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

..3 Appendix C: The Cash Flux of the US Healthcare Industry..124 9...........101 8......5......................117 8.................1 Benefits Of A Clearinghouse...................113 8.................................................................................................................................................................103 8.2 CORBA...doc Ver.............................................................3.4 Government Acts and Regulations...............................................3 Exercise...............115 8..............103 ELECTRONIC HEALTH TRANSACTIONS STANDARDS ...........................................................................................................................................................................117 8....................................113 8..................2.................11 Review Questions.....7 Specialized Adjudication Engines/Companies.......................4 Member has filed a claim...................5 Clearing Houses.....................................................102 8........2 Workflow ...............103 8.......5.....128 10.............4 References............................................................................2......123 9.....129 11 Glossary....................................5.3............2 Appendix B: The world Healthcare market and Healthcare IT spending...............................8 General Agents..................1 The Beginning: Member wants to purchase insurance........123 9.....124 9..................4 Exercise.........2..........................................................................................................5 Effect of external agencies.........................................................................12 References...............3 Centers for Disease Control and Prevention (CDC).........................10 Drug Manufacturers........114 8.........0 Page 4 of 132 ......................3 An Enrolled member wants to seek medical services........4 Appendix C: Sample Quote Sheet..........3.............................................124 9..........116 8............................................1 Unit Objectives .103 8.128 (Source: Gartner Research...............5.............................2 DEPARTMENT OF HEALTH AND HUMAN SERVICES (DHSS)................................. 1..............................................125 10 Appendices.....................127 10....9 Accreditation Agencies...............4 Agency for Health Care Research and Quality (AHRQ) ...................3..........................................................................................2............................115 8.................................................102 8...........................2 Clearinghouse versus Direct Filing.........................127 10.................................................................125 9.......................................................................127 10....3 Review Questions................................6 Third Party Administrators.........................................106 8.........4..............................117 8...............................................3...115 8.................................121 9 Summary....................................2......1 The Accreditation Process.....................................5 National Information Center on Health Services Research and Health Care Technology (NICHSR).......................................................121 8.................................105 8...................131 __________________________________________________________________________________ 65736839...1 HIPAA.............................................3..............Healthcare Market Overview ___________________________________________________________________ 8................3 Clearinghouse Income..120 8.............................................6 Health Resources and Services Administration (HRSA)....125 9.....113 8...........................9.....................1 Appendix A: Total E-Business Services Forecast for Healthcare.......123 9.........................4......................125 9.........................................4. Inc)......103 8.....................................................2 Getting a provider..............7 Exercise.......................................................

there is a Deductible. The industry has grown quickly and at present about 25% of all health insurance members are in some sort of Managed Health Care program. Also. for the next few thousand dollars. and Individuals who look for coverage for themselves and their dependents.1 Introduction This unit provides a brief idea of the Health Care Industry in the United States. which means the first few hundred or so dollars is fully paid by the Member. It aims in providing the brief idea of the Industry and it’s the key players.0 Page 5 of 132 . the Imaging system that scans all incoming documents for storage and retrieval. The concept has gained in popularity mainly from employers who provide health insurance to their employees in the 1990s. 1. 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. Traditionally insurance has been one of the largest users of Information Technology. On the other hand. Though the primary information system is the OLTP system that runs the daily business. response times become a crucial factor both to reduce cost and improve performance 1. The “For-profit” companies control 60% of the Managed Health Care __________________________________________________________________________________ 65736839. 1.3 The Industry Outlook The concept of Managed Health Care gained popularity in the last 80s and the early 90s. All visits to any Doctor or Hospital have to be authorized by the HMO. Managed Health Care is provided by HMOs (Health Maintenance Organizations). Any amount over the Deductible and the Co-insurance will be fully paid by the Insurance Company. a certain percentage will be paid by the Member and the rest by the Insurance Company (co-insurance). When a member follows this rule. This Industry is highly regulated and captures high volume of data. Their primary function is to provide Health Insurance to Employer Groups and Individuals. a high computing power becomes imminent. he ends up paying a small fixed payment.Healthcare Market Overview ___________________________________________________________________ UNIT . The HMO concept has evolved over the last 15 years as a way to provide less expensive health coverage. Also state mandated programs like Medicare and Medicaid also allow the recipients to be enrolled in HMOs. In case of Indemnity Plans. since these companies are service oriented. The member should always visit the chosen PCP and on his referral can visit other doctors. After that. Members enrolled in an HMO are expected to choose one of the Providers as a PCP (Primary Care Physician). HMOs typically interact with two types of customers: Employer Groups – These are companies that provide health coverage for their employees and dependents.2 What is an HMO? HMO stands for “Health Maintenance Organization”. Health Insurance in the United States was through Indemnity Plans.I 1 Healthcare Market Overview 1. the member is free to visit any Provider. there are also support systems like the Data Warehousing System that helps in decision support. violating this rule will make the member liable for the full amount. The basic idea behind this is that the HMO ties up with a group of Doctors and Hospitals (Providers of Health Care) and allows the members enrolled to visit one of the Providers within their list. The Industry is made up of both “For-profit” HMOs and “Non-Profit” HMOs. Historically.doc Ver. To process this high volume of data collected and maintain them for stipulated time. In these plans.

The US Congress is currently debating on a “Patients bill of rights” that will allow the patient to get better care under this system. which are coming into place. privacy and security. due to increasing health care costs. The past few years has seen a consolidation in the hospital and health sectors. US is the largest spender in this market. 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.doc Ver. will continue to grow as newer technologies and sciences (Genomics.1 Trends in Healthcare – Provider Space There are two major regulations. 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. 1.3.S. there has been a tremendous pressure on the bottom line of these companies. however as a result of the BBA. The last major merger happened in Feb 1. At present. the members participating in these plans feel that the HMOs squeeze the patients to maximize their profit. However. The total health care spending (by private and public in the US) is 1. Also. This trend has slowed considerably and can be considered to be over for now. 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. Cap on spending by government (BBA) is focusing efforts on cost cutting in this space. The world market for Healthcare is USD 3 Trillion presently. 1. a decrease of about 11%. __________________________________________________________________________________ 65736839. Provider Organizations are adopting some Cost Cutting measures.0 Page 6 of 132 . The US is the largest player in the Healthcare market and is worth $ 1. 1999 .but low activity expected. (Refer Appendix C). Large corporations want see employee health insurance costs to reduce overheads. The last few years have seen a rise in the Assisted Living Centers. skilled nursing providers were slated to receive $83 billion during 9802. In the last few years there has been an increasing number of acquisitions and the industry is moving into the consolidation phase. reaching $30 billion by 2005. also the fastest-growing segment of the U. 70% of the Federal budget of the US.310 Billion annually (2001) and is growing at 7%.Healthcare Market Overview ___________________________________________________________________ Industry. In the last few years. Proteomics and Bio technology) revolutionize health care. The last few years have seen smaller provider sub segments face financial challenges.6 million) represents the largest number of users of long-term healthcare services. However. (Refer Appendix B). which are going to have a major impact in the way healthcare providers operate presently. population. As a reciprocative step. it is estimated that about 13% of the overall industry bed capacity are operating in bankruptcy. Individuals aged 85 and older (3. they will now receive $74 billion over the same period. will seek acquisition by larger chains. and is estimated to grow to a huge USD 4 Trillion by the end of 2003 (Dataquest.when CHRISTUS Health was formed. Industry sources project expenditures for senior living of $18 billion in 2000.a whopping number by any standards. US also leads in the IT development of this market. Initially small players focused on local markets dominated the Industry. which is a core focus for most governments around the world. Furthermore. See Appendix A).3 Trillion. The trend is still continuing and the growth is expected to continue. Before BBA.  HIPAA (Health Insurance Portability and Accountability Act) This act impacts all segments of healthcare industry with focus on standardization. Furthermore. accounting for 43% of the world spending. struggling independent facilities in rural markets. But the Healthcare market.

5% in 1999. Retirement and Investment Services. 1. Cigna. Ongoing pressure to reduce healthcare costs will prolong the merger trend in coming years. Aetna. These companies cater to small and large Employer Groups. the number continues to climb.3 million of those are Managed Health Care Members includes 5. Aging of the baby boom generation (born between 1946-1964).0 Page 7 of 132 .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. Hartford. Individuals.6 million Americans. on average. and also provide coverage for members participating in government programs like Medicare and Medicare. CT www. Aging Population Poses New Challenge for the Healthcare organizations. which collectively serves 21. And this has resulted in higher costs. People older than 65 years (currently 14%) are estimated to rise to 18. CT www.aetna. The last few years have seen Rising Costs for the MCO (Managed Care Organization). 10. E.cigna.3 members of Prudential Health Care recently acquired.5% in 2025. Pharmaceutical costs are rising about 15 %. HMOs cut 400. Large HMOs are notifying the HCFA of their intent to exit Medicare + Choice market in 2001. Hartford. which requires them to re-look at their transactions. 1. among others. Plans available across the country United Health Care Minneapolis. the rapid expansion of the elderly segment of the population is presenting HMOs with a new set of challenges. MN www.g. Furthermore Managed Care Consolidation has seen larger companies acquiring smaller. Recent times have seen HMOs exiting Medicare Choice plans. Prescription drug coverage has increased (95% of all members).com Into Health Care. 1. including Aetna (affecting 355. Provides both Indemnity and HMO based Health insurance plans 21 million subscribed members in various health plans. Group Insurance etc.doc Ver.com __________________________________________________________________________________ 65736839.000 in 2000. Managed Care Market Still Top-Heavy in the sense the managed care sector is fairly concentrated. HIPAA is going to have sweeping effect on HMO. Provides both Indemnity and HMO based Health insurance plans 6. More than 35 class-action suits have been filed against managed care companies to date. undercapitalized players. Medical costs rose 7.5 Million members enrolled in Medical HMO Plans.2 Trends in Healthcare – Payer Space There has been a rise in Regulations & Lawsuits against payers. with the top 10 HMO chains accounting for close to 2/3 of total HMO enrollment in the US. Numerous companies have exited Medicare Choice markets following implementation of the BBA in 1997.Healthcare Market Overview ___________________________________________________________________ labor costs (typically 40 -50 % of hospital operating costs) are steadily rising (specialized skills shortage).000 members in 1999 and another 327.unitedhealthgroup. The largest privately held chain is the Blue Cross/Blue Shield Association. Property and Casualty.com Leading provider of health and retirement benefit plans.000 members).3. resulting in more people covered.

jup.com/ http://www. operates in many markets. 1. 445.gartner.gigaweb.5 References AETNA Intranet http://www.8 million self-insured members (fee basis. About 5.doc Ver.Healthcare Market Overview ___________________________________________________________________ Primarily into Managed Health Care.8 million Fully Insured Managed Care Members.com/ __________________________________________________________________________________ 65736839. 1. 1. no risk).aetna.com/ http://www.000 Medicare members and 530.000 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.com/ http://www.com/ http://www.gartnerg2.0 Page 8 of 132 .

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

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

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

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

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

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

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

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

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

Give a brief account of the development of the health insurance industry? What are the five pillars of healthcare industry? Explain the terms  Member  Provider  Benefits  Claims Explain in brief the workflow of a managed care organization.edu/ “History of managed care” by Tufts managed care institute. 2.doc Ver.0 Page 18 of 132 .yourdoctorinthefamily. 4.7 1. __________________________________________________________________________________ 65736839.cornell.human.insurance.      www.8 References. “Future of managed care” by Tufts managed care institute. 1. 3. Review Questions. 2.com www.Healthcare Overview ___________________________________________________________________ Figure 2: Detailed Workflow 2.com http://trochim.

