Medical Insurance



Medical Insurance



Key Terms















































































































LEARNING OBJECTIVES PROCEDURES
Introduction to Insurance

  

  

  
Types of Insurance

  

  

  

  

  

  
Insurance and Managed Care Policies and Procedures  

  

 Apply managed care policies and procedures.

 Obtain verification of insurance eligibility and preauthorization or precertification.

  
Insurance Claims

  

 Complete and review insurance claim form.

  

  


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Introduction to Health Insurance


The growth and change in the structure of health insurance has affected American health care since the end of World War II. When industrialized countries such as Canada and many countries in Western Europe were introducing government-provided health care, the United States was turning primarily to the private market to provide insurance coverage for Americans. This created the problem that many Americans could not afford health insurance. As health care costs continue to rise, so does the pressure to maintain high standards at a reasonable cost to both individuals and the government.



History of Health Insurance


Health insurance had its beginnings in accident insurance, which was first sold in the mid-1800s. In exchange for a monthly payment by a customer, the insurance company agreed to replace lost income resulting from an accident, and later resulting from a few specific illnesses, such as smallpox, diphtheria, typhoid, and scarlet fever.


In the 1930s a group of Dallas schoolteachers made an arrangement with Baylor Hospital to have any necessary hospital care provided in exchange for monthly premiums. This arrangement was the precursor to the Blue Cross and Blue Shield programs, which were incorporated as not-for-profit companies in each state. The amount of payment was based on the amount charged for the services provided. Other insurance companies began to offer health insurance using similar models. Labor unions began to negotiate for health insurance as an employee benefit that was not taxed as income in the same way as an increase in wages.


During World War II, Henry Kaiser created clinics in California to provide both inpatient and outpatient care for the workers in his shipyards. These clinics later opened themselves to other employers and individuals and became the Kaiser Permanente program. The employer paid a fixed amount per worker over a stated period of time for all necessary medical care. This method of payment is called capitation, and this type of health insurance is called a prepaid health plan. For many years Kaiser Permanente was the country’s largest health maintenance organization (HMO). The philosophy behind the HMO movement was a belief that health care costs could be lowered if members were restricted to specific providers and facilities. Covered services also included preventive medical care in the hope of preventing conditions that would be expensive to treat. Over time, the HMO model broadened from one in which physicians were salaried employees and worked in a central facility to one in which HMOs contracted with private physicians in each community.


By the 1960s, many larger and even medium-sized businesses were providing company-paid health insurance benefits as a fringe benefit instead of increasing wages or salary. Health care costs began to increase faster than the general rate of inflation, with physicians beginning to earn large incomes. But certain groups of Americans—most notably the poor, elderly, and permanently disabled—were unable to obtain medical insurance through employment.


The federal government created two programs to try to close these large gaps in medical coverage. One was Medicare, the health insurance program for the elderly, disabled, and those with end-stage kidney disease. Medicare is paid for with federal taxes paid by employers and workers. The second government insurance program was Medicaid, the health insurance program for low-income individuals and families. The Medicaid program has different names in different states, and it is administered by each state. The federal government pays for the majority of required care and a smaller percentage of optional care, such as dental care, while the states pay for the rest. Each state sets its own criteria of eligibility for the Medicaid program.


Many senators, congresspersons, and physicians were against Medicare and Medicaid at the beginning, calling it “socialized medicine.” But there were precedents for the government’s involvement in paying for medical care. The Veterans Administration (VA) offered medical care for life for any man or woman who had seen active duty in the military, provided he or she wished to use the VA facilities. In addition, the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) program was developed to provide medical care at government expense for dependent spouses and children of active-duty military personnel. Today the former CHAMPUS program is called TRICARE (because there are three different plans). A companion program, the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA), covers dependent spouses and children of military veterans with service-connected disabilities.


At the beginning of the twenty-first century, American society is still trying to resolve insurance issues. Low-wage workers often do not get health insurance through their employers or have insurance only for themselves and not their dependents. For more than 10 years the federal government has tried to pass legislation to expand insurance coverage to all or nearly all citizens, but the costs have made it difficult to gather enough support. The federal Patient Protection and Affordable Care Act, which became law in March 2010, attempts to define patients’ rights and ensure that all Americans will have access to affordable, high-quality health care and preventative care. It remains to be seen whether this law can accomplish its mission, or even if it will survive efforts to challenge its legitimacy and/or constitutionality.



Obtaining Health Insurance


Individuals and families have basically three ways to obtain health insurance coverage: through a group plan, by purchasing an individual policy, or through one of the government plans described earlier.


Most group plans are available through an employer. A group plan is one insurance policy that covers a group of people. Larger employers generally have several different plans available. The employer pays a portion of the insurance costs. The amount paid by the employer for unionized workers tends to be greater than for workers not in a union.


