The Role of Computers in Health Insurance
Chapter objectives
After completion of this chapter, the student should be able to:
1. Explain how computers have impacted health insurance.
3. Provide a brief history of electronic data interchange, and explain its benefits.
4. Identify the various aspects of the electronic claims process.
5. Provide a brief outline of Medicare electronic claim submission procedures.
6. List and describe additional electronic services available to the health insurance professional.
7. Describe an electronic medical record (EMR) and the two types of EMR hybrids.
8. List potential issues of EMRs.
9. Discuss the future of EMRs, including privacy concerns for patients.
10. Explain how federal funding for EMR trials relates to “Meaningful Use.”
Chapter terms
Administrative Simplification and Compliance Act (ASCA)
billing services
clearinghouse
code sets
combination records
digital imaging hybrid
direct data entry (DDE)
electronic data interchange (EDI)
electronic funds transfer (EFT)
electronic media claim (EMC)
electronic medical record (EMR)
electronic remittance advice (ERA)
enrollment process
General Equivalence Mappings (GEMs)
identifiers
meaningful use
privacy standards
security standards
small provider of services
small supplier
telecommunication
unusual circumstances
Introduction
Computers have influenced every area of society, particularly medicine, which depends on computers as much or perhaps more than any other type of business. Most healthcare facilities use computers in some part of their day-to-day operations. Some systems are basic and perform just a few simple tasks; others are quite sophisticated, incorporating multiple locations and off-site data storage. Computers have changed record keeping in a way that no other advancement has. Many patient records are stored on computer systems; the computer files are backed up, and secured to protect them in the event of computer failure. The medical field depends on computers to keep track of financial records as well. It is very important that patient records and financial information are kept highly secured so that no one can access these data without proper authority. This chapter focuses on the role of computers in medicine, specifically their impact on the health insurance claims and billing processes.
Impact of computers on health insurance
In the past, it was unusual to find a medical office where computers were used for patient accounting and insurance claims submission. As the age of technology advanced, however, the use of computers became more widespread. From a health insurance perspective, computers are now used for
• enrolling an individual in a health plan,
• paying health insurance premiums,
• obtaining authorization to refer a patient to a specialist,
• electronic medical records (EMRs), and
However, as computer technology advanced, it became clear that the health information being transmitted through computers and the Internet had to be monitored, and laws were needed to protect the security of health information and the privacy of individuals. The U.S. government, under Health Insurance Portability and Accountability Act (HIPAA) regulations, now mandates that all healthcare information that is electronically transmitted follow specific rules and guidelines to provide this needed security and protection.
Role of health insurance portability and accountability act (HIPAA) in electronic transmissions
One of the main reasons Congress enacted HIPAA was to reform health insurance and simplify healthcare administrative processes. The intent of the HIPAA Administrative Simplification and Compliance Act (ASCA) was to improve the administration of Medicare by taking advantage of the efficiencies gained through electronic claims submission. Provisions of this act require healthcare providers, health plans, and healthcare clearinghouses to use certain standard transaction formats and code sets for the electronic transmission of health information. These requirements also apply to healthcare providers who transmit health information in electronic form in connection with the transactions covered in the rule. As usage of electronic transmissions of healthcare information increased, privacy and security regulations were adopted to enhance the privacy protections and security measures directed at health information.
One of the goals of ASCA was to reduce the number of forms and methods of completing claims and other payment-related documents and to use a universal identifier for providers of healthcare. Another goal was to increase the use and efficiency of computer-to-computer methods of exchanging standard healthcare information. The five specific areas of administrative simplification addressed by HIPAA are as follows:
ASCA made it compulsory for all Medicare claims to be submitted electronically effective October 16, 2003, with certain exceptions (see section on Medicare and Electronic Claims Submission later in this chapter). These electronic claims are to be in a format that complies with the appropriate standard adopted for national use. ASCA allowed extra time for medical facilities to implement and test HIPAA-compliant software.
Electronic data interchange
EDI may be most easily defined as the replacement of paper-based documents with electronic equivalents. More specifically, EDI is the exchange of documents in standardized electronic form, between business entities, in an automated manner, directly from a computer application in one facility to an application in another. EDI offers the prospect of easy and inexpensive communication of information throughout the healthcare community. In the case of insurance claims, EDI is the electronic exchange of information between the provider’s office and a third-party payer.