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

Healthcare Overview ___________________________________________________________________ __________________________________________________________________________________ 65736839.0 Page 20 of 132 . 1.doc Ver.

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"). __________________________________________________________________________________ 65736839.doc Ver. an insurer provides ID cards to its members. doctor) to avail the service. The provider/ member then will file a claim to insurance company.1 Insurance Business: An Overview. These will be used to show the validity of the policy taken.2.0 Page 21 of 132 . Provider will check the eligibility of the member for that service. 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. 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. Once enrolled.Members ___________________________________________________________________ UNIT .1 Unit Objective This unit will acquaint the reader with the role played by the member in the Healthcare Industry.III 3 Members 3. 3. Some employers sponsor healthcare plans to its employees and its dependents. Member can go to a service provider (hospital. 1.2 Introduction Member is a person who is the actual beneficiary of the healthcare plan.

Insurance: An Overall Picture. 1.0 Page 22 of 132 . Fig 2. __________________________________________________________________________________ 65736839.Members ___________________________________________________________________ For the pictorial representation of insurance business and the member's interaction with other systems please refer to figure 2.doc Ver.

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

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

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

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

 Their Work will be given higher priority by the insurance company.3. staff members can select a higher plan and simply have the balance deducted from their salary. Alternatively. retention and goodwill. professional bodies. quarterly or monthly basis. In a company-paid scheme. they are entitled to claim tax relief on the full premium. But these figures are much lower than paying premium to cover all the employees. 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. one can provide his/her company with significant benefits in terms of employee recruitment. leading to less stress for them and their employees.  They will be given more priority for processing of their claims then others get. half-yearly. Tax Relief for employees Employees are liable for Benefit-in-Kind (BIK) taxation on the paid Healthcare premium at their top rate of tax.Members ___________________________________________________________________ Fast access to the best in modern healthcare Members can choose admission dates to fit in with work and family commitments. the Credit Unions and the Small Firms Association.doc Ver.3.6 Self Insured Group Plan Sponsors / Companies who pay the Claims' amount of their employees themselves are called SI (Self Insured) Groups.  Risk is moved to the Insurance Company.) for their employees. thereby reducing their effective rate of BIK to the standard rate of income tax. The SI group also has to maintain certain bank balance at all times to ensure the continuance of medical benefits to their employees. Benefits to the company Introducing a Healthcare group scheme for employees. __________________________________________________________________________________ 65736839. (Examples are the Irish Farmers’ Association. Insurance Company is profited by:  Getting a fixed sum of money for adjudication of claims. a payment can be made directly on a yearly. sports clubs and interest groups. Ease of Payment Payments can be made by direct debit through company bank account. 1. as it is helpful in growing their relationship. 3. Plan Sponsor is profited by:  They get the Health Insurance plan at a cheaper rate. Benefit in the premium amount Some group schemes qualify reduction in the premium amount. Flexible cover options Once employer chooses a particular level of cover. the company can claim healthcare payments under the Corporation Tax shelter.0 Page 27 of 132 .) 3. The financial risk is borne by the Plan Sponsor. SI Groups pay "Service Charges" to insurer for administration / management of medical insurance (adjudicating claims etc.5 Affinity Groups An Affinity scheme is appropriate for members of business organizations.

Special rules for the self-employed In addition to the general rule of deducting premiums as medical 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. were eligible for an employer-sponsored health plan for any part of the tax year. These deductions aren't limited to amounts over 7. and his/her dependents: First Year Second Year Third Year and thereafter 60% 70% 100% This deduction is limited to amounts less than the earned income.5 percent threshold. In terms of health insurance. because an extended illness or hospitalization could easily deplete his/her personal assets and endanger his/her business. The definition of self-employed individuals includes partners and 2 percent S corporation shareholders.doc Ver. and amounts paid out of his/her pocket for treatment not covered by his/her health insurance.5 percent of his/her adjusted gross income (AGI) in any tax year. 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. his/her spouse.Members ___________________________________________________________________ 3. if the spouse of a self employed person. 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 someone meets the definition of a self-employed individual.. instead of saving for retirement. trade group. surgical. 1.3. However. hospital. and physician's expense insurance. Also. he/she may deduct the amount by which his/her un-reimbursed medical expenses exceed this 7. Most people get their health insurance through their employers. __________________________________________________________________________________ 65736839.e. he/she can deduct the following percentages of premiums for insuring himself/herself.7 Self-Employed Members Health insurance need of a self-insured person is probably greater than the average person. self-employed individuals can deduct a percentage of their health insurance premiums as business expenses.5 percent of AGI as are medical expense deductions.0 Page 28 of 132 . Un-reimbursed medical expenses include premiums paid for major medical. funds in an Archer MSA are used to cover healthcare expenses. This option is not available to self-employed.

Enlist advantages and disadvantages of individual and group insurance. are those who pay the Claims' amount of their employees are Self Insured Groups. 1.400 for individuals ($3. The biggest challenge in setting up an Archer MSA may be finding a company that offers them. However.200 for individuals ($5. 3.850 for families). In fact. Employers 3. 5.800 for families). are those who purchase insurance directly from an insurance company in case of an individual insurance.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. is not eligible to open an MSA. in some states.200 to $4. and The annual out-of-pocket expenses do not exceed $3. there are exceptions to this rule. __________________________________________________________________________________ 65736839. 2. 4. 3. insurers are running into problems with state laws that prohibit such high-deductible plans. This includes Medicare coverage. A highdeductible plan is defined as one in which:  The deductible is between $1. Individual Members 2. Plan sponsors/ Employers 4. Answers: 1.3.600 and $2. For Self-insured groups insurance company may provide the services.  Someone. Many financial institutions are also still in the development stage with their Archer MSA account products. Many insurance companies are still developing qualified high-deductible insurance plans and products with a savings component. Administrative /Management of medical insurance 5.doc Ver. are those who purchase insurance in an employer sponsored insurance.8 Exercise 1. having additional coverage under a health plan that is not a high deductible.0 Page 29 of 132 .

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

hospital. membership number and other details. eligibility information. Employer Report A report will be sent to the employer giving the details of its employees enrolled and their details.doc Ver.0 Page 31 of 132 .    __________________________________________________________________________________ 65736839. membership letters will be sent explaining the benefits he/she has opted. Member Member Member Employer Associations Insurance Company Fig 3: Enrollment Data Flow 3. Provider Report Providers are made aware of the new members enrolled under his/her name. ID card would have details about the member's SSN.4. Member has to show his/her identity card when he/she approaches a service provider (doctor. Membership letters Once the enrollment process is complete. Name. pharmacist). 1.3  Output of enrollment process ID Cards A person insured under an insurance company is given an identity card.Members ___________________________________________________________________ Enrollment Data Flow is shown in figure 3.

Answers 1. 4 Enrollment Process 3. 1.4 Enrollment: Overall Picture Please refer to figure 4 for the pictorial view of enrollment process. Direct enrollment in the field offices c.4. Employers having own member's database provide data to the insurer via _________. 3. Member needs to show _______ as a token of its membership in the insurance company. 3.5 Exercise 1. 2. 2. Web-based applications. Fig.0 Page 32 of 132 .4. Enlist the means of enrollment. ID card __________________________________________________________________________________ 65736839.doc Ver. Traditional Paper transfer b. Means of enrollment are a. Electronic data transfer.Members ___________________________________________________________________ 3. Electronic data transfer from employers d.

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

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

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

N Y N Y __________________________________________________________________________________ 65736839.doc Ver. 3.0 Page 36 of 132 . 1. 2. 4.Members ___________________________________________________________________ 1.

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

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

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

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

__________________________________________________________________________________ 65736839. but the premium can be raised under certain circumstances (the state insurance department must approve the change. Guaranteed renewable. pay attention to whether the contract is non-cancelable or guaranteed renewable. Often.they can be used in any way the member wishes them to use.0 Page 41 of 132 .9. 1. Non-cancelable.1 Member’s concern When a member buys an individual disability insurance policy. Disability benefits contracts in which policy cannot be canceled but premiums can be raised are _________. 5. Disability benefits contracts in which policy cannot be canceled and premium cannot be raised are _________. 4. 3. Guaranteed renewable means that the policy can't be canceled as long as member pays premiums. 5. A non-cancelable contract is preferable to a guaranteed renewable contract. noncancelable policies are offered only to low-risk occupational groups at a high premium. they must have the permission of state's insurance department. Opting for the guaranteed renewable provision may save as much as 30 percent of the premium cost.2 Exercise Questions 1. 3.doc Ver. Answers: 4. For a guaranteed renewable contract company cannot raise your premium on an individual basis.Members ___________________________________________________________________ 3. Enlist the services offered for group maintenance.9.9 Disability Benefits Disability income insurance provides members with an income if they become sick or injured and are unable to work. so may be premium will be raised only every few years. What types of services does the insurer provide? 2. 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. The funds paid are not specified for medical expenses . Employers can provide coverage for employees too. which would apply to all individuals in the same insurance classification). When the groups are formed in case of a group insurance? 3.

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

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

e. IPA or PORG: (Independent Practice Association or Provider ORGANIZATION) It is the legal entity that provides administrative and contract related services for providers. the members. Dentists. 1. 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. PREFERRED PROVIDER: These are those providers who work on contract basis by negotiating the compensation they charge.g.   SPECIALIST: A specialist is one who has one or more areas of specialization in medical field.0 Page 44 of 132 . BACKUP-PROVIDER:   __________________________________________________________________________________ 65736839.1 Provider types Providers are those people.   Depending on contract the Providers can be classified as:  PAR: Such a provider is a participating provider and has a valid contract with Healthcare organization. physicians etc.g.  Other way of classifying them based on the type of contract is as follows:  PCP: Primary care physician.IV 4 Provider 4. Every member is supposed to approach the PCP first before going to anyone else. organization or institution that provide services to those enrolled into the system i.Providers ___________________________________________________________________ UNIT .doc Ver. COMMUNITY PROVIDER: These providers do not have a contract at all with Healthcare organization. Hospital etc.  NON-PAR: These are those non-participating providers whose contract with Healthcare organization is terminated. There can be numerous classifications of providers depending upon the facilities provided by them. As the name suggests it is the PCP who is in constant touch with the members directly. NON-PREFERRED PROVIDER: These are those providers who are not contracted to furnish services or supplies within ‘PREFERRED’ network. Group Or Entity: These are group of people who provide services under a common name 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. a minimum number of member (or dependent) visits.doc Ver. individual practice associations (IPAs). or an appropriately delegated credentialing process.PHO(s). SUPPLIERS: These are those providers who provide medicines and surgical instruments. so as to assure a minimum amount of revenue by way of claims. Some HCO(s) have pioneered the E-Pay/E-Cash option. 4. Health insurance companies sometimes delegate credentialing to some physician groups. • Minimum number of member visits Some HCO(s) guarantee providers. Based on nature of service. Pharmacies.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. Maternity Home etc. education and other relevant information.3.g. path labs etc.1 Provider Contract Process Providers who wish to participate in one of the networks must complete an application and the corporate credentialing process. Backup provider provides medical services to the patients of the provider when he is not available. providers can be classified as following:    4. and physician hospital organizations . Once a provider is accepted as a participating provider. which share knowledge and intellectual property via the Internet.0 Page 45 of 132 . 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. e.3. E.. These are specialist networks of providers.g. 4. large HCO(s) provider e-learning options to enrolled providers via virtual communities on the Internet.2 FACILTIES: These are those providers who provide facilities such as wards. which involves clearing provider claims within a fortnight (subject to the provider electronically filing the claim in a prescribe format). 1. ICU’s. EQUIPMENTS: These are those providers who provide medical equipment for executing medical tests such as X-ray labs. • E Learning Virtual Communities As some of the fringe benefits. Provider Participation HCO (Healthcare organizations) usually elicit provider participation (into their network) using some standard marketing strategies. Hospital.Providers ___________________________________________________________________ A provider can specify another provider as his/her backup. 4.2 Credentialing Criteria The process requires providers to present documentation of training. there will be routine visits to the provider's office and a re-credentialing process every two years.

