans. the other partner is no longer able to perform his duties. which plan is most cost effective and why? State whether true of false – Private insurance companies provide Medicare plans.doc Ver 0.  Review Questions. 6.00a Page 79 of 150 .insurance.10 References 1. 2. 2.   Deductible is usually zero for most HMO plans. 65736839.com http://www.

00a Page 80 of 150 .doc Ver 0.Benefits ___________________________________________________________________ 65736839.

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

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

o Determination of whether member is suspended or terminated ( i. o Provider type is evaluated i.e. Determination of whether the claim is too old. The provider information is validated. DOS > suspense or term date).2. o Date of Service of the Claim is compared with the current date. o Determination of whether this claim is a fraudulent specific member claim. o Par status of Provider 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.Claims ___________________________________________________________________ 7. o Provider name and address is validated. Determine if the claim is timely filed    65736839. o Member no is validated.00a Page 83 of 150 .Capitation of the Provider is validated .e if the provider is hospital type or a specialist etc.1  Claim Preparation and determining eligibility The member information is validated. o Check is done for whether Provider is suspended.doc Ver 0.2 Claim Adjudication Process Claim adjudication is a process in which the actual data on the Claim is compared with the data in the system and based on the business rules or policies the payment of the Claim is decided. o Provider Specialty is validated . o Provider no is validated.

doc Ver 0.  Direct access ( i.member category etc .Claims ___________________________________________________________________ o Date of service of the Claim is compared with the received date of the Claim.  Par status of provider. based service. procedure code . Provider no .   Determination of whether this is a member reimbursement or provider is already reimbursed. Place of Provider network. if the claim has not been file within the proper timeframe it is denied . etc it is determined if there is to the benefits payable for the product for which claim is filed.  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. Also a 65736839.  Provider network. AND PRODUCT which for which the Claim has has been filed Benefit eligibility is checked o Here depending on the Provider type. and presence of any rider . CONTRACT. member no . o Here the Date of service of the claim.types of benefits provided.    Product benefit eligibility is checked  Here. 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). Place of service and the benefit code of the claim . Group.Area .  Claim emergency or non emergency. PLAN.Place of service is checked with a history claim for determining duplicity.  Determination of whether the claim is duplicate ( by comparing with history). diagnosis code. it is determined if the member is eligible for the benefit of the product under which the member is covered. it is determined if the member is eligible to receive the particular benefit for which claim has been filed.e for which no authorization needed). provider specialty .00a Page 84 of 150 . o Determination of whether the member is covered under the GROUP. Group/plan eligibility is checked.  Presence/Absence of referral. depending on the member region.  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.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. The difference of the dates is compared with the timely filing limits which is predecided based on different types of Provider. Product exception o In this. any exception override is checked on various factors like service start and end dates . proc 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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the process followed is . o Denial letters are sent if :  other insurance paid in full  experimental procedure not covered  Cosmetic surgery not covered    65736839. 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 . after a provider has been paid. Claims database updates o Processed Claims stored for maintaining History. Healthcare company discovers that another insurer is the primary carrier.   7. The insurance industry has established standard rules to determine which insurer is primary payor.doc Ver 0. they will:  Notify the provider that they have discovered that another insurer is the primary carrier.  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.3  Update Claim Accumulator updates o This involves updating of Various accumulators for Copay .Claims ___________________________________________________________________ Cross/Blue Shield).4  Claim adjudication outputs Check extract o Adjudicated claims that are passed to Accounts payable for check printing.2.  Inform the provider that he/she can return their previous payment or elect to have them debit his/her account after 60 days. thereby giving him/her an opportunity to seek reimbursement from the member’s primary insurer. 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.Penalties etc that a Healthcare company liable to pay in certain cases  Any Other Information required . This provision prevents double or over-payment by the carriers. Referral updates o Referrals are updated for no of visits after the claim has been processed properly.  Provide the name and address of the primary carrier and the patient’s name and address and any other pertinent information.2. a. deductible .00a Page 88 of 150 . If. o o 7. coinsurance etc depending upon the processing of the claim.

