Health Insurance Billing Procedures

CHAPTER

© 2011 The McGraw-Hill Companies, Inc. All rights reserved.

15Health Insurance Billing Procedures


15-2

Learning Outcomes

15.1 Define Medicare and Medicaid.

15.2 Discuss TRICARE and CHAMPVA health-care benefits programs.

15.3 Distinguish between HMOs and PPOs.

15.4 Explain how to manage a workers’ compensation case.


15-3

Learning Outcomes (cont.)

15.5 List the basic steps of the health insurance claim process.

15.6 Describe your role in insurance claims processing.

15.7 Apply rules related to the coordination of benefits.

15.8 Describe the health-care claim preparation process.


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Learning Outcomes (cont.)

15.9 Explain how payers set fees.

15.10 Complete a Centers for Medicare and Medicaid Service (CMS-1500) claim form.

15.11 Identify three ways to transmit electronic claims.


15-5

Introduction

• Health care claims = reimbursement– Accuracy = maximum appropriate payment

• Medical assistant– Prepare claims– Review insurance coverage– Explain fees– Estimate charges for payers– Prepare claims


15-6

Basic Insurance Terminology• Medical insurance – written contract between a

policy holder and a health plan

• First Party – the patient or policy holder

• Premium – the amount of money paid by the policy holder to the insurance carrier

• Lifetime maximum benefit – a total sum that the health plan will pay out over the patient’s life


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Basic Insurance Terminology (cont.)

• Second Party – the physician who provides medical services

• Benefits – payment by the insurance carrier for medical services provided

• Third-party payer – the health plan that agrees to carry the risk of paying for services

• Deductible – a fixed dollar amount paid or met once a year before third-party payers begin to cover expenses


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• Coinsurance – a fixed percentage of coverage charges after the deductible is met

• Copayment – a small fee that is collected at the time of the visit

• Exclusions – uncovered expenses

• Formulary – a list of approved drugs

• Elective procedure – one not required to sustain life


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• Pre-authorization – approval in advance of the need for a specific procedure

• Pre-certification – determination of whether the proposed procedure is a covered service under the patient’s insurance plan

• Liability insurance – covers injuries caused by the insured or on their property

• Disability insurance – insurance that is activated when the insured is injured or disabled


15-10

Apply Your Knowledge

What is the difference between first party, second party, and third-party payer?

ANSWER: The first party is the patient or owner of the policy; the second party is the physician or facility that provides services, and the third-party payer is the insurance company that agrees to carry the risk of paying for approved services.

Good Job!


15-11

Types of Health Plans

• Insurance companies– Rules about benefits and

procedures• Manuals, printed or online

• Representatives to assist

• Sources of health plans– Group policies – through

employer– Individual plans – Government plans


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Fee-for-Service Plans

• Oldest and most expensive type of plan

• Covers costs of select medical services

• Amount charged for services is determined by the physician

• Amount paid for services is controlled by the insurance carrier


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Managed Care Plans• Controls both the financing and

delivery of health care to policy holders

• Both policy holders and physicians (participating physicians) are enrolled by the Managed Care Organizations (MCOs)

• MCOs pay physicians in two ways– Contracted fees– Capitated fees – fixed amount per month to

provide contracted services to patients enrolled in the plan


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Managed Care Plans (cont.)

• Preferred Provider Organization (PPO)– A network of providers to perform services to plan

members– Physicians in the plan agree to charge discounted

fees

• Health Maintenance Organization (HMO)– Physicians who contract with HMOs are often paid a

capitated rate– Patients pay premiums and a small copayment for

each office visit


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Government Plans

• Health care – Retirees– Low-income and disadvantaged– Active or retired military

personnel and their families

• Maintain features of managed care plans


15-16

Medicare• The largest federal program that provides

health care to citizens aged 65 and older

• Managed by the Centers for Medicare and Medicaid Services (CMS)

• Part A– Hospital insurance available to anyone

receiving social security benefits– No premium unless ineligible for social

security benefits


15-17

Medicare (cont.)

• Part B– Covers physician services,

outpatient services, and many other services

– Available to United States citizens and permanent residents 65 and older

– Participants must pay a premium


15-18

Medicare (cont.)