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. the system uses a three-part quality factor to adjust the physician’s capitation payments. In most areas.3.0 Page 46 of 132 . professional organizations. specialists.4 Types of Contracts All major health insurance companies have several different types of provider contracts based on the type of servicing provider.3. 1. hospitals. physician hospital organizations. Medicare/Medicaid) Work history Malpractice insurance coverage history Clinical privileges at a hospital hospital 4.3 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. For example. Some of the different types of provider contracts include PCP contracts. 4. a physician receives payment for a patient whether the physician sees the patient that month or not. DEA registration. per month)  By integrated delivery systems. membership/privileges. Additionally.  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. many participating primary care physicians are compensated in accordance with the Quality Care Compensation System* (QCCS) described below. physicians are paid by capitation. independent practice associations (IPAs). Under capitation. 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.3.5 Provider Reimbursement Most health insurance companies incorporate the following payment methods to reimburse providers for services. Quality Review considers: __________________________________________________________________________________ 65736839.Providers ___________________________________________________________________     Disciplinary history (including licensure. 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.doc Ver.

details of the provider who is referring. 2.1 Referrals processing  Referral entry – All the referral should be entered in the referral database so that it can be used if required.4 1. IPA. The inquiry can be done either on the basis of member number or referral number which ever is known. Answers: 1. referral validity ‘From’ and ‘To’ date and service code (it specifies the king of service/treatment). Referral inquiry by member or referral number – Once the entry is made then at any time one can inquire about the details of any referral.5 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. diabetes and heart failure   4. details of the provider for whom referral given. PAR or Participating 3. 1. Exercise The legal entity that provides administrative and contract related services for providers are also a type of provider – True or False. If some referral has to be cancelled then we can do that through this process. Insurance Company 4. (E. Referral is not always required to visit outside PCP.5. 4. PORG etc) 2. A provider is called as ________ provider if he has a valid contract with the company.g. 3. The information which needs to be entered are Member number. It depends on the plan taken by the member. True. Referral maintenance – through this process one can modify the existing referral entry. A referral once issued has a validity period.doc Ver. 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. A PCP can issue themselves referrals for non-routine services. Contract is an agreement between the provider or group of providers and the _________________. Referral entry can be done through batch or online processing however inquiry and maintenance is done through online screens.   __________________________________________________________________________________ 65736839. Some plan has flexibility to visit any provider without any prior authorization in that case referral doesn’t come into picture. Suppliers 4. Providers who provide medicines and surgical instruments are known as ___________. 4. Encounter date. which is generally fixed and can be 30 to 90 days and to utilize the referral the initial visit must be within that validity period.0 Page 47 of 132 . A PCP or an authorized provider provides it when special care is required.Providers ___________________________________________________________________ Results of member surveys Review of the care (like childhood immunization rates.

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

The criteria used to select participating providers reflect minimum network composition standards. A provider who is providing healthcare services on current date is an active provider. closed. which includes hospitals.0 Page 49 of 132 . The local Network Management staff has the ongoing responsibility of ensuring that each network has the proper composition of providers. 4. In the healthcare organization.   __________________________________________________________________________________ 65736839. Doctors. networks are adequate when there are enough providers available for the member population in a geographic area. The status can be retired. and when members have access to the various types of medical services they may need. If it is any group or hospital then name of that should be stored. Labs etc. Provider status – Shows current status of the provider. Almost all the system uses this database to get any information about any provider. licensure or accreditation status.doc Ver. They must also maintain adequate malpractice and general liability insurance or self-insurance.7.1 some common information of Providers Some of the common information that needs to be captured for a provider is given below:  Provider number – this is a unique number which is system generated. and provide evidence of such insurance upon request.6.Providers ___________________________________________________________________ 4. All the inquiry or maintenance of providers is done based on provider number. Instead of engaging in direct contracting arrangement with individual providers. but may vary to accommodate local supply and regulatory requirements. Pro Net) contracts with the providers.7 Provider maintenance This process involves collecting information on all type of Health Care Providers. deceased etc. appropriately licensed and accredited by either the American Osteopathic Association (AOA) or the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). After developing a list of providers by type needed to meet customer needs. 1.2 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. one the major database is Provider database. 4. 4.6. All facilities are also required by contract to notify us of any change in coverage. In other words.4 Network Hospital Standards Our current hospital contracts require network hospitals to represent and warrant that they are. Provider maintenance should be done everyday in order to keep the provider database up to date all the time. 4.6.g. A PPO network must be complete enough to provide members’ access to a participating provider for a core of essential medical/dental services.3 Rental networks A rental network is an arrangement in which another organization (e. They compare the existing network with adequacy guidelines for the specific service area and identify whether there is a need for new providers.. network staff target providers to be recruited and contracted. Aetna reimburses the rental network organization for allowing our members to use the network. given to each provider to identify the provider easily. and will remain during the term of the contract. Provider name – it is the name of the provider if he is an individual provider.

only then the payment is made to the principle service address. 4.0 Page 50 of 132 .doc Ver. E.The area in which a provider specializes is called his SPEC or specialty.  4. Nurse Practitioner. Clinical Social worker. he specifies a level 10 billing address. Exercise Referral is mandatory to visit a specialist irrespective of insurance plan/policy – True or False. which is different from all his SL addresses. transportation etc.Providers ___________________________________________________________________ Provider type – Provider type is categorization of the providers depending on the type of healthcare services they provide. There are some plans available in which the member can visit any provider irrespective to his contract with the company. which are not in contract with the company. 1. o This is CAP and Claims billing address. ____________________ is the interval of claim payment to the provider. Midwife. Provider can have maximum of ten Service Locations (SLs). 14 & 15 – If a provider wishes to have separate addresses for capitation and claims payment. Providers will participate with an organization for a certain period and may discontinue. If there are no levels 10.8 1.All information maintained are time sensitive. c) Both of the above. Dentist. Both claims and capitation payments go to this address only if provider has not specified level 14 and level 15 addresses. he can specify level 14 billing address for payment of capitation and level 15 billing address for payment of claims. 2. If a provider has more than one service locations. Provider Specialty . If a provider wishes to have a billing address. 3. Provider network is adequate when: a) There are enough providers available for the member population in a geographic area. 14 or 15 billing address.g. to process their claims.09 Service addresses. There would be providers in the database.The address at which the payment of claims is made to a provider is called the billing address. __________________________________________________________________________________ 65736839. but the company needs to put their details as well. – Physician. one of their addresses is identified as principle billing address. which ease in maintenance of that provider record. 02…. Psychologist. A provider can have more than one billing addresses. Contract info – this information tell whether the provider is in contract with the company or not.    o   Claims payment schedule – It is the interval of claim payment to the provider. A unique number given to each provider. Effective and termination date . is ____________. bi-weekly or monthly. It can be weekly. Radiology center. Nutritionist. d) None of the above. If the code for billing address is o It’s the principle service address. b) Members have access to the various types of medical services they may need. Billing Address . The addresses of rest of the nine SLs are stored as 01.

healtheon.com/www/provider. 4.asp/ http://www.ucla.edu __________________________________________________________________________________ 65736839. (E.com/healthcareproviderinfo. 4.healthinsurance. 3.com/ http://www.masslegalnurse.0 Page 51 of 132 .Providers ___________________________________________________________________ Answers: 1. 4.9 1.doc Ver.doctorandpatient. Provider number 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.healthaffairs. 2. C.com/ http://www.org/ http://www.g.10 References AETNA Intranet http://www. 1.com/ http://www. False. Claims payment schedule 4.doctorquality. In Indemnity plan referral is not mandatory) 2.htm/ http://healthcare.

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

This bonus is one time payment for new application and it depends on number of new application submitted.doc Ver 0. 5.1 Calculation for Brokers Broker Commission calculation can be divided into following main sub topics  Product-wise compensation: Sometimes a broker group deals with only a particular kind of product. in health insurance too brokers bring together buyers and sellers against a commission.2 Introduction Sales and Marketing form an important activity in the health insurance industry. A substantial percentage from customer groups’ payments result in distributing some percentage as commission to brokers. As in every other business. This bonus is in addition to commission a producer receives on premium paid by Customer Groups. Key Producer Compensation – Sometimes the company identifies key producers and gives them bonus if they get more than a fixed number of new subscribers. The banding of the medicare promotion award could be something like this: Program To Date Application Level Payoff per Application   65736839. The various entities involved like Brokers and Underwriters are also discussed.1 Unit Objectives This unit aims to familiarize the reader with some aspects of insurance sales and quote creation. Each Customer group should submit a stipulated minimum number of applications for corresponding broker to qualify for commission. An insurance company has its own marketing workforce and also a pool of external agents (brokers). Together they use various methods and strategies to sell the plans to as many customers as possible. 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. 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. here buyers being the customer group buying a plan and sellers being the insurance company.000 per Customer group per calendar year. Medicare Promotion Compensation – Some companies pay bonus to brokers for bringing in new Medicare Applications.Sales ___________________________________________________________________ UNIT .3. 5.3 Brokers An insurance company generally has a pool of brokers. 5. Users within the company need to maintain particulars of brokers and information regarding broker-customer relationship.00a Page 53 of 150 . Producer Data is frozen at the end of a year.V 5 Sales 5. In such cases the Customer and Cash receipts information is maintained and broker commission is calculated from that. Brokers are also called Producers in this context.

A highly specialized and trained user group called Actuarials does rate Setup. Name of the firm buying the policy 2. Admin users usually do product setup. Some standard information – like applicable conditions. All these affect the cost of the plan. (It is to be noted here that an insurance company needs an approval from the government in order to sell a plan in an area at any time. State regulations affect prices. It contains information about: 1. Effective Date & Renewal Date (date from which the policy will take effect and date when the policy will be due for renewal. Name of Plan 4. Service Area – Area in which the members will be based 3.) 65736839. make certain products saleable in certain area and withdraw some products from some areas as and when required. These rates need to be approved by the concerned department in some states. do not take account of any factors specific to any customer-group.4. But they do not apply these factors.  The effective date . Rates (the premium due per member.6 we will study in details how Actuarials arrive at these rates.1 Quote Creation What is a quote? A quote is a statement of rates of a particular product. Actuaries also calculate the values of group-specific factors for different locations at different times. benefits and new locations where plans will be offered for sale. statutory information etc 5. Details of coverage (benefits like pcp visit. In case of a group insurance policy the rates may be banded on basis of age/ gender/ family status).rates are revised from time to time and hence the dae of commencement of coverage affects the rates. for the member(s). benefits and conditions of a chosen plan. They enter data about new/updated plans. These rates are called Community rates or Book Rates or Base Rates and they depend only on:  The plan chosen . possibly after relevant customizations. 6. On the basis of statistical considerations and mathematical calculations and with the aid of rating applications. In context of health insurance. Actuaries come up with rates for each product. given by a seller to prospective buyers.4.00a Page 54 of 150 . a quote is a statement of cost. However. the policy becomes void) 1.e.) These are all mainly data-entry operations. If not renewed by that time.the benefits included in a plan are basis of the cost of the plan.doc Ver 0. Hence Book Rates are same for any customer group availing a particular plan in the same area and hence the name Community Rates. (In section 5.2 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. They group and combine benefits into plans and maintain data about product-offerings in different service-areas i. 5. tax structures etc.Sales ___________________________________________________________________ 1-250 $100 250-500 $125 500-1000 $150 1000-2000 $175 2000+ $200 Cap of $60. inpatient hospitalization etc) 5.000 per Customer group per calendar year.  The location / service area of the customer group .4 5.Government regulations often mandate certain kinds of coverage.