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

00a Page 90 of 150 .doc Ver 0.Claims ___________________________________________________________________ ADJUDICATION CLAIM PREPARATION AND ELIGIBILITY DETERMINE PAYMENT CLAIM UPDATION CLAIM OUTPUTS Validate member no Validate provider no Maternity percent Contracts Referral updates Accumulator updates Check extract Reports Is Claim too Old ? Is Claim timely filed ? Indemnity processing Product exception override Facility fee Claim history Letters Is Claim duplicate ? Group/Plan eligibilty Product component eligibilty Product exception override Copay processing Benefit eligibility Product bebefit eligibility Check Stacked benefits Memb reimburseme nt /Prov reimburseme nt ? Verify precert Coordination of benefits Accumulator processing Verify referral Veryify Diagnosis code Verify Proc code Figure 2 : Claim adjudication process Validate drug code Claim check 65736839.

6 Provision for Advance Payment Some insurance companys also have a facility to pay the providers some lumpsum amount in advance.2 Provider as Specialist If a provider is giving services to member as a Specialist. Hospitals send the survey results to Insurance company. 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. This incentive to be paid is decided as fixed % of the contractual amount between Insurance company and the provider.3. 7. These routines (which are black box to the insurance company’s system). Procedures are in place which detect such duplicate claims and avoid the repayments. are paid extra for the quality of services they provide. these amounts are then adjusted during adjudication against the claims filed by provider. 7.1.3.3 7.7 Provision for Advance Payment Some providers. a survey is conducted where in the member fills in a form to comment about the quality of service provided by the hospital. He has to file claims with all the involved insurance companies. 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. the physicians fill in the data such as quality of operating rooms. Mostly all the In-patient type of services and none of the Out-patient type of services are eligible for this incentive. 7.1 Capitated Provider If provider is a Capitated Provider.  Efficiency of Care 65736839.doc Ver 0. If the provider is non-capitated.4 COB Adjustments If Coordination of benefit applies for any member. both with a few exception. This data is then passed through ‘United States Quality Algorithms (USQA)’ routines. 7. then provider receives payment from primary and secondary insurance companies. provider has tendency to file the same claim again.1. in most of the general scenarios.Claims ___________________________________________________________________ 7. Once the service is provided to a member.3. administration in the hospital etc. then claim gets adjudicated against Insurance Company’s business policies and rules as imposed by federal/state laws. Otherwise claims without proper referral get denied. It becomes mandatory to identify all the types of services that will become eligible for consideration under quality incentive. then all his claims are bound to get denied if filed for services covered under capitation. then the insurance company will pay the provider adjudicated amount less the copay amount as described by member’s plan. based on some algorithms.1.3.3.00a Page 91 of 150 . Principle categories for this payment are as follow:  Quality of Care It measures the quality of care based on physician and member surveys. 7.3. especially the big providers like Hospitals.3 Copay Adjustments If the claim filed required member to pay some copay amount. which should be covering the visit and specific services for the member.3.1. 7.1. Over a specific period of time.1.1 Claim Payments Provider Payments Inputs for any provider payment. Higher these points. the higher will be the incentive. In the physician surveys. these providers will file claim for the services rendered to the member. assign points / marks. then the claims filed would require specific referral already in place.1.5 Duplicate Claims In case of late payments by insurance company. would come in the form of claims filed by the providers. 7. When members have encounters with provider.3.

the payment is made. 7. higher will be the payments. Also.3.00a Page 92 of 150 . Under such circumstances. medicine and OB/GYN.  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. system assigns points.3 Deductible Applies Member pays to the provider Out-of-Network and files a claim with the Insurance company. 7.4 Claim Adjustments These are the various types of adjustments that can be made to the claim. 7.doc Ver 0. longer the stay.4 Co-insurance Applies In this case. lower will be the payments as it is hospital’s responsibility to see that fewer adverse events arise. If the member has not reached the Deductible limit. whether denied or paid. So. higher the adverse conditions.3.2. then higher will be the costs that hospital incurs and hence the claim amount. 7. insurance company intimates provider of the extra payment made and provider is required to repay to the company accordingly.2 Member Re-imbursement Following are various scenarios when member is eligible for re-imbursement by The Insurance Company. In this case insurance company pays directly to member.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. the lesser will be the incentives paid. 7.8 Payment to Insurance Company It may happen that provider claims are incorrectly adjudicated and provider is overpaid. 7. If a member spends more time in hospital for a service. as defined in the plan adopted by member.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. the provider is informed by the Insurance Company regarding the reasons and split of payments. a fixed % of adjudicated claim amount is paid back to the member.1. points are assigned and based on the points. part or full payment made by him to provider. 65736839. Based on the answers. through USQA routines.Claims ___________________________________________________________________ It measures the efficiency of the care based on length of stay for surgery.2.3. When provider’s claim is adjudicated. For this category: higher the points. then the insurance company will reimburse all the amount paid towards copay back to member.3. adverse events and C-section rates. Higher the points. For each of these measures. 7.2.3.2.3. lower will be the payments. then Insurance Company will then deny such a claim.