Some small business owners can purchase insurance through group plans sponsored by a trade organization. Individuals sometimes have access to group plans through professional associations, or even college alumni associations. The self-employed can deduct a portion of their health insurance costs from their business income, as companies do.


As part of the process of gaining the right to sell health insurance in a particular state, most insurance plans are required to offer individual policies to individuals or families who are not covered under a group plan. An open-enrollment period usually occurs at least once per year for individuals to purchase coverage. Discussion has occurred at the federal level about allowing individuals or families who purchase their own insurance to claim a tax credit, or a larger tax deduction, for the cost.


Taxpayer-funded, or government, health insurance is usually provided as an entitlement when other conditions are met. For instance, when an individual reaches age 65, he or she is entitled to Medicare benefits if he or she has worked for at least 10 years in Medicare-covered employment. However, the individual must still file an application because the benefits do not begin automatically. An individual must meet other criteria for other government health insurance programs.



Paying for Health Insurance and Health Care


The amount of money paid by the consumer to purchase health insurance is called the premium. This premium can be paid monthly, quarterly, semiannually, or annually. All or part of the premium may be paid by the person enrolled in the insurance plan or by the employer. In exchange for the payment of a premium, the insurance company or managed care plan agrees to provide payment for specific services provided by physicians, hospitals, laboratories, and other health care providers. Payment for a service covered by health insurance is called a benefit, and each individual covered by the health insurance plan is called a beneficiary, enrollee, or member. The insured is the individual who has the insurance, but the plan may also cover dependents of the insured including a spouse and children.


When the premium is paid by a person’s employer, even if the employee is responsible for part of the cost, that premium is often paid with before-tax dollars. This means that the amount of the premium paid by the employer is not included in the amount of wages reported for the employee. The employee’s portion may also be deducted before tax is calculated. In this case, the employee cannot use the payment for insurance as a tax deduction.


Another way to pay for health care using before-tax dollars is a medical savings account. This is a fund set up by the employer before tax is taken out of a person’s earnings. The money in this fund can be used only for qualified health expenses, and it must be spent within a specified time frame. Money not used is lost to the employee.


Depending on the type of insurance policy, a patient may have to make certain payments for medical services. A deductible is an amount of money that must be paid for services provided to an individual or a family member in a group plan every calendar year before any insurance payments. After the deductible has been met, the patient may be required to pay a percentage of the allowed charge or a fixed fee every time service is received. If the patient is responsible for a specific percentage of the allowed charges (such as 20%), the patient portion is called coinsurance. An example of an insurance plan with coinsurance is Medicare Part B. If the patient is required to pay a fixed dollar amount every time he or she obtains medical services or fills a prescription, it is called a copayment. In some plans, the amount of the copayment is always the same, but often there are different amounts for different types of medical and/or pharmacy services.



Factors Affecting Insurance Reimbursement


Primary, Secondary, and Tertiary Insurance


If a person is covered by more than one insurance policy, the insurance to which the insurance claim is sent first is called the primary insurance. When the patient is the insured, that insurance is the primary insurance. Insurance held by another insured (such as a spouse) that provides additional insurance coverage would be secondary insurance. If a third type of insurance also covers the patient, that insurance would be tertiary insurance. As a general rule, private insurance must be billed before government insurance, and Medicaid is always the last insurance to be billed.



Coordination of Benefits


Some households have two working adults, both of whom are covered under separate employer health benefits. Coordination of benefits is a term for the rules insurance companies use to coordinate the payments for medical services so that no provider is paid more than 100% of the charge for any service provided.


If both members of a couple have insurance with coordination of benefits provisions, the following rules apply:



1. If the employee who holds the policy is the patient, his or her insurance is the primary insurance for any services obtained. The spouse’s or partner’s insurance becomes the secondary insurance and can be used to pay only for any portion of the charge not covered by the primary insurance. The deductible for the primary insurance may not be covered by the secondary insurance.


2. If a child is the patient, in most states the “birthday rule” applies. Under the birthday rule, the primary insurance for the child of parents who both have a family health plan is the insurance belonging to the working adult whose birthday comes first in the year. The insurance of the adult whose birthday is later is the secondary insurance.


3. When the patient is a child of divorced parents, the rules can get somewhat complicated. If a court has decreed that one parent is the “responsible party,” that parent’s policy provides the primary insurance. A responsible party ruling is often made in cases of joint custody, although the responsible party can also be a noncustodial parent. If no court ruling is in place, the custodial parent’s policy is primary if the custodial parent has remarried. If there is no court ruling in place and the custodial parent has not remarried, the birthday rule remains in effect.