Generally marketing people are given privilege to create only very straightforward quotes. in order to let the customers know of the exact price (premium. A few examples of special rates could be increased rates due to industry specific risks. copay & coinsurance) of the chosen plan(s). Some special rates can be used only by underwriters. product comparison reports etc) which give them a rough idea of the costs of the short listed plans. marketing activities begin. They suggest some suitable plans to these customer groups. At this point the representatives approach the assistants to get the quotes for these plans. 65736839. Initially representatives approach prospective customers. Prospective customers include new prospects and existing customers whose policies are approaching renewal dates. and then apply special rates or group specific factors depending on the profile of the group and their specific needs. reduced rates due to prior history of low number of claims and so on.Representatives who interact with customers and Assistants who have some (generally limited) access to applications generating quotes.doc Ver 0.00a Page 55 of 150 . For most special rates they need to fall back for on another user group called Underwriters. and narrow their selection to a few plans.Sales ___________________________________________________________________ Figure 1 below depicts the setup workflow. while some others can be used by marketing assistants also but need a validation / approval from Underwriters. Through a few iterations customers see some generic rate sheets (like Copay sheets. Customers give their details and preferences. requirement of extended coverage. Figure 1: Workflow for Quote Creation Once set up is complete. Marketing personnel are broadly of two types . The assistants first pull out the book rates.

00a Page 56 of 150 . thus entering into a legally binding contract and members are enrolled for the accepted policy.7).doc Ver 0. (We will discuss activities of underwriters and special rates in detail in section 5.Sales ___________________________________________________________________ Underwriters have the final say on the rates. If rates are acceptable to the customer group they sign on the quote sheet. Once they approve the quotes the marketing people present them to the customers. Fig2 below is a pictorial depiction of this workflow: Fig 2 To support these various activities a health insurance company typically has a suite of applications as shown in fig 2: 65736839. They can make adjustments according to their discretion.

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

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

Rates need to be raised or lowered accordingly. they get a discount and vice versa. PMPM of a plan is the same as Book Rate. Retention 5. while the latter may be more prone to a heart attack. false 2.6 Underwriters 3. 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. parent child and family) and members pay according to the kind of coverage they want. thus generating a table or matrix.g. Sometimes underwriters have exclusive access to some special factors. they have the final say on the rates.Sales ___________________________________________________________________ ii) iii) Trend factor: This takes care of market trends and possible changes in rates over subsequent quarters. Class Rate/ Tabular Rate: Sometimes firms requests and sometimes state regulations mandate that the demographic composition of the group needs to be considered. Depending on the geographical factors and state regulations even the 65736839. and suitable factors are applied to account for these. For estimating the values of group specific factors also they use similar considerations. Tabular Rating is a rating methodology wherein multiple tier rates are exploded into age/gender bands. This would affect the probable usage of relevant benefits. Here each member pays more accurately for the risk he/she adds. an unmarried males in age group 20-30 would be assumed to be more prone to accidents than a married male in age group 40-50. If number of claims for a plan is low.00a Page 59 of 150 . Thus. Prior experience: Underwriters need to analyze the customer-group’s prior history of claims. (True/ False) Q2. Exercises Q1. PMPM of a plan identifies the income of the company per member per month for that plan. Profits are included in the rates by applying _______________ factor.false Underwriters form a very important user group in any insurance industry. Q2.    Dependant age: A firm may want employees’ dependents to be covered to a higher / lower age than the default coverage. The probable frequency of members availing this benefit varies accordingly. Retention factor. (True/ False) Answers 1. Class rating is a rating methodology where rates are banded into tiers (single. For example people working in S/w industry are likely to go for routine eye check-ups more frequently.  Mutualized : Some customer groups may have outlets/ offices in various locations across the country.Normal profits are hereby built into the rates Thus the actuaries arrive at the Book Rates or the Community Rates for the plans.doc Ver 0. Accordingly underwriters apply factors specific to the industry to adjust the rates. couple. E. Their main function is to approve/ validate the group specific factors added to Book Rates by marketing people and apply mark-up or discount based on their judgement.

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

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. 3. 2. Tele marketing department retrieves the names from Dialer box for phone follow-ups. False 2. seeds are implanted in each batch of mails dispatched.00a Page 61 of 150 . These names stay on the database for one year from the date the names were received from the vendor.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. Seeds are sales department employees and if the mail reaches the seed. Postal mails sent by sales department fall in three categories: a) Regional mailing: Mailing is restricted to selected regions or states. Answers : 1.7. True 4. who voluntarily contact healthcare company to get information on it’s products. Their expiry date is one year from the date on which it was entered. new prospects with phone numbers are loaded to the Dialers. 65736839. • • • 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. These prospective customers are entered into the database by Tel Marketing department. True 3. b) Meeting mailing: Informing the new prospects about seminars or meetings conducted by Aetna and requesting them to attend the same. b) Vendors who supply data of all the deaths in a given service area. Marketing by mailing involves sending e-mails to prospects. 4. Mailstream system is used to pre-sort the mails to obtain further discounts from postal department. After sending mails.doc Ver 0. Meeting mailing informs prospects about meetings and seminars. c) Member mailing: Involves mailing to existing customers of Aetna. d) Vendors who maintain latest information like addresses of all prospects and update our data files by matching it with theirs. Responders are customers. Telemarketing department gets new prospective customers by calling people. Exercises True or False 1. US Postal Department gives discount on CASS certified mails. False 5. The responders names do not expire from database. Code1 plus software validates addresses. It also helps to ensure that same set of prospects are not getting selected for marketing too often. Responders expire from the database after one year. it’s a fair assumption that all the prospects addressed in that batch of mails must have received the mails too. To ensure if the mails are delivered. History of mailing is maintained for each prospect and each product to ensure that one product is not marketed to the same prospect twice.Sales ___________________________________________________________________ The mails to prospects are processed through Code1 Plus software which validates addresses and gives CASS certification.

Sales ___________________________________________________________________

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

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

8.

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Sales ___________________________________________________________________

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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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  For the entire family to be covered. insurer will provide 100% reimbursement of costs. It involves a lot of paperwork and is time consuming. 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.doc Ver 0. Managed care plans originated in the early 1970s. Members have to pay heavy premiums and need to meet deductibles before they can start claiming benefits. which are more cost effective. They prefer to use managed care plans. i. For people who cannot afford to spend large amounts on their healthcare. Managed Care Plans   6. a routine checkup is not covered.00 80% if true emergency. But.Benefits ___________________________________________________________________  Filing of claims is the responsibility of the member. The coinsurance limit is $1000. Reduced benefits if not a true emergency 80%/20% 80%/20% No coverage 80% The member has to pay a deductible of $200 every year before he can start Table 1: A sample Indemnity plan claiming the benefits. The insurer will reimburse only 80% of the costs. 65736839. rest the member will have to pay out of his pocket.00a Page 65 of 150 . as explained earlier. which the member may have to pay is $1000. the maximum amount. Indemnity insurance is not a good option. this amount is $600. There is no coverage for any preventive care.e.Above this. provide great flexibility to members in choosing a provider.4 Indemnity plans. this freedom comes at a very high cost.this means that.

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

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

he will have to pay $35 as $10. it becomes clear that the cost for the member is much less. In some cases. 6.2 Preferred Provider Organization (PPO) Like an HMO. 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. as PPO members are not required to seek care from PPO physicians. the insurance company will pay 100% of the providers charges  If compared with the Indemnity plan provided in the earlier section. However. or by some other type of organization. PPO physicians provide medical services at discounted rates and may set up utilization control programs to help reduce the cost of medical care.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.00 copay 100%  For all kinds of treatment. there are several important differences between HMOs and PPOs. there is a strong financial incentive to do so. a preferred provider organization (PPO) is a managed healthcare system.  Every time he avails the service of a provider he has to pay $10 irrespective of the kind of services availed. A PPO is actually a group of doctors and/or hospitals that provide medical services only to a specific group or association. The PPO sponsor (employer or insurance company) generally reimburses the member for the cost of the treatment minus any co-payment. In return. The healthcare providers and the PPO sponsor(s) negotiate the price for each type of service in advance. members may receive 90% reimbursement for care obtained from innetwork physicians but only 60% for out-of-network treatment. PPO members usually pay for services as they are rendered. In case he has to use the emergency room facilities. In order to avoid 65736839. which are at the higher level of benefit coverage. usually 100% payment rate. For example. When members receive care from a non-participating provider they receive benefits. The PPO may be sponsored by a particular insurance company.00a Page 68 of 150 .4. Advantages  Free choice of healthcare provider. usually 80% payment rate. When a member receives care from a participating provider they receive benefits. known as ‘Preferred Benefits’. by one or more employers.doc Ver 0. known as ‘Non-Preferred Benefits’.  copay. the provider may submit the bill directly to the insurance company for payment.00 copay $10. The insurer then pays the covered amount directly to the healthcare provider. which are at the lower level of benefit coverage. However. and the member pays his or her co-payment amount.

the POS plan mirrors an HMO. Thus. Additionally.00 $200.00 copay $25. most PPOs have larger copayment amounts than HMOs. The plan can be visualized as having 2 sides. A PPO member has to file claims on his own. One side is for in-network services and the other side is for out-of-network services. For example.doc Ver 0. the expenses and paperwork are higher as compared to HMOs. The benefits are reduced in case of non-preferred option.4.00 80%/20% Same as preferred if true emergency.00 100% 100% Non-preferred Benefit $200. and members may be required to meet a deductible.00 office visit 100% None 100% after $10. 80% / 20% 80% / 20% Preferred option closely mirrors the HMO option while the non-preferred option approaches the Indemnity option.00 3x deductible None 80% / 20% $1000. if a member’s longtime family doctor is outside of the PPO network. else none.  6. the member pays no deductible and usually only a minimal co-payment when he uses an in- 65736839.3 Point Of Service (POS) POS plans give two benefit levels. members may receive 90% reimbursement for care obtained from in-network providers but only 60% for treatment provided by out-of-network providers.Benefits ___________________________________________________________________ paying an additional 30% out of their own pockets. Hence. most PPO members choose to receive their healthcare within the PPO network. Disadvantages  As mentioned previously.00a Page 69 of 150 . When a member uses the in-network benefits. but it will cost more. there is a strong financial incentive to use PPO network physicians.  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. he may choose to continue seeing him. Like an HMO.