History of Electronic Data Interchange
The early applications of what later became known as EDI can be traced back to the 1948 Berlin Airlift, where the task of coordinating air-freighted consignments of food and other consumables (which arrived with differing manifests and languages) was assisted by creating a standard shipping manifest. Electronic transmission began during the 1960s, initially in the transportation industries, when standardization of documents became necessary, and the U.S. Transportation Data Coordinating Committee (TDCC) was formed to coordinate the development of translation rules among four existing sets of industry-specific standards. A further step toward standardization came with the creation of standards for the American National Standards Institute (ANSI), which gradually extended and replaced the standards created by the TDCC. To see a timeline of EDI, visit the 
Evolve site or use the words “History and Timeline of EDI” in your search engine.
Benefits of Electronic Data Interchange
EDI leads to faster transfer of data, fewer errors, instant document retrieval, and less time wasted on exception handling, resulting in a more streamlined communication process. Benefits of EDI can be achieved in such areas as inventory management, transport, and distribution; administration and cash management; and, in this case, transmission of healthcare information data. EDI offers the prospect of simple and inexpensive communication of structured information throughout the healthcare community.
HIPAA has set standards for the electronic transmission of healthcare data. As of October 16, 2003, any healthcare service provider has the option of sending client medical billing data electronically to a health plan (or payer), but if so, the data must be in a HIPAA-compliant format. The health plan must be able to receive and process the data and respond electronically, likewise in a HIPAA-compliant format.
Electronic claims process
We learned in Chapter 5 that there are two basic methods for submitting health insurance claims—using the universal CMS-1500 paper claim and submitting claims electronically. Also, with few exceptions, ASCA prohibits payment of services or supplies that a provider did not bill to Medicare electronically. This section discusses various aspects of electronic claims processing.
Methods Available for Filing Claims Electronically
The electronic claims process incorporates the use of EDI. There are three ways to submit claims electronically:
To send claims electronically, the medical practice needs a computer, modem, and HIPAA-compliant software.
Enrollment
Whether the medical practice chooses to use a clearinghouse or submit claims directly to the insurance carrier, it needs to go through an enrollment process before submitting claims. The enrollment process typically involves completing and returning EDI setup requirement forms. This process is necessary so that the business that receives the claims can create a compatible information file about the practice in its computer system and process claims. Most government and many commercial carriers require enrollment. Some also require that the practice sign a contract before sending any claims. The enrollment process typically takes several weeks to complete, and providers are typically required to submit “test” claims before the conversion from paper claims can be completed. The biggest obstacle to getting set up for electronic claims processing is the time that it takes for approval from state, federal, and, in some cases, commercial or health maintenance organization carriers.
Electronic Claims Clearinghouse
As mentioned previously, an electronic claims clearinghouse is a business entity that receives claims from several medical facilities and consolidates them so that one transmission containing multiple claims can be sent to each insurance carrier. More specifically, a clearinghouse serves as an intermediary between medical practices and the insurance companies, facilitating the electronic exchange of information between the facilities.
A clearinghouse works as follows. When claims are received from providers/suppliers, they are edited and validated to ensure they are error-free and checked for completeness. If an error is discovered or information is missing, the issuing facility is notified that there is a problem with a claim. Often, the claim can be corrected quickly and resubmitted to the clearinghouse, eliminating the costly delay associated with mailing back an incorrectly submitted paper claim. If the claim is clean, the clearinghouse translates the data elements into a format that is compatible with the format required by the target insurance carrier. (The data are not changed, but the order in which they are presented may be changed to accommodate the sequence required by the claims processing software system of a particular insurance company.) When reformatted, the data are sent electronically (usually overnight) to the target insurance company for processing. The insurance company prepares an explanation of benefits (EOB) or a RA, which is sent electronically to the clearinghouse. The data are reformatted (back into the original format) and transmitted back to the originating medical facility. Fig. 16-1 is a flow chart of electronic claims transmission through a clearinghouse.
Anthony Skovoski, a radiologist with Mt. Clair Hospital, has an in-house computer set up so that the hospital can transmit x-ray images electronically to him at home. On days that Dr. Skovoski is not at work, the hospital can transmit images directly to his house and he can read them and generate a written report within minutes, avoiding a 40-minute commute to the hospital. If Dr. Skovoski needs information from the patient’s health record, he can also access that from his home computer.
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