    Coordination of benefits issues can be avoided if individuals in households with two working adults make modifications in their benefits. In order to reduce premium costs, some employers allow employees to take cash instead of health insurance if the family already has insurance. In cases where the company covers the complete cost for individual but not family coverage, only the husband or the wife needs to pay for family coverage. Of course, available plans should be compared for cost and benefits when deciding which policy to extend to family coverage.


4. If the patient is a Medicare recipient who also is covered by an employer’s policy, the employer’s policy is the primary insurance and Medicare is the secondary insurance. Patients with Medicare may also have supplemental insurance to cover what would normally be a patient responsibility. These plans, which are clearly defined as Medicare supplemental insurance, are considered secondary insurance.



Participating and Nonparticipating Providers


If the physician has a contract or agreement with a third-party payor (insurance carrier [company] or managed care organization), he or she is called a participating provider (PAR). One of the requirements is often that the physician accepts the insurance carrier’s determination of the allowable fee and may not bill the patient for any additional amount that the insurance company did not allow. A nonparticipating provider (nonPAR) has no contractual agreement with the third-party payor and can bill the patient for the difference between the insurance payment and the amount billed. A PAR receives payment from the insurance carrier directly. A nonPAR must obtain payment from the patient (who receives reimbursement from the insurance carrier) unless the patient signs a form authorizing assignment of benefits. This term is used for the patient’s request that the insurance carrier pay the provider directly. This authorization is usually part of the new patient information form.



Types of Reimbursement


Two basic types of insurance reimbursement exist: capitation and fee-for-service.


Under capitation, the primary care physician receives a monthly, quarterly, semiannual, or annual payment from the managed care insurance company. Specialists are usually not paid by capitation. The reimbursement per patient may vary depending on age and sex, but it does not depend on the amount of care the patient receives.


As discussed earlier, capitation moves some of the risk away from the managed care company and onto the primary care physician who treats the patient, and most physicians prefer other payment methods. In most circumstances, there will be enough healthy patients who cost the physician less to treat than the amount being paid by the company to make up for the few sick patients who cost more to treat.


Under fee-for-service insurance, the health care provider, including all physicians, is reimbursed for each treatment or procedure performed. In this case the only difference between traditional fee-for-service insurance and managed care is that managed care companies often negotiate a fee schedule that is lower than traditional indemnity plans.


In many instances, however, if the physician or other medical provider agrees to accept assignment of benefits, he or she cannot bill the patient for any portion of the charge not paid by the insurance company except the deductible and copayment or coinsurance.



Putting It All into Practice


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My name is Sandra O’Keefe, and I am a registered medical assistant. I work in the office of three dermatologists. With the advances in laser technology, there are many new procedures for removing spider veins, birthmarks, scars, hair, and tattoos. We also do Mohs micrographic surgery, a technique that removes skin cancers one layer at time with immediate tissue analysis. Using this technique the physicians can be sure that all malignant cells have been removed while taking a minimum of healthy tissue.


Billing in our office is somewhat complicated because many of the procedures are not covered by insurance. In general, insurance companies will pay for procedures that are medically necessary, like removal of skin cancers. They do not cover procedures that are strictly cosmetic, such as removal of spider veins (small varicose veins on the skin). Then there are some procedures that sometimes are covered by insurance and sometimes are not, such as the removal of birthmarks on the face.


When a procedure is medically necessary, we have to obtain preauthorization from the patient’s insurance company, and sometimes we need to provide documentation for the insurance company to review before they give their approval. When a procedure is not covered, we have to be sure that the patient is willing to pay for it and knows how much it will cost. We can help arrange for the patient to obtain financing in order to pay for the procedure over a period of time.


Our physicians accept several different types of insurance including government plans, managed care plans, and traditional insurance plans. When patients are covered by managed care plans, we have to be sure that they have the proper referrals to cover each office visit, as well as the procedure. In some cases the insurance covers a consultation visit but the proposed treatment plan is not approved, and then the patients must decide about paying for any recommended procedure themselves. We do our best to complete all of the paperwork to obtain insurance coverage for our patients, but we are limited by the rules of each insurance company. image



Types of Insurance


Several different types of health insurance are currently available. When learning about insurance, it is helpful to learn the characteristics of different types of insurance, although the medical assistant may also be responsible for finding out more specific information related to individual insurance plans.



Fee-for-Service Plans


Traditionally, private insurance plans provided payment, either to the physician or to the patient, for each medical service provided. These traditional plans are called fee-for-service plans or indemnity plans. The term indemnity means an obligation to compensate an individual for loss or damage. Until the late 1980s, fee-for-service plans dominated the health care industry. They were provided through private insurance companies and also through the Blue Cross and Blue Shield plans, which were established in each state as not-for-profit, quasi-governmental agencies. Since the late 1980s, the percentage of individuals covered under traditional fee-for-service plans has steadily decreased. Fee-for-service plans usually have a deductible, and the insurance pays for a percentage of the allowed charges (commonly 80%).