Benefits ___________________________________________________________________ network healthcare provider. the POS plan is an indemnity plan. co-payment is around $10 per treatment or office visit.00 $200. he can mix the types of care he receives.00 3x deductible None 80% / 20% $1000. he also must choose a primary care physician who is responsible for all referrals within the POS network.   Disadvantages  There are substantial co-payments and deductibles for out-of-network care.00 80%/20% Same as preferred if true emergency.doc Ver 0. 80% / 20% 80% / 20% 65736839. the member’s child could continue to see his pediatrician who is not in the network. As in an HMO. When he uses the out-of-network benefits. As with HMO coverage.  A typical POS plan will look like this – Plan Feature Calendar Year Deductible Per Confinement Deductible Family Limit Deductible Copay Coinsurance Coinsurance Limit Physicians Emergency room Hospital Other Covered Services Table 4: A sample POS plan In-Network None None None $10. But. while the member himself receives his healthcare from in-network providers.00a Page 70 of 150 . Advantages  POS coverage allows a member to increase his freedom of choice. while there is no PCP for out-ofnetwork services. Unlike HMO coverage. members must have paid a specified deductible before coverage begins on out-of-network care. members must choose a primary care physician (PCP) and hence there is a tight control to get specialized care within the network. No deductible is required for in-network services. POS plan encourages members to use innetwork providers but does not make it mandatory. as with HMO coverage.00 100% 100% Out-of-network $200. For example.00 copay $25.00 100% None 100% after $10. members pay only a nominal amount for in-network care. else none. members always retain the right to seek care outside the network at a lower level of coverage. In most cases. Like a PPO. Usually. The member will likely be subject to a deductible and co-payment.

as compared to the POS plan. This provides members with the ease and low cost of the HMO. In contrast.doc Ver 0. the PPO plan gives more flexibility for choice of provider. and the price is somewhat higher. and employers. in general. 6. while providing them with the option to make appointments directly with a larger group of providers (instead of just their primary care provider). some insurers will offer an EPO/HMO plan. managed care plans are better suited for the average individual because they end up being more cost effective in the long run. Exclusive Provider Organization (EPO)  6. The variation in the various plans can be understood more effectively by referring to the following table. 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. All the plans outlined till now are generic plans.Benefits ___________________________________________________________________  The POS plan is very similar to a PPO plan. as there are no deductibles and very less copays. The major difference between them is in the in-network option. 65736839.5 Which plan is the best? The first thing to note is that. The choice of providers is greater than the typical HMO. For example. this leads to less flexibility in choice of provider. Disadvantages  Members need to choose from the HMO and EPO networks.4. A PPO may also make an EPO option available to members. however. give more freedom than managed care plans in terms of using the healthcare provider of choice. Here.00a Page 71 of 150 . also. EPO Plans—a hybrid of POS plans were developed. which can be customized according to the members needs.4 In order to fulfill the diverse needs of participants. providers. Indemnity plans. with maximum benefits within network and reduced benefits out-of-network. Advantages  Limited out-of-pocket expenses. However. These plans offer members great flexibility at the lowest price by combining various plans. there is no such thing as ‘the best plan’.

Considering the cost for a member. the choice ultimately depends on the member’s personal circumstances and preferences. PPO plan members do not have to choose a PCP (Y/N). 3. 5. 1. 4. 2. Plot a graph of ‘cost to member’ (x axis) versus ‘freedom of choice’ (y axis) and place the various plans on it. if his goal is maximum flexibility and cost is not a major factor. he is probably better off with a managed care plan. 65736839. 6. On the other hand.doc Ver 0. which plan is most effective? POS plans do not offer out-of-network coverage (Y/N). 2. 4.00a Page 72 of 150 .1 Exercise Plan offers the maximum freedom of choice for a member. 5. 3. indemnity plans should be preferred. If the goal is to minimize costs. Available Not available Required Available Available Not available Required Not required Not required Required 5 5 1 1 4 4 3 3 2 2 Table 5: Comparison of various plans So. Answers Indemnity HMO N Y Indemnity Freedom EPO HMO PPO POS 1.5.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.

Depending on the specific plan. With some employer-sponsored vision plans. while others may limit coverage to reasonable and customary charges incurred during routine eye exams. It depends on the specific plan.2 Dental Plans Dental insurance provides coverage for services relating to the care and treatment of teeth and gums. The regular dental visits allow problems to be diagnosed early and corrected without involved diagnostic testing or treatment. The plans discussed till now were medical plans and did not cover:        Work related injuries Treatment provided by relatives Cosmetic surgery Government health services Vision benefits Dental benefits Over the counter medicines and non-prescription drugs To cover these.1 Vision Plans Vision insurance provides coverage for services relating to the care and treatment of eyes. It typically covers services delivered by an optometrist or ophthalmologist. This keeps the cost of dental care much lower than medical care.6.6.00a Page 73 of 150 . and then file a claim for reimbursement.doc Ver 0. Dental plans are of three types based on the mode of treatment and payment. 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). 6. insurers provide the following plans: 6. Most of these plans in some or other will belong to the two main categories listed above. 65736839. Regular dental checkups and cleaning will be sufficient to maintain dental health. The basic difference between a Medical and Dental disease is that a medical disease can be unpredictable and catastrophic while most dental diseases are preventable.Benefits ___________________________________________________________________ Cost Figure 3: Variation of Freedom with Cost 6.6 Other Plans In addition to the common Indemnity and Managed care plans listed above. insurers offer a wide variety of specific plans. Or the member may be required to cover the charges out-of-pocket at the time of service. 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. Reasonable and customary charges generally don't include the cost of glasses and contact lenses.

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

All ten must cover certain services. the costs associated with an overnight stay in a hospital. In addition. Some also provide coverage for deductibles and services that are not covered by Medicare such as prescription drugs and preventive care. 65736839. skilled nursing facility. A third part. Medigap is specifically designed to fill some of the gaps in Medicare coverage. they are standardized and regulated by federal and state law. whether it was received while member was an inpatient at a hospital. meals. Medicare coinsurance amounts. However. Three tier plans  Lowest copay for Generic drugs  Medium copay for branded drugs  Highest copay for Non formulary drugs 6. a division of the U. The Health Care Financing Administration (HCFA).  Part C expands the kinds of private health-care plans that may offer Medicare benefits to include managed care plans. There is no variation in the types of medigap policies provided by various insurance companies. Medicare coverage consists of two main parts . at a doctor's office. if not all. regardless of their medical condition.Medicare Part A (hospital insurance) and Medicare Part B (medical insurance).5 Medigap Medicare does not cover all health-care costs during retirement. has overall responsibility for administering the Medicare program. medical savings accounts.. Members may purchase a supplemental medical insurance policy called Medigap.4 Medicare Plans Medicare is a government-sponsored program that provides health insurance to retired individuals. Most people become eligible for Medicare upon reaching age 65.6. Also covered are laboratory tests. and private fee-forservice plans. Although the Social Security Administration processes Medicare applications and claims.doc Ver 0. and nursing service s). 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. Only ten standardized plans can be offered as Medigap plans.00a Page 75 of 150 . Medigap policies pay most.6. people may be eligible if they are disabled or have endstage terminal disease. Medigap policies are sold through private insurance companies. such as charges for the hospital room.S. and ambulance service. or psychiatric hospital.  Part B covers other medical care. the HCFA sets standards and policies. physical therapy or rehabilitation services. or as an outpatient at a hospital or other health-care facility. They are in addition to the fee-for-service options available under Medicare Parts A and B. Physician care. 6.e.Benefits ___________________________________________________________________ 3. Part A also covers hospice care and home health care. Department of Health and Human Services.

occupational therapy. 6. and speech therapy. optometrist services and eyeglasses. States may elect to provide other services for which federal matching funds are available. duration. medical transportation.they can be used in any way the member wishes them to use.9 Catastrophic Coverage Plans Catastrophic coverage is not a separate entity by itself but forms a part of an existing plan. The funds paid are not specified for medical expenses .7 Long Term Care Most of plans discussed till now are the kind. Some policies include special features like:    Key-person insurance to protect a firm against the loss of income resulting from the disability of a key employee. 6. They pay hospital and medical expenses above a certain deductible. Employers can provide coverage for employees too. offers the assistance people need if they have a chronic illness or disability that leaves them unable to care for themselves.6. including hospital bills. as well as young and middle-aged people who have been injured or have suffered a debilitating illness. and long-term nursing home care. For jointly owned businesses. or blind individuals (or to needy.6. adult day care. Long-term care. This may be used to help the aged. and (4) oversees its own program.6. and are reestablishing a customer or client base. which pay for hospital bills and doctor visits. dependent children) who cannot afford the necessary medical care. (2) prescribes the amount. a disability buy-out policy disburses funds for one partner or business entity to buy a disabled partner's share of the company. Some of the most frequently covered optional services are clinic services. prescribed drugs. The treatments covered by long term care insurance usually include four general types of care: in home care. which is usually very high.8 Disability Income Insurance Disability income insurance provides members with an income if they become sick or injured and are unable to work. However the maximum lifetime limit of benefits is high enough to cover the cost of catastrophic illness.6. Medicaid pays for a number of medical costs. services for the mentally retarded in intermediate care facilities. (3) chooses the rate of reimbursement for services.doc Ver 0. members pay a set premium that offsets the risk of a much larger out-of-pocket expense. prosthetic devices. Each state administers its own Medicaid programs based on broad federal guidelines and regulations. disabled. home health care. Most of the plans seen till now can be customized to include coverage for catastrophic illnesses. each state (1) determines its own eligibility requirements. 6. physician services. Recovery benefits that pay after members return to work full-time. however. 65736839. As with other insurance policies. Within these guidelines. assisted living and nursing home living. It is a joint federalstate program to provide medical assistance to aged. and types of services.6 Medicaid Medicaid is a health insurance program for people with low income.Benefits ___________________________________________________________________ 6.00a Page 76 of 150 .

Individual health insurance is a type of policy that covers the medical expenses of only one person. Long Term care covers nursing home care? (Y/N) Who all are eligible for Medicaid benefits? 1. Medicare has parts.Benefits ___________________________________________________________________ The most common example is the Medicare plans which include a clause for catastrophic coverage. 3. with the sponsoring employer or association paying all or part of the premium. plans are similar to HMO plans The federal government regulates Medicare benefits? (Y/N).6. catastrophic PPO and catastrophic EPO coverage. For this reason. Member’s risk potential will determine whether he qualifies for insurance and how much the insurance will cost. Answers 1.10 Exercise Pharmacy plans usually have tiers of benefits. 3 (hospital. medical. With group health insurance. In general. Others include disability income insurance. Is used to protect a firm against the loss of income resulting from the disability of a key employee. the only real disadvantage of group insurance is limited or no freedom to customize the policy to member’s individual needs. Y 8. This is generally done through a series of medical questions and/or a physical exam. because group insurance allows the insurer to spread the risk over a larger number of people. Employer-sponsored plans and associations are among the most common sources of group health insurance. individual insurance is generally more difficult to obtain and more costly than group insurance. Y 7. Capitation 6. The premium for group insurance is calculated based on characteristics of the group as a whole. The policy is typically negotiated between the insurer and the "master" policy owner (employer or association) without any inputs from 65736839. they are evaluated in terms of how much risk they present to the insurance company. When they apply for individual insurance. such as average age and degree of occupational hazard. where each person's risk potential is evaluated and used to determine insurability. 7. all eligible people can be covered by a group policy regardless of age or physical condition. Policy extends the Medicare policy by offering additional benefits. 8. members purchase individual insurance directly from an insurance company. Medigap 4. 2. medicare+choice) 3. Key person insurance 5. the initial cost of establishing group coverage is lower than the cost of issuing a separate policy to each person. 6.doc Ver 0. 6. a single policy covers the medical expenses of many different people (a group) instead of covering just one person. 3 2. 4. 6. In case of Dental insurance. Because only one policy is issued for the entire group. All people who cannot afford medical care. Individual insurance is somewhat more risky for insurers than group insurance. 5. Unlike individual insurance.7 Individual Insurance and Group Insurance.00a Page 77 of 150 . Unlike group insurance.