A connection is established between the manual check and the claim entered. The check status is also changed from open (blank) to Void (V). Deduction may be split across multiple claims. It is completed and stored. i. Further claims of the provider are not paid till the all the amount on the negative claim has been recovered. In the process.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).Claims ___________________________________________________________________ 7. The original claims are overridden with new payment codes. Claim gets completed without adjudication.00a Page 93 of 150 . Provider over-payment letter is generated one claim per letter.2 Minus Debit Adjustment In case of overpayment to providers. 7. This is to account for the payment being made using the manual check.4. the original claims remain untouched. cash date for check is recorded and necessary deductions are applied to claim.3 Manual Check Adjustment Sometimes a check is required to be created manually if there is a need to adjust amount of payment. The claim does not undergo adjudication.4.4. 7.4. there has to be a claim for which a check is created.1 Refund Adjustment This type of adjustment takes place when a Health Services Provider overpays the provider.doc Ver 0.4 Void Adjustment The Claim is completed but the check is still in open status (Check information has still not been sent to the bank) only in this scenario a void can be issued on the check. The check status is changed from open (blank) to Stopped (S). 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. When provider agrees and refunds over-payment (provider will cut check and send in). 7.e. when stop payment is done.4. Only in this scenario a stop can be issued on the check. 65736839. a letter is sent to the provider notifying of over-payment. Original completed claim remains unchanged. A new set of claims are generated which have amount equal to negative of the amounts of the original claims. 7. If provider does not agree to cut and send check to refund over-payment. When void is done then a new set of claims are generated which are associated with the same check with negative amounts as the original claims. minus debit option is used to create an equal amount negative check. On receipt of the manual check paperwork a Manual claim is entered. The manual check request paperwork is then sent to Claims system. Such a check is created by entering data into the system manually. New negative claims created with negative dollar amount.

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

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

7. 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. o Member’s deductible limit is say $ 500. deductible paid by member in a specific later portion of the effective year. Say. 7. (Details will come down the line in the document) 7.3.3.7. say $100) during the last 30 days of plan year.doc Ver 0. When the same has been decided. In this case.4.7.5 Family Dollars Insurance company’s disbursement to member or the provider.for member.3 What is accumulated? 7. accumulators for the next period will get updated for the deductibles paid. Once the maximum limit set by plan is met.7. in case member chooses to continue. member + family Co-insurance is also accumulated separately for member as well as member and all his/her dependents. Accumulators records are updated accordingly in such cases. 7. member + family Copay is accumulated separately for member as well as member and all his/her dependents. the amount of money that is going to be paid to/from a member is decided based on the accumulator amounts. 7.00a Page 96 of 150 . This reduces burden on member and acts as incentive for member to continue with the co-insurance company.4 Visits – for member Visits of the member to provider are accumulated.7. It comes into picture when deductible limit is met. 7. 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). Carry over Deductible Updates Some plans provide for the provision that. 7.4 Types of Accumulator  7.3.7. 65736839. member + family These accumulators include combined figures of co-insurance and deductibles. 7. In a general scenario.7. will be considered as deductible paid towards next year. during predefined period.3.2 7.7.1 Copay – for member.7.3. this figure may be used to decide the method of payment.Claims ___________________________________________________________________ 7.6 Out of Pocket .member.2 Co-insurance – for member. member no more pays copay to provider.7.7. o Plan provision says Carry over deductible is applicable for last 30 days of the plan year.3 Deductible . depending upon how many visits covered for a specific service to same provider. o Accumulator for yr. it accumulates $ 350. say partial/full/some percentage of billed. the corresponding accumulators are updated with those amounts for the latest instance under consideration. o Members pays remaining deductible (part or full. Some plans provide for facility of carry over deductible.1 Periodic Accumulators These accumulators will cover up the amounts for period as mentioned in the effective plan for the member.2 Function/Purpose of Accumulators The main use of accumulators is during the claims adjudication process. So. Example: o If a member XYZ has plan year 01-Jan-2001 to 31-Dec-2001.3.