The insurance company determines the allowed charge in two ways:



What Would You Do? What Would You Not Do?



Case Study 1


Diane Bennett is a 35-year-old woman who has come to the office for treatment of a lesion on her neck. She has been referred from her primary care physician for up to three visits for consultation, diagnostic studies, and treatment. She is seen by one of the dermatologists in the practice, who recommends that the lesion be removed surgically in the office with a biopsy. During this visit the patient tells the physician that she has two other lesions she would like to have removed, one on her arm and one on her abdomen. The physician inspects the lesions and asks Sandra to contact the patient’s managed care plan for authorization to treat the additional lesions. The patient says, “My physician gave me a referral to be treated by you. What’s the problem? If these lesions need to be removed, I don’t want any delay.” image



1. Through a fee schedule. A fee schedule says the insurance company will pay the specified percentage of a particular amount for a particular procedure. Any additional charges are the patient’s responsibility.


2. Through service benefits, which define covered services but not the exact payments. Under service benefit plans, the insurance company will agree to pay the specified percentage of charges that are usual, customary, and reasonable (UCR) for the procedure and the state or region of the country in which it was performed. The usual fee is the amount that a physician usually charges or charges most often. The customary fee is the amount charged by physicians in the same specialty in the same geographic area (usually the 90th percentile amount of the charges of all physicians in the area. A reasonable fee meets the two criteria described earlier or is justifiable if there are special circumstances. Based on statistics kept by the insurance company, the fee actually charged by the physician is reviewed. The insurance company’s payment is based on its own determination of what is UCR.


Under a traditional fee-for-service plan, a patient can make an appointment with any doctor, in any specialty, he or she wishes, and the insurance will pay the designated amount for the services. Some plans do have lists of approved providers for whom they pay 100% of charges and pay only a percentage of charges for other providers (similar to a preferred provider organization [PPO], discussed in more detail later in the chapter).



Managed Care Plans


Since the introduction of the Kaiser plan, HMOs have evolved into many forms. Both private insurance companies and government insurance plans offer HMOs, as well as other types of managed care plans. The various HMO models and their descendants, collectively, are known as managed care. This term is used in two ways: It describes the movement to control health care costs while improving preventive care and is a general term for insurance programs reimbursing care provided in this way. Managed care plans negotiate reimbursement amounts and limit patients to those providers and facilities with whom they have contracts.


Most insurance plans today involve some form of managed care. The patient’s care is managed by the insurance plan in several ways:



1. Each patient chooses one physician as a primary care provider (PCP), a physician who provides most of the patient’s care and also determines what other medical services the patient requires.


2. Care is usually restricted to specific providers, laboratories, and hospitals that have accepted the insurance plan’s fee schedule or capitation payment plan.


3. The patient may or may not have access to providers and services outside the insurance plan. If there are tiers of providers, the patient must usually pay more for services obtained outside the plan. In addition, the patient may be subject to balance billing if he or she seeks service from a provider who is outside the managed care plan. This means that the patient must pay the difference between the amount allowed by insurance and the amount charged for services.


4. The insurance plan may require referrals from a PCP for services including consultations with specialists, therapy such as physical therapy or speech therapy, care outside of the medical office, and some diagnostic tests. The PCP functions as a “gatekeeper” to limit and approve access to specialty services. (The process of referrals is discussed later in this chapter.)


5. The insurance plan usually requires prior notification and/or utilization review (reviewing proposed or current care to determine medical necessity) before authorizing referral to specialists, certain procedures, therapy, surgery, and other types of care.



Health Maintenance Organization Models

In the original HMO concept, all medical care was provided for 1 year for a fixed premium, with no deductibles or coinsurance. The patient was responsible only for a fixed amount for each visit or prescription (copayment).


HMOs have always practiced preventive medicine, on the theory that much of the cost of medical care can be eliminated through routine care by PCPs. To reduce the cost of specialty care, PCPs including physicians, nurse practitioners, and physician assistants act as “gatekeepers,” seeing patients first for nearly all illnesses and referring them to specialists only when necessary. The PCP is paid by capitation. HMOs are usually incorporated and regulated state by state. They are subject to regulation requiring more comprehensive quality assurance programs than other types of insurance. Medical record audits allow the HMO to check the records of any physician’s patients to make sure the physician is not performing unnecessary procedures or ordering unnecessary tests.





Other Managed Care Models

Health care plans that are regulated by state and federal laws as insurance plans instead of HMOs may still maintain many features of managed care. Depending on the state, there may be separate regulatory agencies.



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Apr 16, 2017 | Posted by in NURSING | Comments Off on Medical Insurance

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