8.2 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. The major provisions of HIPAA do the following:  Allow workers to move from one employer to another without fear of losing group health insurance. In addition. The specific policy provisions are all determined in advance. his employer is not required to pay any part of it. They could suffer a serious injury and become disabled. So the federal government has provided certain laws to help people cope with the situations mentioned above.Benefits ___________________________________________________________________ the member. 6. 6. If a person is entitled to COBRA coverage for other qualifying reasons.1 Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) If a person and his dependents are covered by an employer-sponsored health insurance plan. if his employment has been terminated or if his work hours have been reduced. A person can continue his health insurance for 18 months under COBRA.A count on their employer for health insurance coverage.  Increase the tax deductibility of medical insurance premiums for the selfemployed. In 1996.  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.  Require health insurance companies that serve small groups (2-50 employees) to accept every small employer that applies for coverage. leaving them without health benefits. But what will happen to their health insurance if they stop working or no longer qualify for benefits? Their company might begin downsizing. he is entitled to COBRA coverage only if his employment has been terminated or downsized.S. as are the deductible amount and co-payment percentage. the person will have to pay the premium for COBRA coverage. Most employers are required to offer COBRA coverage. death.A.8. or in certain other situations. The two most important of these are – 6. However. his dependents may be eligible for COBRA benefits if they are no longer entitled to employer-sponsored benefits due to divorce. As an employee.S. he can continue the coverage for 36 months. COBRA entitles him to continue coverage under circumstances that would otherwise cause him to lose this benefit. 65736839.8 Laws and Legislations Most people in U.doc Ver 0.00a Page 78 of 150 . the Health Insurance Portability and Accountability Act (HIPAA) expanded on COBRA. These events can occur when least expected.

10 References 1. 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.com 3.Benefits ___________________________________________________________________ 6.00a Page 79 of 150 .doc Ver 0. Copay is what the member pays to the insurance company for treatment. 65736839. “A to Z of Health Insurance” – By Prashant Burse.   Deductible is usually zero for most HMO plans. 6. each partner can take out an insurance policy to cover the expenses. 2.   Medicaid policy is the most expensive type of Indemnity plan. “Managed Care – An Overview ” – By Amit Shukla.9 1. which plan is most cost effective and why? State whether true of false – Private insurance companies provide Medicare plans. Long-term care is covered under Medicare. 4.yourhealthplans.insurance. Abhishek Virginkar and Saurabh Kulkarni.com http://www. 2.  In case of a joint business venture. the other partner is no longer able to perform his duties.  Review Questions. 5. 3. 4.  Coinsurance is the insurance provided by two insurance companies to one individual. in case. http://www. 6.

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

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

1. directly into the Claims Online Adjudication system. The newly reformatted claims will follow the existing Receipts system path for electronic claims.2 ENVOY Claims Intake : DiagrammaticIKFI Paper Claim EDI Referral Prereceipts REFERRAL SYSTEM Receipts Verification 65736839. The Reformat will also be responsible for passing the UCK along to the HMO system on each transaction. The modifications consist of inquiring on the UCK database table or file and generation of the event response for pre-Receipts system. The Load is responsible for passing the UCK to the HMO Adjudication system. claims will flow into the Generate Response process. When Hospital claims are processed Revenue codes are grouped and rolled and then translated into Benefit codes.Claims ___________________________________________________________________ as input and produce a UB92 Hospital transaction format or a NSF1500 Specialist transaction format as output. in order to determine if a claim will be Accepted or Rejected. This response status serves as the initial response for all HMO claims. Each benefit code represents a detail line. Some paper claims cannot be loaded into Receipt System usually due to non-standard formats. The generation of a status response is required to be sent back to Pre-receipts system at this point. The Conversion process handles Hospital and Specialist claims differently. modifications are made to establish the UCK segment number. Due to limitations of the HMO Adjudication. If a claim is split in the Conversion. At the completion of all Receipts system edits. Encounter PROVIDER MEMBER EDI Claim 7. The last process within the Receipt System is the Load to the HMO database. This process will evaluate each edit flag. The response for claims that have been rejected also represents a final response. Users enter these claims online. 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.doc Check Information CLAIMS SYSTEM Ver 0.00a DENIALS Page 82 of 150 ACCOUNTS PAYABLE Check to Provider/ Member . Receipts system Conversion. subject to existing Receipts system edits. These claim forms are captured on microfilm.

o Determination of whether member is suspended or terminated ( i.Capitation of the Provider is validated . o Provider name and address is validated. o Check is done for whether Provider is suspended.e.00a Page 83 of 150 . o Date of Service of the Claim is compared with the current date.1  Claim Preparation and determining eligibility The member information is validated.2. Determine if the claim is timely filed    65736839. DOS > suspense or term date).doc Ver 0. o Provider no is validated. o Provider Specialty is validated . o Determination of whether this claim is a fraudulent specific member claim.Claims ___________________________________________________________________ 7. 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.e if the provider is hospital type or a specialist etc. o Member no is validated. Determination of whether the claim is too old. o Par status of Provider is validated .2 Claim Adjudication Process Claim adjudication is a process in which the actual data on the Claim is compared with the data in the system and based on the business rules or policies the payment of the Claim is decided. The provider information is validated. o Provider type is evaluated i.

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

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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Referral updates o Referrals are updated for no of visits after the claim has been processed properly.Claims ___________________________________________________________________ Cross/Blue Shield). This provision prevents double or over-payment by the carriers.doc Ver 0. after a provider has been paid. If. o o 7. o Denial letters are sent if :  other insurance paid in full  experimental procedure not covered  Cosmetic surgery not covered    65736839.Penalties etc that a Healthcare company liable to pay in certain cases  Any Other Information required . 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.  Provide the name and address of the primary carrier and the patient’s name and address and any other pertinent information.  Inform the provider that he/she can return their previous payment or elect to have them debit his/her account after 60 days. 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 .   7. thereby giving him/her an opportunity to seek reimbursement from the member’s primary insurer. the process followed is . deductible . Healthcare company discovers that another insurer is the primary carrier. The insurance industry has established standard rules to determine which insurer is primary payor. a.3  Update Claim Accumulator updates o This involves updating of Various accumulators for Copay .00a Page 88 of 150 . they will:  Notify the provider that they have discovered that another insurer is the primary carrier.2.4  Claim adjudication outputs Check extract o Adjudicated claims that are passed to Accounts payable for check printing. coinsurance etc depending upon the processing of the claim.2.  Inform the provider that he/she can write or call the person signing the notification if there is additional information that would alter the proposed process. Claims database updates o Processed Claims stored for maintaining History.

doc Ver 0.00a Page 89 of 150 . no change Explanation of benefits – (covered in other section) 65736839.Claims ___________________________________________________________________   Decision re-reviewed.

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

then provider receives payment from primary and secondary insurance companies.1. Principle categories for this payment are as follow:  Quality of Care It measures the quality of care based on physician and member surveys.3 Copay Adjustments If the claim filed required member to pay some copay amount. the higher will be the incentive. administration in the hospital etc. both with a few exception. It becomes mandatory to identify all the types of services that will become eligible for consideration under quality incentive. provider has tendency to file the same claim again.5 Duplicate Claims In case of late payments by insurance company.3. the physicians fill in the data such as quality of operating rooms.6 Provision for Advance Payment Some insurance companys also have a facility to pay the providers some lumpsum amount in advance. assign points / marks. Procedures are in place which detect such duplicate claims and avoid the repayments. 7. These claims then are taken through claim adjudication process to decide how much amount should be paid to the member or the claim should get denied. This incentive to be paid is decided as fixed % of the contractual amount between Insurance company and the provider.4 COB Adjustments If Coordination of benefit applies for any member. Over a specific period of time. would come in the form of claims filed by the providers.3.3. In the physician surveys. Otherwise claims without proper referral get denied.2 Provider as Specialist If a provider is giving services to member as a Specialist. When members have encounters with provider.3 7. a survey is conducted where in the member fills in a form to comment about the quality of service provided by the hospital. 7. which means he gets a fixed fee by Insurance Company on monthly basis irrespective of actual services provided by the provider during the period under consideration.1. He has to file claims with all the involved insurance companies.3. 7.1 Claim Payments Provider Payments Inputs for any provider payment. these providers will file claim for the services rendered to the member. Mostly all the In-patient type of services and none of the Out-patient type of services are eligible for this incentive. then the insurance company will pay the provider adjudicated amount less the copay amount as described by member’s plan. these amounts are then adjusted during adjudication against the claims filed by provider. Higher these points. These routines (which are black box to the insurance company’s system). which should be covering the visit and specific services for the member. Hospitals send the survey results to Insurance company. especially the big providers like Hospitals.doc Ver 0. then all his claims are bound to get denied if filed for services covered under capitation. 7.1. If the provider is non-capitated. based on some algorithms.3. 7.1 Capitated Provider If provider is a Capitated Provider. Once the service is provided to a member.  Efficiency of Care 65736839. in most of the general scenarios.Claims ___________________________________________________________________ 7.00a Page 91 of 150 .1. then the claims filed would require specific referral already in place. 7.1. are paid extra for the quality of services they provide. then claim gets adjudicated against Insurance Company’s business policies and rules as imposed by federal/state laws.3.1.7 Provision for Advance Payment Some providers.3.1. This data is then passed through ‘United States Quality Algorithms (USQA)’ routines.3. 7.

the provider is informed by the Insurance Company regarding the reasons and split of payments.3. insurance company intimates provider of the extra payment made and provider is required to repay to the company accordingly.1. Also.Claims ___________________________________________________________________ It measures the efficiency of the care based on length of stay for surgery.2. higher will be the payments. 7. 7.  Commitment to Managed Care Principles The negotiators have the providers fill in a questionnaire that contains the questions such as: o if the provider sends the data to Insurance Company electronically o if there exists long term contract between hospital and Insurance Company o if nurses from the hospital participate in training programs conducted by Insurance Company The provider has to fill in either Yes or No to each of these questions.3.1 Copay Limit Reached If member has already reached the copay limit mentioned on his plan and in the next encounter he still pays the copay.3. system assigns points. In this case insurance company pays directly to member.3. Based on the answers. as defined in the plan adopted by member.2. Under such circumstances. the lesser will be the incentives paid.00a Page 92 of 150 . When provider’s claim is adjudicated.2.doc Ver 0. Higher the points. lower will be the payments. medicine and OB/GYN.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. part or full payment made by him to provider. If a member spends more time in hospital for a service. For this category: higher the points.2 Member Re-imbursement Following are various scenarios when member is eligible for re-imbursement by The Insurance Company.4 Claim Adjustments These are the various types of adjustments that can be made to the claim. the payment is made. then Insurance Company will then deny such a claim.8 Payment to Insurance Company It may happen that provider claims are incorrectly adjudicated and provider is overpaid. 7.3.2. 7. 7. adverse events and C-section rates. a fixed % of adjudicated claim amount is paid back to the member. then the insurance company will reimburse all the amount paid towards copay back to member. points are assigned and based on the points. If the member has not reached the Deductible limit.4 Co-insurance Applies In this case. higher the adverse conditions. through USQA routines. 65736839. lower will be the payments as it is hospital’s responsibility to see that fewer adverse events arise. So. 7. longer the stay.3 Deductible Applies Member pays to the provider Out-of-Network and files a claim with the Insurance company. then higher will be the costs that hospital incurs and hence the claim amount.3. whether denied or paid. 7. For each of these measures.