doc Ver 0. 7. 2.00a Page 97 of 150 .4. If member chooses to continue.Claims ___________________________________________________________________ o o Then new accumulators will be generated as if paid for the next year 2002. he now needs to pay $100 less towards deductible in the next plan year.7. 4. 3.2 Lifetime Accumulators These accumulators will sum up the amounts for the life time for a member.8 Overall Claims system diagram : Figure 3: Claims overview 7. $100 will get updated in these accumulators. 5. because of this facility.9 1. Why are letters required? What are different types of letters? What are the various types of Claim adjustments? What does Government reporting consist of? What are the various criteria for deciding the payment of a claim? What is the significance of maintaining Claims history? 65736839. 7. Review Questions.

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

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

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

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

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

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

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

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

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

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

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

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

00a Page 113 of 150 . 8. ______ Contains provisions giving certain former employees the right to temporary continuation of health coverage at group rates. COBRA creates an opportunity for persons to retain this important benefit. down from 4-8 weeks on paper claims. Say True or False. 3. Improved efficiency in healthcare delivery by standardizing electronic data interchange is a main feature in HIPAA. 2. COBRA 3. Workers need to be aware of changes in health care laws to preserve their benefit rights. we make no guarantees. 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.4. If a claim is determined to be free of typographical. We will make an effort to correct errors brought to our attention. The Department of Labor maintains this article to enhance public access to the Department's information.5 Clearing Houses A HealthCare Transaction Clearinghouse performs auditing services on insurance claims.3 1. it is forwarded to the insurance company responsible for payment. Exercise HIPAA Means Health Insurance Portability & Affordability Act.External Agents ___________________________________________________________________ Conclusion Rising medical costs have transformed health benefits from a privilege to a household necessity for most Americans. If errors are detected. Say True or False. it is returned to the HealthCare Provider along with an explanation of what was wrong. syntax.1 Benefits Of A Clearinghouse  Cash Flow If a HealthCare Provider were to send claims through the mail. Net result: Improved cash flow.5. A good starting point is reading your plan booklet. The HealthCare Provider may then correct the related errors and resubmit for another pass. False 2. Most of the specific rules on COBRA benefits can be found there or with the person who manages your health benefits plan. 65736839. 8. 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. Answers: 1.doc Ver 0. This is a service that is continually under development. This process may be repeated until the claim passes the inspection. and logistical content errors. A Clearinghouse collapses the wait cycle into an average of 5-21 days. True 8.

A clearinghouse serves as a liaison to the HealthCare Provider.S. these instances are greatly reduced. 8. Direct Filing Same. Insurance companies have everything to gain by delaying payment to HealthCare Providers.2 Clearinghouse versus Direct Filing Using A Clearinghouse Routinely check for as many as 10. Today's HealthCare Clearinghouse market is very confusing. Typically. Coding is crucial in determining the income of a HealthCare Provider. HealthCare Providers using the free or low cost software distributed by some insurance companies are subject to biased auditing without knowing so. have strong ties with insurance companies that result in biased editing.External Agents ___________________________________________________________________  Guaranteed Delivery Insurance Companies often claim not having received claims that HealthCare Providers send through the mail.  Connectivity Some insurance companies offer direct filing software. Some clearinghouses charge $0.00a Page 114 of 150 .30. Some clearinghouses though. When the claim travels electronically through a clearinghouse.000 . and yet others in-between somewhere. but most are not reported back to the HealthCare Provider. Filing a claim to an insurance company direct is almost reminiscent of allowing the IRS to file your tax return. direct filing to insurance companies offers potentially hard to detect disadvantages to U. This may go unnoticed by incompetent or negligent staff inside the office of the HealthCare Provider.50 per claim. Insurance companies tend to "pick" on some HealthCare Providers and not on others. The industry is riddled with organizations that are exceptionally difficult to decipher.doc Ver 0. since the software may reject certain coding combinations during data entry. But clearinghouses can typically access hundreds of insurance companies through a single port of entry from the office of the HealthCare Provider.000 combinations of errors. Audits performed on claims are not critiqued in favor of the insurance company with regard to how claims are coded. In many cases claims just "sit there" until a tracer or formal complaint is received. Topic Audit Logic Unbiased Processing Clearly. Then rejection occurs.5. a clearinghouse has nothing to gain by delaying submissions or other operational errors. 65736839. Instant notification back to the Provider. others nothing. HealthCare Providers. A clearinghouse has everything to gain by HealthCare Providers getting paid quickly and collecting as much of a submitted claim value as possible.