• Part C – 1997– Provides choices in

types of plans– Medicare Advantage

plans• PPO• HMO• Private Fee for Service

(PFFS)• Special Needs Plans• Medicare Medical

Savings plan (MSA)

• Part D –– Passed in 2003– Coverage began in

2006– Prescription drug plan


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Medicare Plans

• Fee-for-Service: The Original Medicare Plan– Allows the beneficiary to choose any licensed

physician certified by Medicare

– An annual deductible fee

– Medicare pays 80 percent and the patient pays 20 percent• Medigap plan – secondary insurance


15-20

Medicare Advantage Plans


15-21

Medicare Plans (cont.)

• Recovery Audit Contractor (RAC) Program– Designed to guard the Medicare Trust Fund– Identify improper payments

Underpayment

Overpayment


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Medicaid

• A health-benefit program designed for:– Low-income – Blind – Disabled patients– Temporary assistance to needy families– Foster children – Children born with disabilities

• Not an insurance program


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Medicaid (cont.)

• Funded by the federal and state governments

• Provides assistance such as:– Physician services – Emergency services– Laboratory and x-rays – Skilled nursing facility (SNF) care – Vaccines – Early diagnostic screening and treatment for minors


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Medicaid (cont.)

Medicaid

Accepting Assignment

Medi/Medi

Physicians agreeing to treat Medicaid patients also agree to the set amount for reimbursements

Older or disabled patients unable to pay the difference between the bill and the Medicaid payment may qualify for both Medicaid and Medicare


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Medicaid (cont.)

• Comply with state guidelines– Verify Medicaid eligibility

– Ensure that the physician signs all claims

– Authorization must be received in advance for medical services except in an emergency

– Verify deadlines for claim submissions

– Treat Medicaid patients with the same professionalism and courtesy that you extend to other patients


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Types of Health Plans

• Department of Defense

• Families of uniformed personnel and retirees

• TRICARE for Life – Medicare-eligible

military retirees 65 and older

• Dependent spouses and children of veterans with disabilities

• Surviving spouses and dependent children of veterans who died in the line of duty or from service-connected disabilities


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Blue Cross and Blue Shield

– A nationwide federation of nonprofit and for-profit service organizations that provide prepaid health-care services to subscribers

– Specific plans for BCBS can vary greatly because each local organization operates under its own state laws


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State Children’s Health Plan (SCHIP)

• Enacted in 1997 and reauthorized in 2009

• State-provided health coverage for uninsured children in families that do not qualify for Medicaid


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Covers accidents or diseases incurred in the workplace

By federal law, employers must purchase a minimum amount of workers’ compensation insurance

Coverage Includes

Basic medical treatment Weekly or monthly amount paid to patient while not employedRehabilitation costs

Types of Health Plans: Workers’ Compensation

Verify coverage prior to procedures and treatments.


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A 72-year-old disabled patient is being treated at an office that accepts Medicaid. The total office visit is $165, but Medicaid will only reimburse a set fee of $125. In this situation, what is the most likely solution?

a. Bill the patient for the balance due.b. Expect the balance to be paid at the time of service.c. This patient probably has a secondary employer health

insurance plan.d. This patient may qualify for the Medi/Medi coverage.

ANSWER:


15-31

The Claims Process: An Overview

• Obtains patient information

• Determines diagnosis and fees based on services provided

• Records patient payments

• Prepares health-care claims

• Reviews the insurer’s processing of the claim

Services Provided by the Physician’s Office


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The Claims Process: An Overview (cont.)

• Gathering and reporting patient information

• Verifying patient’s insurance coverage

• Recording procedures and services performed

• Recording applicable diagnosis and codes for

each procedure performed

• Filing insurance claims and billing patients

• Reviewing and recording payments

Tasks Supported by Using a Billing Program


15-33

Obtaining Patient Information

• Insurance information– Current employer– Employer address and

telephone number– Insurance carrier and date of

coverage– Insurance group plan– Insurance identification number– Name of subscriber or insured

• Personal information– Name

– Home address

– Telephone number

– Date of birth

– Social security number– Emergency contact

person


15-34

Obtaining Patient Information (cont.)