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

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

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

3.7. member + family Co-insurance is also accumulated separately for member as well as member and all his/her dependents. Once the maximum limit set by plan is met. member + family Co-insurance is also accumulated separately for member as well as member and all his/her dependents. It comes into picture when deductible limit is met.7.7. In this case. Example: o If a member XYZ has plan year 01-Jan-2001 to 31-Dec-2001. 7.3.doc Ver 0. the amount of money that is going to be paid to/from a member is decided based on the accumulator amounts.2 7.7. Say.00a Page 96 of 150 .7.member.7. 7. in case member chooses to continue. In a general scenario.2 Co-insurance – for member.for member.4 Types of Accumulator  7.3. o Members pays remaining deductible (part or full. Accumulators records are updated accordingly in such cases.Claims ___________________________________________________________________ 7.2 Function/Purpose of Accumulators The main use of accumulators is during the claims adjudication process. Carry over Deductible Updates Some plans provide for the provision that.1 Copay – for member. depending upon how many visits covered for a specific service to same provider. When the same has been decided.7.3. member + family These accumulators include combined figures of co-insurance and deductibles. So. 7. member + family Copay is accumulated separately for member as well as member and all his/her dependents. say partial/full/some percentage of billed.3 What is accumulated? 7.3.7. say $100) during the last 30 days of plan year. 65736839. during predefined period. member no more pays copay to provider.3 Deductible .4.7. 7. it accumulates $ 350. o Accumulator for yr. This reduces burden on member and acts as incentive for member to continue with the co-insurance company. deductible paid by member in a specific later portion of the effective year.7.3. this figure may be used to decide the method of payment. will be considered as deductible paid towards next year.7. 2001 will go on accumulating the data till end of Nov-2001.4 Visits – for member Visits of the member to provider are accumulated. Some plans provide for facility of carry over deductible. 7. (Details will come down the line in the document) 7.6 Out of Pocket .1 Periodic Accumulators These accumulators will cover up the amounts for period as mentioned in the effective plan for the member. accumulators for the next period will get updated for the deductibles paid. 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). o Member’s deductible limit is say $ 500. o Plan provision says Carry over deductible is applicable for last 30 days of the plan year. the corresponding accumulators are updated with those amounts for the latest instance under consideration.5 Family Dollars Insurance company’s disbursement to member or the provider.

4.8 Overall Claims system diagram : Figure 3: Claims overview 7. 5.doc Ver 0. 3. he now needs to pay $100 less towards deductible in the next plan year. Why are letters required? What are different types of letters? What are the various types of Claim adjustments? What does Government reporting consist of? What are the various criteria for deciding the payment of a claim? What is the significance of maintaining Claims history? 65736839.2 Lifetime Accumulators These accumulators will sum up the amounts for the life time for a member.7.9 1.00a Page 97 of 150 . because of this facility. Review Questions. If member chooses to continue. 2. 7.Claims ___________________________________________________________________ o o Then new accumulators will be generated as if paid for the next year 2002. 7. $100 will get updated in these accumulators. 4.

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

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

External Agents ___________________________________________________________________

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

Claims Claim info

Enrollment Member Info

Provider Provider Info

Provider Network Area

Provider Validations

Claims

State Government Rules Medicaid Data State Governments

Encounters

Pharmacy Aetna Internal
Systems

Business Raw Data

Business Criteria + Refined Data

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

External sources of data Make Corrections

Federal Rules

Errors from Federal Gov. Members

Users

Letter Generator Letters

Members Make Corrections Corrected Errors Error Correction System Errors

Government Programs

Figure 1 : CMS - Center for Medicare and Medicaid Services

8.3.2

DEPARTMENT OF HEALTH AND HUMAN SERVICES (DHSS)

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

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

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

8.3.3

Centers for Disease Control and Prevention (CDC)

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

8.3.4

Agency for Health Care Research and Quality (AHRQ)

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

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

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

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

8.3.6

Health Resources and Services Administration (HRSA)

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

8.3.7 5. 6. 7.

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

Answers: 5. CMS 6. AHRQ 7. DHSS

8.4 8.4.1

Government Acts and Regulations HIPAA

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

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

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

External Agents ___________________________________________________________________ The Security Standard does not require specific technologies to be used. These programs can be one of the most important benefits provided by an employer. privacy is about whom has the right to access personally identifiable health information. PRIVACY AND CONFIDENTIALITY The Final Rule for Privacy was published just as President Clinton was leaving office. What Is the Continuation Health Law? 65736839. on December 28.  establish new requirements for access to records by researchers and others. 2001. no transactions adopted under HIPAA currently require an electronic signature. depending on the needs and technologies in place.000 comments and plans to issue guidelines and clarification of the final rule in response. solutions will vary from business to business. pushing the effective date of the rule until April 14.2 CORBA Health insurance programs allow workers and their families to take care of essential medical needs. Also. In general. 2001.doc Ver 0. The rule covers all individually identifiable health information in the hands of covered entities. The Privacy standards:  limit the non-consensual use and release of private health information.  establish new criminal and civil sanctions for improper use or disclosure. improving the quality of care. If you are entitled to COBRA benefits.  restrict most disclosure of health information to the minimum needed for the intended purpose. Once COBRA coverage is chosen. 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. That changed in 1986 with the passage of health benefit provisions in the Consolidated Omnibus Budget Reconciliation Act (COBRA). A paperwork glitch delayed notification of Congress. your health plan must give you a notice stating your right to choose to continue benefits provided by the plan. regardless of whether the information is or has been in electronic form. 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. an individual's health care information should be used for health purposes only. for the first time. conducting medical research. DHHS Secretary Tommy Thompson used the time to solicit additional comments during March. so the Congressional Review period didn't begin until February. Now.4. DHHS received over 11. Compliance will be required on April 14.  Accountability: Under HIPAA. 8.  Security: It is the responsibility of organizations that are entrusted with health information to protect it against deliberate or inadvertent misuse or disclosure.  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. including treatment and payment. There was a time when group health coverage may have been terminated when a worker lost his job or changed employment. there will be specific federal penalties if a patient's right to privacy is violated. and fighting health care fraud and abuse.00a Page 106 of 150 . You have 60 days to accept coverage or lose all rights to benefits. you may be required to pay for the coverage. 2003 for most covered entities.  give patients new rights to access their medical records and to know who else has accessed them.

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

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. may provide longer periods of continuation coverage. an individual to lose health coverage. 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. Qualified beneficiaries have the right to elect to continue coverage that is identical to the coverage provided under the plan.External Agents ___________________________________________________________________ and dependent children. the retired employee's spouse and dependent children. The qualifying events contained in the law. Qualifying Events "Qualifying events" are certain types of events that would cause. at its discretion. and in certain cases. and plan administrators and qualified beneficiaries. The type of qualifying event will determine who the qualified beneficiaries are and the required amount of time that a plan must offer the health coverage to them under COBRA. except for COBRA continuation coverage. a retired employee. Employers and plan administrators have an obligation to 65736839.00a Page 108 of 150 .doc Ver 0. create rights and obligations for employers. A plan.

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

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

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

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

3. we make no guarantees. 8. Improved efficiency in healthcare delivery by standardizing electronic data interchange is a main feature in HIPAA. Say True or False. ______ Contains provisions giving certain former employees the right to temporary continuation of health coverage at group rates. syntax.00a Page 113 of 150 . Most of the specific rules on COBRA benefits can be found there or with the person who manages your health benefits plan.1 Benefits Of A Clearinghouse  Cash Flow If a HealthCare Provider were to send claims through the mail.5 Clearing Houses A HealthCare Transaction Clearinghouse performs auditing services on insurance claims. COBRA 3.5. Net result: Improved cash flow. This process may be repeated until the claim passes the inspection. 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. down from 4-8 weeks on paper claims.External Agents ___________________________________________________________________ Conclusion Rising medical costs have transformed health benefits from a privilege to a household necessity for most Americans. The HealthCare Provider may then correct the related errors and resubmit for another pass. False 2. and logistical content errors. We will make an effort to correct errors brought to our attention. COBRA creates an opportunity for persons to retain this important benefit. A Clearinghouse collapses the wait cycle into an average of 5-21 days. While we try to keep the information timely and accurate. 65736839. many weeks would pass before he would receive mail notification that errors were holding up payment release on his submitted claims.4. Answers: 1. Workers need to be aware of changes in health care laws to preserve their benefit rights. 2.3 1. Say True or False. 8. If a claim is determined to be free of typographical. If errors are detected. A good starting point is reading your plan booklet. True 8. This is a service that is continually under development. Exercise HIPAA Means Health Insurance Portability & Affordability Act. it is forwarded to the insurance company responsible for payment. The Department of Labor maintains this article to enhance public access to the Department's information.doc Ver 0. it is returned to the HealthCare Provider along with an explanation of what was wrong.

In many cases claims just "sit there" until a tracer or formal complaint is received. HealthCare Providers using the free or low cost software distributed by some insurance companies are subject to biased auditing without knowing so. since the software may reject certain coding combinations during data entry. Direct Filing Same.S. A clearinghouse has everything to gain by HealthCare Providers getting paid quickly and collecting as much of a submitted claim value as possible. Some clearinghouses though. direct filing to insurance companies offers potentially hard to detect disadvantages to U. Coding is crucial in determining the income of a HealthCare Provider. Today's HealthCare Clearinghouse market is very confusing. When the claim travels electronically through a clearinghouse. Filing a claim to an insurance company direct is almost reminiscent of allowing the IRS to file your tax return. A clearinghouse serves as a liaison to the HealthCare Provider. HealthCare Providers. but most are not reported back to the HealthCare Provider. 65736839. Then rejection occurs. others nothing.50 per claim. 8.External Agents ___________________________________________________________________  Guaranteed Delivery Insurance Companies often claim not having received claims that HealthCare Providers send through the mail. The industry is riddled with organizations that are exceptionally difficult to decipher. Insurance companies have everything to gain by delaying payment to HealthCare Providers. But clearinghouses can typically access hundreds of insurance companies through a single port of entry from the office of the HealthCare Provider. Some clearinghouses charge $0.000 . Typically.2 Clearinghouse versus Direct Filing Using A Clearinghouse Routinely check for as many as 10.30.doc Ver 0. This may go unnoticed by incompetent or negligent staff inside the office of the HealthCare Provider.  Connectivity Some insurance companies offer direct filing software. Insurance companies tend to "pick" on some HealthCare Providers and not on others. Instant notification back to the Provider.5.000 combinations of errors. Audits performed on claims are not critiqued in favor of the insurance company with regard to how claims are coded. and yet others in-between somewhere.00a Page 114 of 150 . Topic Audit Logic Unbiased Processing Clearly. have strong ties with insurance companies that result in biased editing. a clearinghouse has nothing to gain by delaying submissions or other operational errors. these instances are greatly reduced.

Unbiased and "rebate" free. 8. "Administrator" does not include any of the following: 65736839. close affiliation with insurance companies Unbiased. The following chart will illustrate all the groups Clearinghouse Types  Type 1 Type 2 Type 3 Biased processing. 2. or disability insurance or self-insurance programs. Type 3 clearinghouses "lease" Type 2 gateways to insurance companies at volume driven rates. most income derives from insurance companies and is formally referred to as "rebates". Type 3 clearinghouses utilize Type 2 gateways for transporting claims. all clearinghouses are not created equal. Cash Flow. but render unique and superior audits resulting in improved services at a lower cost to the HealthCare Provider. to whom services are rendered. Rebates. dental.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. thus avoiding the typical enormous overhead of Type 2 clearinghouses. "Administrator" means any person who adjusts or settles claims on. Insurance companies typically do not charge anything to receive claims. however.00a Page 115 of 150 .doc Ver 0. They typically fall into one of three possible group types. Typically competitive in cost and superior in service. to understand how clearinghouses make their money. standard working relationship with insurance companies Unbiased. 2. health.5. Primary income is derived from the submitting HealthCare Provider. A HealthCare Transaction Clearinghouse performs auditing services on ___________ _______. Exercise List down the Benefits of a Clearinghouse.4 1. close affiliation with leading Type 2 clearinghouses. imply that something was initially received. residents of this state in connection with life.   It may be helpful. Type 2 clearinghouses followed up by negotiating rebates as well. 8.  Type 2  Type 3 8. As Type 1 clearinghouses developed "rebate" income. Answers: 1.5. Guaranteed Delivery & Connectivity.3 Clearinghouse Income  Type 1 Biased. Insurance Claims.External Agents ___________________________________________________________________ As indicated.