Rebates. Insurance companies typically do not charge anything to receive claims. thus avoiding the typical enormous overhead of Type 2 clearinghouses. As Type 1 clearinghouses developed "rebate" income. Cash Flow. Unbiased and "rebate" free. but render unique and superior audits resulting in improved services at a lower cost to the HealthCare Provider. to whom services are rendered.5. Guaranteed Delivery & Connectivity. Typically competitive in cost and superior in service. 2. Answers: 1.00a Page 115 of 150 . "Administrator" does not include any of the following: 65736839. or disability insurance or self-insurance programs. Primary income is derived from the submitting HealthCare Provider.4 1. imply that something was initially received. dental. Type 3 clearinghouses utilize Type 2 gateways for transporting claims. standard working relationship with insurance companies Unbiased. health. to understand how clearinghouses make their money.External Agents ___________________________________________________________________ As indicated. most income derives from insurance companies and is formally referred to as "rebates". 8. all clearinghouses are not created equal. They typically fall into one of three possible group types. close affiliation with insurance companies Unbiased.doc Ver 0.   It may be helpful. Type 2 clearinghouses followed up by negotiating rebates as well. 2. Type 3 clearinghouses "lease" Type 2 gateways to insurance companies at volume driven rates. A HealthCare Transaction Clearinghouse performs auditing services on ___________ _______. 8. Exercise List down the Benefits of a Clearinghouse. The following chart will illustrate all the groups Clearinghouse Types  Type 1 Type 2 Type 3 Biased processing. Insurance Claims. however. residents of this state in connection with life. close affiliation with leading Type 2 clearinghouses. "Administrator" means any person who adjusts or settles claims on.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.  Type 2  Type 3 8.3 Clearinghouse Income  Type 1 Biased.5.

that enables to conquer the mysticism of Claims Adjudication. 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.  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. 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.   Administrators may be tested and shall be licensed by the superintendent of insurance in accordance with rules adopted by the superintendent. identifying what each fixed cost includes. 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. Levels of the specific excess insurance stop-loss deductible. The names of all insurance payers providing protection for the plan sponsor's plans. dental. provided the state of domicile recognizes and grants licenses to administrators of this state who have obtained licenses under such sections. health.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.doc Ver 0. or provide administrative services to. The aggregate excess insurance stop-loss attachment point factors.01 to 3959. and any ownership relationship of five per cent or more between the administrator and such insurance payers. including any minimum attachment point factors. at least once annually. be licensed without testing. Any person that administers an insured plan or a self-insured plan that provides life. 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. or disability benefits exclusively for the person's own members or employees.7 Specialized Adjudication Engines/Companies Adjudicator A powerful engine that links to the existing software equipped with simple Boolean rules. upon application. to the plan sponsor all of the following: All fixed plan costs. 8.00a Page 116 of 150 . 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.16 of the Revised Code. No person shall solicit a plan or sponsor of a plan to act as an administrator for. 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. Any person who administers or operates the workers' compensation program of a selfinsuring employer under of the Revised Code.  Fail to disclose in written form the method of collecting and holding any plan sponsor's funds.  Fail to disclose in written solicitation material and on an on-going basis. Features: Repricing 65736839.

Once the application and base fee are received by URAC (The American Accreditation Healthcare Commission/Utilization Review Accreditation Commission (URAC). the applicant usually must provide additional documentation clarifying any pending issues. serve and renew policies. and program descriptions and plans for departments such as quality management and credentialing. one or more full-time URAC reviewers analyze the applicant's documentation in relation to the URAC standards. including licensing and appointment with insurance payer. they provide valuable services.9 8. usually takes several months. 8. As a full-service agency. The applicant's documentation usually consists of.9. purchase. This system comes equipped with "AccuChecker for Windows". 8. formal policies and procedures. enroll. but is not limited to.9.8 General Agents They provide end-to-end connectivity that allows brokers and their clients to shop. resolve complex service issues. consultation. procedures. also uses the HFCA published guidelines for medical procedures.doc Ver 0. and preserve the integrity of brokerclient relationships. the leading accreditation organization for traditional health insurers).00a Page 117 of 150 . case installation and communication. diagnoses and the Medicare fee schedule. the system allows you to insert additional files with the information needed. 65736839.1. The initial phase "Building the Application". contracts. negotiation. If you process claims that require different fee schedules. like for example Workers Compensation cases. which consists of completing the application forms and supplying supporting documentation.1 Desktop Review In the desktop review process. They are the people who work behind the scenes to reduce administrative hassles. a comprehensive database that contains procedures. sample template letters. 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. supporting brokers in plan development. 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. After receiving a desktop review summary. in an effort to maximize cost containment and fairness in adjudicating claims. organizational charts. the remaining three phases of the accreditation process cover a period of approximately three to six months. "AccuChecker for Windows" has the 2001 tables of procedures and ICD-9 codes.1 Accreditation Agencies The Accreditation Process Organizations applying for accreditation participate in a process that entails a rigorous review occurring in four phases. as well as plan management and customer service. These phases include the following: 8. position descriptions.External Agents ___________________________________________________________________ Validates eligibility of patients.