• Release signatures– Form to release insurance

information to insurance carrier

– Form for assignment of benefits

• Verify eligibility – Check effective date of

coverage


15-35

Obtaining Patient Information (cont.)

• Coordination of benefits– Legal clauses to prevent

duplication of payment

– Primary or main insurance plan pays first

– Secondary or supplemental plan pays the deductible and co-payment

The Birthday Rule

If a husband and wife both have a family insurance plan, the insurance plan of the person born first becomes the primary payer.


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Delivering Services

• Physician’s services– Examines patient– Documents symptoms, diagnosis, and

treatment plan in medical record

• Medical coding– Translates the medical terminology into codes

for reimbursement


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Delivering Services (cont.)

• Referrals to other services– The medical assistant

• Secures authorization from the insurance company for additional services

• Arranges an appointment for referred services


15-38

Preparing the Health-Care Claim

• Filing the insurance claim– Once prepared, the physician

reviews the claim– Usually transmitted to payer

electronically

• Time limits– Vary by company and state– Medicare and Medicaid


15-39

Insurer’s Processing and Payment

Insurance claims are reviewed for:

Medical necessity

Allowable benefits

Payment and remittance advice


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Insurer’s Processing and Payment (cont.)

• Remittance advice (RA)– Sent with payment to patient and physician– Also known as explanation of benefits (EOB)

• Information the RA Form– Insured name and identification number– Name of beneficiary– Claim number– Date, place, and type of service– Amount billed and amount allowed– Amount of copayment and payments made– Notation of any services not covered


15-41

Reviewing the Insurer’s RA and Payment

– Verify all information on the remittance advice (RA) line by line

– If a claim is rejected, check the diagnosis codes for accuracy

– Track all unpaid claims using either a follow-up log or computer automation


15-42

A patient had two appointments in the same week for different ailments. On Monday, the patient complains of back pain and receives a prescription for a muscle relaxant. On Wednesday, the patient complains of hair loss. When the medical assistant files the claims, she accidentally codes the first visit diagnosis (muscle spasm) with the prescribed treatment for the second visit (hair loss) which was an anti-fungal shampoo. The insurance claim is probably rejected for which of the following reasons:

Medical necessity Payments


Allowable benefits

ANSWER:

Very Good!


15-43

Fee Schedules and Charges: Medicare Payment Systems—RBRVS

• Resource-based relative value scale (RBRVS)– Payment system used by Medicare

A nationally uniform conversion factor

The nationally uniform relative value

A geographic adjustment factor

The current annual Medicare Fee Schedule (MFS) is published by CMS in the Federal Register


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Capitation

ContractedFee Schedule

Fee Schedules and Charges (cont.)

Payment Methods

Allowed Charges


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• Allowed charges– This represents the most the payer will pay

any provider for that work– Other equivalent terms

Maximum allowable fee Maximum charge

Allowed amount

Maximum charge

Allowed feeAllowable charge

Billing the patient for the difference between the higher usual fee and a lower allowed charge is called balance billing


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• Contracted fee schedule– Fixed fee schedules for

participating physicians– Non-covered services

billed to patient

• Capitation– The fixed prepayment for

each plan member– Non-covered services

billed to patient


15-47


• Calculating patient charges– Depending on plan, patients

may be obligated to pay• Premiums and deductibles• Copayments and coinsurance• Excluded and over-limit services• Balance billing


15-48

Communication with Patients About Charges

• A practice may require patients to– Sign an assignment

of benefits statement

or– Pay in full for services

at the time provided

• Remind patients of financial obligation

• Ask patients to agree in writing to cost of procedures not covered by plan

• Advance Beneficiary Notice of Noncoverage (ABN)


15-49

Communication with Patients About Charges (cont.)

• Financial policy – Patient responsibility for payment for services

Copayments must be paid before patients leave the office

Managed Care Members

The patient is responsible for any amounts not covered by the insurance carrier

Assigned Claims

Unassigned Claims

Unless other prior arrangements are made, payment is expected at the time service is delivered


15-50


What do you need to consider when calculating patient charges?

