Tasks Related to the Cycle of Health Insurance

Determining Primary and Secondary Coverage

When the patient is the insured, the patient becomes the guarantor, and the patient’s insurance is primary. If the patient also is covered by another policy, that policy becomes the secondary insurance.

The only exception to this convention arises when the patient is not the insurance policy holder, such as when a child is insured by each parent. In such cases, the birthday rule applies; that is, under law, the insurance plan of the policyholder whose birthday comes first in the calendar year (month and day, not year) becomes the primary insurance.

Cost of Coverage

In this age of rising healthcare costs, most insurance carriers do not reimburse the full amount for services and procedures rendered. A carrier is an insurance company or third party that pays for medical care. The insured, or beneficiary, in most instances is required to pay certain out-of-pocket expenses, such as deductibles, co-payment or co-insurance charges, and costs for noncovered services.

A deductible is an amount a policyholder agrees to pay per claim or per accident toward the total amount of an insured loss before the insurance company begins payment of benefits. A deductible amount is stated in the insurance contract and normally ranges from $100 to $500. Under most circumstances the deductible must be paid only one time per calendar year; however, some policies have a deductible per occurrence.

The medical assistant should always verify the effective date, or date the insurance coverage began, on the patient’s insurance card. An excellent policy for any provider’s office is to call the insurance company to verify insurance eligibility, benefits, and exclusions before the patient’s appointment or encounter with the provider. This verification is done by phone or fax and ensures that the insurance is in effect and the patient is eligible for benefits. Most major insurance carriers have a Web site dedicated to verifying eligibility and claims payments. (Verification of benefits is discussed in more detail later in the chapter.)

Co-insurance is a policy provision frequently found in medical insurance. Under this provision, the policyholder and the insurance company share the cost of covered losses in a specified ratio, such as 80/20 (i.e., 80% of services are paid by the insurance carrier and 20% by the insured).

Many plans now require a co-payment, which is a type of co-insurance that is collected at the time of service. Co-payments usually range from $10 to $25 for office visits but can vary according to the services rendered. Most managed care plans require a co-payment. In addition, any services or procedures that are not covered under the terms of an insurance policy are the responsibility of the policyholder or insured.

Group Policies

Insurance written under a group policy covers a number of people under a single master contract (subsidized by employers) that is issued to their employer or to an association with which they are affiliated. Group coverage usually provides greater benefits at lower premiums because of the large pool of people from whom premiums are collected. Physical examinations are normally not required, and pre-existing conditions are often waived. Often the employee shares the cost of coverage through payroll deductions.

Individual Policies

Individuals who do not qualify for inclusion in a group or government-sponsored plan may apply to companies that offer individual policies, often called personal insurance. The applicant is normally required to fill out an extended health questionnaire and undergo a physical examination before acceptance. Unlike with group policies, with personal insurance there is a risk that coverage may be denied, or the individual may have to accept a rider, or limitation, on benefits the policy will cover. Premiums are almost always higher with individual policies, and often the benefits are less.

Government Plans

Many large groups of people are covered by government plans or entitlement programs. A patient who is age 65 or older is covered by Part A and Part B of Medicare. A medically indigent patient may be eligible for Medicaid, with or without Medicare. Dependents of military personnel are covered by TRICARE (formerly the Civilian Health and Medical Program of the Uniformed Services [CHAMPUS]); surviving spouses and dependent children of veterans who died as a result of service-related disabilities are covered by CHAMPVA.

Some wage earners are protected against the loss of wages and the cost of medical care resulting from an occupational accident, disease, or disability through workers’ compensation insurance. An individual may collect benefits for health expenses from an automobile policy if the injury is related to a car accident or other such loss.

Self-Insured Plans

Many large companies or organizations have a big enough employee base that they choose to fund their own insurance program. This is called a self-insured (or self-funded) plan. Technically, a self-funded plan is not insurance by true definition. The employer pays employee healthcare costs from the firm’s own funds. Usually the costs of benefits and premiums for self-insured plans are similar to those for group plans. Self-funded plans tend to work best for companies that are large enough to offer good coverage and reasonable premium rates and are able to pay large claims for expensive medical services. Often a third-party administrator (TPA) or fiscal intermediary handles paperwork and claim payments for a self-insured group.

Self-funded healthcare or self-insurance is an arrangement in which an employer provides health or disability benefits to employees with its own funds or employees for health coverage with their personal funds. This is different from fully insured plans, in which the employer contracts an insurance company to cover the employees and dependents. In self-funded healthcare, the employer assumes the direct risk for payment of the claims for benefits. The terms of eligibility and coverage are set forth in a plan document, which includes provisions similar to those found in a typical group health insurance policy. Unless exempted, such plans create rights and obligations under the Employee Retirement Income Security Act of 1974 (ERISA).

Medical Savings Account

In 1996 Congress made tax-free medical savings accounts (MSAs) available to 750,000 American workers and their families. This is a type of self-insurance. Under a provision of the Kassebaum-Kennedy health insurance reform bill, small companies (50 or fewer employees), self-employed individuals, and the uninsured can purchase health insurance policies and make tax-free deposits to an MSA. They can use their MSA money to pay small and routine healthcare expenses, reserving a high-deductible medical insurance policy to pay large, catastrophic expenses. Money that remains in the account at year’s end earns tax-free interest. People can also elect to use MSA money to pay their health insurance premiums during a job change, which should reduce job lock, a situation in which people do not change jobs for fear of losing their health insurance.