8.1.g. denied accreditation. During the onsite visit.doc Ver 0.. This will help the applicant differentiate its various products in the health care market and target a variety of current and potential clients.1.1. Follow-up activities for organizations receiving conditional accreditation or corrective action may include submission of additional or revised documentation and another onsite review. Organizations that are unable to meet URAC standards may be placed on corrective action status. audits are conducted and personnel and credentialing files analyzed. carried out by the same team that performed the desktop review. or choose to withdraw. An accreditation recommendation is then forwarded to URAC's Executive Committee. This summary is submitted to URAC's Accreditation Committee for evaluation with discussion with the review team as needed.4 Accreditation Status Applicants who successfully meet all requirements are awarded a full two-year accreditation.External Agents ___________________________________________________________________ 8.9. but incomplete implementation of certain policies and procedures. Education and quality management programs are reviewed in detail as well. Complaints against an Accredited Company 65736839. e.2 Onsite Review After the desktop review is complete. Conditional accreditation may also be awarded to companies determined to be "start-ups". URAC reviewers also share "best practices" and provide other helpful guidance. 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. Ongoing Compliance with the Standards Accredited organizations must continue to remain in compliance with the applicable standards throughout the accreditation cycle. a follow-up executive summary is submitted to URAC's committees for a possible change to full accreditation.9. Conditional accreditation may be awarded to applicants who have appropriate documentation. During this review. and an accreditation certificate is issued to each company site that participated in the accreditation review. which has the authority to grant accreditation. 8. Accreditation Certificates A certificate of accreditation is awarded to accredited organizations. Each accredited site is given its own certificate. the accreditation review team conducts an onsite review to verify compliance with the standards.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. If an accredited company is unable to comply with URAC Standards. management is interviewed about the organization's programs and staff is observed performing its duties. After reviewing the summary and considering the Accreditation Committee's recommendation.9. its accreditation will likely be rescinded. Accredited organizations also provide copies of accreditation certificates to regulators in states where URAC accreditation is deemed. attesting to the program the organization is accredited for. the Executive Committee makes a final accreditation determination. The committee review process begins with a written summary documenting the findings of the desktop and onsite reviews. When these follow-up activities are complete.00a Page 118 of 150 . In addition.

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

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

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

com http://www.nlm.hrsa.doc Ver 0.cdc.gov/nichsr/nichs http://www. yourhealthplanonline.healtheon. 30.com http://www. 32. 34.os.gov/ http://www.gov/ http://www. 31. 29.gov http://www.html 65736839.dhhs.hipaadvisory.External Agents ___________________________________________________________________ 26.healthinsurance. 27.com http://www.hcfa. 33.00a Page 122 of 150 .dhhs. 28. http://www.com http://www.nih.gov/ r.

doc Ver 0.Summary ___________________________________________________________________ UNIT .00a Page 123 of 150 .2 Workflow The detailed workflow for the healthcare industry can be represented as shown in the Following figure.IX 9 Summary 9. Figure 4: Detailed Workflow This diagram can be broken down into following stages – 65736839. 9.1 Unit Objectives This unit will summarize the contents of this course material by presenting a detailed description of healthcare industry workflow.