ANSWER: You need to consider whether the patient has met the deductible, if the patient has to pay a copayment, if the service is excluded, or if the patient is over his/her limit for services.

Nice Job!


15-51

Preparing and Transmitting Health-Care Claims

• HIPAA claims

– Electronic

– X12 837 Health Care Claim - official name

– Information entered is called data elements

– Data must be entered in CAPS in valid fields

– No prefixes or special characters allowed


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Preparing and Transmitting Health-Care Claims

• Data elements – five major sections

– Provider section –

• Billing and rendering provider

• Taxonomy information

– Subscriber (insured or policyholder) section

– Patient (may be the subscriber or another person) and payer section

– Claim details

– Services


15-53

Preparing and Transmitting Health-Care Claims (cont.)

• Paper claims

– A CMS-1500 paper form is used

– May be mailed or faxed to the third-party payer

– Not widely used as a result of HIPAA requirements

– CMS-1500 requires 33 form indicators


15-54


Transmission of Electronic Claims Three major methods of transmitting

claims electronically

Direct transmission to the payer

Using a clearinghouse

Direct data entry

Offices and payers exchange information directly by electronic data interchange (EDI)

Translates nonstandard data into standard format. Clearinghouse cannot create or modify data

Internet-based service that loads data elements directly into the health plan’s computer


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• Generate clean claims by avoiding common errors

or incomplete service facility name, address, and identification for services rendered outside the office or home

Medicare assignment indicator or benefits assignment indicator

part of the name or the identifier of the referring provider

or invalid subscriber’s birth date information about secondary

insurance plans, such as spouse’s payer

payer name and/or payer identifier


15-56


• Claims security– The HIPAA rules

• Standards for protecting individually identifiable health information when maintained or transmitted electronically

– Common security measures• Access control, passwords, and log files • Backup copies• Security policies to handle violations


15-57

A medical assistant has two part-time positions, one for a pediatrician and the other for a surgeon. When completing the X12 837, which of the following would be a major difference?

a. Provider information

b. Taxonomy information

c. HIPAA identifiers


The taxonomy information would be very different because the physician preparation and licensing are very different.

ANSWER:


15-58

In Summary

15.1 Medicare provides health care for citizens aged 65 and over, and certain patients under 65 may also qualify for Medicare. Medicaid is a health benefits program for low-income, blind or disabled patients, needy families, foster children, and children born with birth defects.

15.2 TRICARE is a health insurance plan for families of uniformed personnel and retirees from the uniformed services. CHAMPVA covers the expenses of families of veterans with total, permanent, service-connected disabilities, as well as the surviving spouses and children of veterans in this same category.


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In Summary (cont.)

15.3 HMOs generally seek services from a specific group of providers within their plan. PPOs establish a network of providers to perform services for their plan members.

15.4 Keep medical and financial records of workers’ compensation cases separate from other employee records; verify coverage and maintain confidentiality.

15.5 The claims process consists of obtaining patient information, determining diagnosis and fees, recording charges and codes, preparing the claim, reviewing the processing of the claim and remittance advice, and making sure the payment comes into the office.


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In Summary (cont.)

15.6 Medical assistants gather and record patient information; verify coverage, record procedures and services performed; file claims; bill patients; and review and record payments.

15.7 The rules that determine the coordination of benefits are guidelines for payments from insurance companies.

15.8 Preparing the health-care claim consists of filing the claim, setting time limits for filing the claim, reviewing the claim for medical necessity, reviewing for allowable benefits, payment, and remittance advice.


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In Summary (cont.)

15. 9 Payers set fees based on the amounts that Medicare allows, geographic factors, a uniform conversion factor, practice costs, insurance, and the physician’s work.

15.10 The CMS-1500 form contains numbered items that refer to the patient and the patient’s insurance coverage.

15.11 Three ways to transmit electronic claims are to– Transmit claims directly to the clearinghouse– Use a clearinghouse to prepare and send claims– Use direct data entry using an Internet-based service


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I am always doing that which I can not do, in order that I may learn how to do it.

~ Pablo Picasso

End of Chapter 15

Health Insurance Billing Procedures

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