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

consultation.1 Accreditation Agencies The Accreditation Process Organizations applying for accreditation participate in a process that entails a rigorous review occurring in four phases.00a Page 117 of 150 . 8. a comprehensive database that contains procedures. 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. usually takes several months. organizational charts. purchase. position descriptions. which consists of completing the application forms and supplying supporting documentation.9 8.1. as well as plan management and customer service. in an effort to maximize cost containment and fairness in adjudicating claims.9. contracts. one or more full-time URAC reviewers analyze the applicant's documentation in relation to the URAC standards.1 Desktop Review In the desktop review process. the leading accreditation organization for traditional health insurers). and preserve the integrity of brokerclient relationships. Once the application and base fee are received by URAC (The American Accreditation Healthcare Commission/Utilization Review Accreditation Commission (URAC). and program descriptions and plans for departments such as quality management and credentialing. negotiation. The applicant's documentation usually consists of. resolve complex service issues. "AccuChecker for Windows" has the 2001 tables of procedures and ICD-9 codes. procedures. diagnoses and the Medicare fee schedule.doc Ver 0. If you process claims that require different fee schedules.9. As a full-service agency. The initial phase "Building the Application". case installation and communication. enroll.External Agents ___________________________________________________________________ Validates eligibility of patients. 65736839. 8. After receiving a desktop review summary. serve and renew policies. but is not limited to. the applicant usually must provide additional documentation clarifying any pending issues.8 General Agents They provide end-to-end connectivity that allows brokers and their clients to shop. They are the people who work behind the scenes to reduce administrative hassles. they provide valuable services. the system allows you to insert additional files with the information needed. 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. These phases include the following: 8. like for example Workers Compensation cases. sample template letters. including licensing and appointment with insurance payer. the remaining three phases of the accreditation process cover a period of approximately three to six months. also uses the HFCA published guidelines for medical procedures. formal policies and procedures. This system comes equipped with "AccuChecker for Windows".

but incomplete implementation of certain policies and procedures. Education and quality management programs are reviewed in detail as well. and an accreditation certificate is issued to each company site that participated in the accreditation review.g. Accreditation Certificates A certificate of accreditation is awarded to accredited organizations.9.3 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.1.. the Executive Committee makes a final accreditation determination. audits are conducted and personnel and credentialing files analyzed. the accreditation review team conducts an onsite review to verify compliance with the standards. which has the authority to grant accreditation. Follow-up activities for organizations receiving conditional accreditation or corrective action may include submission of additional or revised documentation and another onsite review. URAC reviewers also share "best practices" and provide other helpful guidance. This will help the applicant differentiate its various products in the health care market and target a variety of current and potential clients. Ongoing Compliance with the Standards Accredited organizations must continue to remain in compliance with the applicable standards throughout the accreditation cycle. This summary is submitted to URAC's Accreditation Committee for evaluation with discussion with the review team as needed. carried out by the same team that performed the desktop review. Organizations that are unable to meet URAC standards may be placed on corrective action status. If an accredited company is unable to comply with URAC Standards. During the onsite visit. After reviewing the summary and considering the Accreditation Committee's recommendation. attesting to the program the organization is accredited for.External Agents ___________________________________________________________________ 8.4 Accreditation Status Applicants who successfully meet all requirements are awarded a full two-year accreditation. During this review. An accreditation recommendation is then forwarded to URAC's Executive Committee. The committee review process begins with a written summary documenting the findings of the desktop and onsite reviews.1. In addition. Complaints against an Accredited Company 65736839. Conditional accreditation may be awarded to applicants who have appropriate documentation.00a Page 118 of 150 . e. a follow-up executive summary is submitted to URAC's committees for a possible change to full accreditation.doc Ver 0. or choose to withdraw.1. Each accredited site is given its own certificate. 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.9.2 Onsite Review After the desktop review is complete. 8.9. Accredited organizations also provide copies of accreditation certificates to regulators in states where URAC accreditation is deemed. 8. Conditional accreditation may also be awarded to companies determined to be "start-ups". When these follow-up activities are complete. management is interviewed about the organization's programs and staff is observed performing its duties. denied accreditation. its accreditation will likely be rescinded.

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

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

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

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

Figure 4: Detailed Workflow This diagram can be broken down into following stages – 65736839. 9.2 Workflow The detailed workflow for the healthcare industry can be represented as shown in the Following figure.doc Ver 0.Summary ___________________________________________________________________ UNIT .1 Unit Objectives This unit will summarize the contents of this course material by presenting a detailed description of healthcare industry workflow.IX 9 Summary 9.00a Page 123 of 150 .

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

Claims adjudication requires a lot of information about various entities such as members. If the claim requires very specialized processing (and if the rule engine for that is not available with the insurance company). In case of the member having coverage with multiple carries. There are several government agencies that help in regulation of the healthcare industry. it was the path breaking HMO act of 1973. In short claims adjudication requires lot of database interaction and is the most complex of all processes. plays an important role in shaping the way the industry functions.doc Ver 0. 9. 9.00a Page 125 of 150 . 65736839. The federal government too. then the claim adjudication is outsourced to a company specializing in adjudication of such claims.A. as otherwise these claims would have to be adjudicated manually. The government controlled Medicare and Medicaid are amongst the most important healthcare plans available.4 References. policy that are stored in their respective databases. If the claim is found to be a valid one. He is also sent an EOB detailing the payments made and the reasons for those. then the member is paid for his expenses. Hence the insurance companies try to reduce the time for adjudication by going automatic claim adjudication systems. Incorrect claims are returned back to the member (or his PCP whoever has file the claim). As a matter of fact. If the claims are found to be free of such errors. which paved the way for the managed care model. The federal spending on healthcare also has been on a steady rise. providers.2.Summary ___________________________________________________________________ 9. the claim examiners do the adjudication manually. which has since then dominated the market. There is usually a rule engine (a software) in place for adjudication. 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.3 Review Questions. The information about the entire processing is usually stored in a database for further reference. The company validates the claims based on various factors (as were detailed out in the unit on claims). NA 9. they are sent to the insurance company. This helps reduce the burden on the insurance company and speeds up the process.S. The turn around time take to process the claims is also an important consideration for members and providers.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. In case the claims have incomplete information or the information is ambiguous. the primary payer takes care of the COB or coordination of benefits.5 Effect of external agencies Health insurance is a highly regulated area in the U.2.

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

050.752 140. by Region. Dollars) Healthcare 1998 1999 2000 2001 2002 2003 CAGR (%) 53.201 2.113 500.8 46.285 816.850 48.606.259 194.668 44.829 31.479 9.628 289.144 13. In Germany/ France.314 25.5 45.800 20.674 32.146 592. Other countries spend less on IT as a % of revenues.682 258.5% in Europe.S.8 Asia/Pacific Canada Europe Japan Latin America Rest of World United States Total Healthcare Worldwide 42.090.187 40.437 266.877 1.122 17.749 5. Whereas they are Tax based systems (all providers are government owned) are in vogue in UK/Australia.756 50.164 417.551 45.612 1.1 Appendix A: Total E-Business Services Forecast for Healthcare Total E-Business Services Forecast for Healthcare.393 411.1.403 1.979 3.2 Appendix B: The world Healthcare market and Healthcare IT spending The US healthcare market is predominantly privately run.408 69.doc Ver 0.081 81. Japan and Australia.843.805 646.Appendix ___________________________________________________________________ 10 Appendices 10.140 5.018 91.804 109.931 1. 1998-2003 (Millions of U. 65736839. there are Insurance-based systems in which providers are subcontracted by the government.979 363.1 1.402 66.477 141.020 293.964 151.6 43.00a Page 127 of 150 .988 210.741.5 515.917 29.867 161.523 442.3 Source: Dataquest (January 2000) 10.444 184.834 10.505 54.2 835.086 14.819.268.

00a Page 128 of 150 . Inc) 10. less choice to patients and administration efficiencies. (Source: Gartner Research. Proteomics and Bio technology) revolutionize health care.Appendix ___________________________________________________________________ Worldwide. Inc) 65736839. (Source: Gartner Research. Healthcare market. but the profit angle is increasingly focused on.doc Ver 0. Other countries spend less on healthcare than the US does because single payer systems tend to have efficiencies in purchasing. investment in IT in healthcare is at a low of 3% as compared to an overall average of 6% and 12% for Financial services.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. a core focus for most governments around the world will continue to grow as newer technologies and sciences (Genomics.

a whopping number by any standards. Inc) 10. account for 43% of the world spending. Rates will vary for other service areas. 2001 ABCDEF Inc Effective Date 10/01/2001 Renewal Date 10/01/2001 Service Area Colorado .60 $227. 70% of the Federal budget of the US.00 $264.70 $413.doc Ver 0.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 $114.3 Trillion.30 The foregoing rates apply in the Service Area specified above.Appendix ___________________________________________________________________ US is the largest spender in this market. 65736839.4 Appendix C: Sample Quote Sheet Page 1 XXXX Proposal For July 26.00a Page 129 of 150 . The total health care spending (by private and public in the US) is 1. Service Area is determined by the location of the subscriber's primary care doctor. (Source: Gartner Research.US also leads in the IT development of this market.

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

Referral: An authorization from a PCP permitting a member to visit a specialist doctor for further treatment. Member: The person or group who seeks insurance. Premium: A fixed amount. Plan: An agreement between the Insurance Company and the member that details the services that can be provided to the plan holders i. Long Term Disability.doc Ver 0.               65736839. A plan document identifies the benefits the members are to receive and the requirements they must meet to become entitled to those benefits. benefits meaning Medical Services (Service Types .g. Insurer: The organization that provides insurance. o What types of medical services will be covered.say Surgery) Insurance company will pay for. Medical.) 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. Life. pharmacies all can be providers. which the member has to pay for service availed from a provider. (2) A major line of coverage provided by an insurance company (i. which has to be paid by the member to the insurance company before he can claim for benefits. the member. etc. o What will be the maximum amount for which the member is covered. doctors.e.g. For e. Benefit Code : Code assigned to Benefits.e.: A member has to pay $5 every time he visits his PCP. Dental. It covers aspects like – o Policy agreements. fully or partially. which the member has to pay to the insurance company on a timely basis (annually/quarterly/monthly) as a fee for providing insurance coverage. 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.Glossary ___________________________________________________________________ 11 Glossary  Benefit: (1) Right of the insured to receive either cash or services promised under the terms of an insurance policy. Deductible: The minimum amount. hospitals. his co-pay is $5.00a Page 131 of 150 . Co-Pay: The fixed amount. Network: A group of providers in designated areas who are contracted by the insurance company to provide healthcare services to its members. For e. Provider: The person or group that provides medical services. Diagnosis Code : Code used for diagnosis that the patient has undergone. PCP: Or the primary care physician is a doctor contracted by the insurance company to manage the healthcare of a member.

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

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