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

The federal spending on healthcare also has been on a steady rise. 65736839. There are several government agencies that help in regulation of the healthcare industry. The government controlled Medicare and Medicaid are amongst the most important healthcare plans available.S. the claim examiners do the adjudication manually. The turn around time take to process the claims is also an important consideration for members and providers. they are sent to the insurance company. If the claim requires very specialized processing (and if the rule engine for that is not available with the insurance company). then the claim adjudication is outsourced to a company specializing in adjudication of such claims. which paved the way for the managed care model. 9. This helps reduce the burden on the insurance company and speeds up the process. The information about the entire processing is usually stored in a database for further reference. it was the path breaking HMO act of 1973. then the member is paid for his expenses. NA 9. The company validates the claims based on various factors (as were detailed out in the unit on claims). Claims adjudication requires a lot of information about various entities such as members. If the claims are found to be free of such errors.A. He is also sent an EOB detailing the payments made and the reasons for those. policy that are stored in their respective databases. In case of the member having coverage with multiple carries. There is usually a rule engine (a software) in place for adjudication.Summary ___________________________________________________________________ 9. 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. as otherwise these claims would have to be adjudicated manually. In case the claims have incomplete information or the information is ambiguous.5 Effect of external agencies Health insurance is a highly regulated area in the U. the primary payer takes care of the COB or coordination of benefits. providers. Incorrect claims are returned back to the member (or his PCP whoever has file the claim).4 Member has filed a claim In most cases the claim is first validated for typographical and information errors by clearinghouses. 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.4 References. plays an important role in shaping the way the industry functions. 9. The federal government too.doc Ver 0. Hence the insurance companies try to reduce the time for adjudication by going automatic claim adjudication systems.2. which has since then dominated the market.2. As a matter of fact. If the claim is found to be a valid one. In short claims adjudication requires lot of database interaction and is the most complex of all processes.00a Page 125 of 150 .3 Review Questions.

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

081 81.1 1.144 13.682 258.314 25.917 29.674 32.259 194.140 5.741.201 2.020 293.551 45.931 1.122 17.988 210.867 161.187 40.612 1.437 266.408 69.3 Source: Dataquest (January 2000) 10.086 14.164 417.804 109.752 140.477 141.1 Appendix A: Total E-Business Services Forecast for Healthcare Total E-Business Services Forecast for Healthcare. there are Insurance-based systems in which providers are subcontracted by the government. 65736839.5% in Europe.8 46.505 54.800 20. by Region.979 3.113 500. Dollars) Healthcare 1998 1999 2000 2001 2002 2003 CAGR (%) 53.018 91.8 Asia/Pacific Canada Europe Japan Latin America Rest of World United States Total Healthcare Worldwide 42.749 5.090.1.805 646.393 411.146 592.403 1. Other countries spend less on IT as a % of revenues.606.S.00a Page 127 of 150 .850 48.5 515. Whereas they are Tax based systems (all providers are government owned) are in vogue in UK/Australia.834 10.6 43.843.819.979 363. In Germany/ France.668 44.756 50.doc Ver 0.628 289.Appendix ___________________________________________________________________ 10 Appendices 10.050.285 816. Japan and Australia.2 835.444 184.5 45.2 Appendix B: The world Healthcare market and Healthcare IT spending The US healthcare market is predominantly privately run.479 9.829 31. 1998-2003 (Millions of U.877 1.523 442.268.964 151.402 66.

Healthcare market. Proteomics and Bio technology) revolutionize health care. less choice to patients and administration efficiencies. Inc) 10.00a Page 128 of 150 . 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.Appendix ___________________________________________________________________ Worldwide. Inc) 65736839. but the profit angle is increasingly focused on. (Source: Gartner Research.3 Appendix C: The Cash Flux of the US Healthcare Industry Healthcare started in a “not for profit” mindset and that still has influence in decisions made in this sector. Other countries spend less on healthcare than the US does because single payer systems tend to have efficiencies in purchasing. a core focus for most governments around the world will continue to grow as newer technologies and sciences (Genomics.doc Ver 0.

00 $264.doc Ver 0. (Source: Gartner Research. 65736839.US also leads in the IT development of this market.30 The foregoing rates apply in the Service Area specified above.60 $227. 2001 ABCDEF Inc Effective Date 10/01/2001 Renewal Date 10/01/2001 Service Area Colorado .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% of the Federal budget of the US. account for 43% of the world spending.00a Page 129 of 150 .70 $413. Service Area is determined by the location of the subscriber's primary care doctor.Appendix ___________________________________________________________________ US is the largest spender in this market. Inc) 10.3 Trillion. Rates will vary for other service areas.a whopping number by any standards.4 Appendix C: Sample Quote Sheet Page 1 XXXX Proposal For July 26. The total health care spending (by private and public in the US) is 1.

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

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

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

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