In an MSA program, generally associated with self-employed individuals, tax-deferred deposits can be made for medical expenses. Withdrawals from the MSA are tax free if used to pay for qualified medical expenses. The MSA must be coupled with a high-deductible health plan (HDHP). Withdrawals from MSA go toward paying the deductible expenses in a given year. MSA funds can cover expenses related to most forms of healthcare, disability, dental care, vision care, and long-term care, whether the expenses are billed through the qualifying insurance or otherwise.

Once the plan deductible has been met in a given year, the HDHP pays any remaining covered medical expenses in that year. If there are funds remaining in the MSA at the end of the year, the funds can either roll over for the following year or can be withdrawn as taxable income.

MSAs have been superseded by health savings accounts (HSAs), which were established as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. Existing MSAs were grandfathered.

Hospitalization

Hospital coverage pays the cost of all or part of the insured person’s hospital room and board and specific hospital services, such as the costs involved in having surgery in a hospital. Hospital insurance policies frequently set a maximum amount payable per day and a maximum number of days of hospital care, per the diagnosis-related group (DRG). Some insurance companies require that the hospital be accredited or licensed.

Surgical

Surgical coverage pays all or part of a surgeon’s fee; some plans also pay for an assistant surgeon. Surgery includes any incision or excision, removal of foreign bodies, aspiration, suturing, and reduction of fractures. Surgery may be performed in a hospital, physician’s office, or elsewhere. The insurer frequently provides the subscriber with a surgical fee schedule that establishes the amount the insurer will pay for commonly performed procedures.

Basic Medical

Basic medical coverage pays all or part of a physician’s fee for nonsurgical services, including hospital, home, and office visits. Usually there is a deductible that the patient pays, in addition to a co-payment or co-insurance payment each time service is received. The insurance plan may include a provision for diagnostic laboratory, radiology, and pathology fees. Some medical plans do not cover routine physical examinations or preventive health checkups, such as mammograms or prostate examinations, if the patient does not have a specific complaint or illness.

The four core categories of the Act include benefits for hospitalization and ER services, physician and midlevel practitioners care, pharmacy benefits, and laboratory and imaging services. In 2015 and beyond, additional provisions will go into effect, such as paying physicians based upon value and not volume.

Disability (Loss of Income) Protection

Disability insurance is a form of insurance that insures the beneficiary’s earned income against the risk that a disability will make working uncomfortable (as with psychological disorders), painful (as with back pain), or impossible (as with coma). It encompasses paid sick leave, short-term disability benefits, and long-term disability benefits.

Weekly or monthly cash benefits are provided to employed policyholders who become unable to work as a result of an accident or illness. Many disability policies do not start payment until after a specified number of days or until a certain number of sick leave days have been used. Payment is made directly to the individual and is intended to replace lost income resulting from an illness or other disability. It is not intended for payment of specific medical bills, and it should not be confused with a regular insurance plan, entitlement program, or workers’ compensation, in which compensation is provided for an employee who is injured on the job or cannot work as a result of a job-related illness or other disability.

Dental Care

Dental benefits programs offer a variety of options in the form of either fee-for-service or managed care plans that reimburse a portion of a patient’s dental expenses and may exclude certain treatments.

Dental coverage is included in many fringe benefit packages. Some policies are based on a co-payment and incentive program, in which preventive dental care (e.g., cleaning and x-ray films) is covered 100%, with most other coverage paid at 50%.

Vision Care

Vision care insurance may include reimbursement for all or a percentage of the cost for refraction, lenses, and frames. Some vision plans also pay for corrective procedures, such as laser eye surgery.

Special Risk Insurance

Special risk insurance protects a person in the event of a certain type of accident, such as an automobile or airplane crash, or for certain diseases, such as tuberculosis or cancer. There is usually a maximum benefit.

Liability Insurance

Liability insurance covers losses to a third party caused by the insured. There are many types of liability insurance, including automobile, business, and homeowners’ policies. Liability policies often include benefits for medical expenses resulting from traumatic injuries, lost wages, and sometimes pain and suffering payable to individuals who are injured in the insured person’s home or car, without regard to the insured person’s actual legal liability for the accident.

Life Insurance

Life insurance provides payment of a specified amount on the insured’s death, either to his or her estate or to a designated beneficiary or, in the case of an endowment policy, to the policyholder at a specified date. Life insurance policies sometimes provide monthly cash benefits if the policyholder becomes permanently and totally disabled. Sometimes the proceeds from life insurance are used to meet the expenses of the insured person’s last illness.

Long-Term Care Insurance

Long-term care insurance is a relatively new type of insurance that covers a broad range of maintenance and health services for chronically ill, disabled, or mentally retarded individuals. Services may be provided on an inpatient basis (at a rehabilitation facility, nursing home, or mental hospital), on an outpatient basis, or at home. The Health Insurance Portability and Accountability Act (HIPAA) of 1996 improved access to long-term care services and coverage.