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Copyright © 2014 Wolters Kluwer Health | Lippincott Williams & Wilkins Copyright © 2014 Wolters Kluwer Health | Lippincott Williams & Wilkins

Chapter 13

Medical Insurance

Copyright © 2014 Wolters Kluwer Health | Lippincott Williams & Wilkins

As you read this chapter, write any definition or insurance type that requires further review on an index card or piece of paper (definition on the front, answer on the back); writing the information helps reinforce it. Go over the cards whenever you have a “learning moment” or at a set study time. This is a good exercise for study groups.

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The intent of medical insurance is to provide financial protection for costs associated with sickness or injury. Because of the complex American social and health systems, the types of medical insurance and payers are varied and dependent on eligibility criteria.

Health care is one of the few services paid for by a party other than the one receiving the actual service. The insurance company or responsible governmental agency or private entity is known as the third-party payer—the party that pays the second party (doctor, hospital, pharmacy, etc.) for the medical bills of the first party (patient or insured individual). The term third-party administrator is sometimes used.

This chapter is organized differently from previous chapters. The types and sources of insurance are described with information that has “exam probability.” The “Terms” section contains the remaining materials and definitions for medical insurance. Do not skip it.

Overview


An insurance company (carrier), whether private or governmental, may offer all common plan types or a hybrid of multiple types. The medical assistant and medical administrative specialist must know not only the insurance company but also the plan covering the patient. Each plan has different costs and benefits to the patient and different payments to the health care provider:

■ Health maintenance organization (HMO)—an association that provides all care to the insured person for a fixed fee, usually paid for by the insured or employer through a monthly premium; a copayment may or may not be required

■ Indemnity—plan through which the insured person selects his or her own health care providers; an established amount or percentage of care costs is paid by the insurance plan on a fee-for-service basis; usually has deductibles and limits

Common Types of Medical Insurance Plans


■ Preferred provider organization (PPO)—a list of physicians, hospitals, and other health care services approved by the insurance plan to provide these services at a discounted rate

■ Major medical—type of insurance that does not cover primary care, but covers costs associated with significant illness or injury (e.g., hospitalization, surgeries); premiums are lower than full-coverage insurance

Common Types of Medical Insurance Plans, cont’d.


■ Commercial—for-profit companies that provide health insurance for a fee to individuals or groups; Blue Cross and Blue Shield is perhaps the most widely known

• Eligibility- Individual plan—coverage provided for a person

and eligible dependents when premiums are made and designated criteria are met

- Group plan—generally associated with employment; coverage provided for employee and usually dependents; premiums may be paid by employer or shared with the employee

• Benefits—dependent on plan selection, premiums, and eligibility criteria

Sources of Medical Insurance


■ Medicare—federal insurance program established in 1965 under the Social Security Act (Title 18) and administered by the Centers for Medicare and Medicaid Services (CMS), formerly called HCFA; primarily designed for eligible citizens age 65 years and older

• Eligibility- Persons and spouses of persons age 65 years or

older who are eligible for Social Security benefits- Retired railroad workers- Persons receiving Social Security benefits- Persons with end-stage kidney disease who have

contributed to Social Security

Sources of Medical Insurance, cont’d.


• Benefits- Part A—benefit is automatic when eligibility and

deductible are met; covers hospital inpatient costs, hospice, limited nursing facility stays, and home health

- Part B—optional benefit; requires premiums, deductibles, and coinsurance; covers physician costs, outpatient services, durable medical equipment, and medical supplies

- Part C—formerly called Medicare+ Choice, now referred to as Medicare Advantage; requires participants to be covered under both Medicare Part A and Medicare Part B; allows participant to choose a Medicare Advantage plan, which is HMOtype coverage

- Part D—optional benefit; covers approved pharmaceuticals



• Advanced Beneficiary Notice of Noncoverage (ABN)—notification to the beneficiary (person insured by Medicare) of their potential liability for payment of services under certain conditions that are not covered or approved for payment by Medicare; i.e., frequency of coverage such as a maximum number of glucose tests that will be approved for payment within a specific time frame

■ Medigap—also called Medicare Supplement Insurance; commercial medical insurance intended to cover Medicare deductible, coinsurance, and other uncovered items

■ Medicaid—federal insurance program established in 1965 under the Social Security Act (Title 19) and administered by the Centers for Medicare and Medicaid Services (CMS), formerly called HCFA; eligibility, benefits, and name differ from state to state (e.g., in California, it is called MediCal); provides health coverage for the categorically needy



• Eligibility—low-income (calculated as a percentage of poverty level, which differs from state to state) families and individuals who are citizens or, in some cases, select refugees and immigrants

• Benefits—minimum benefits are mandated by the federal government, and other benefits are defined by the states; minimum medically necessary benefits include:

- Primary care- Early, periodic screening, diagnosis, and treatment

(EPSDT) for children- Hospitalizations- Outpatient services- Family planning- Skilled nursing facilities (SNFs)- Medi/Medi—persons eligible for both Medicare and

Medicaid (dual eligibility); Medicaid is always the payer of last resort



■ TRICARE—formerly CHAMPUS; offers three health care benefits plans sponsored by the federal government, primarily for spouses and dependents of service men and women

• TRICARE Standard—program under TRICARE that automatically enrolls all eligible beneficiaries

• TRICARE Prime—PPO-type TRICARE option with an annual deductible

• TRICARE Extra—HMO-type TRICARE option with an annual deductible and copays



• Eligibility- Spouses and dependents of active military

personnel- Military retirees, spouses, and dependents- Spouses and dependents of deceased active or

retired military personnel- Former spouses of active or retired military

personnel who meet requirements- Spouses, former spouses, and dependents of

court-martialed active-duty service personnel- Spouses, former spouses, and dependents of

retirement-eligible military personnel who lost eligibility as a result of child or spousal abuse

- Other select individuals



• Benefits- Hospitalization- Maternity care- Inpatient and outpatient treatment for mental

illness- Physician services- Diagnostic testing- Emergency services, including ambulances- Family planning- Durable medical equipment- Home health care



■ CHAMPVA (Civilian Health and Medical Program of the Veterans Administration)—a service benefit program with no premiums for select family members of specific veterans

• Eligibility- Spouses and dependents of military personnel

with permanent, total, service-related disability- Spouses and dependents of military personnel

who died from a service-related disability• Benefits—the same as TRICARE Standard



■ Workers’ compensation—medical and disability insurance that covers employees in the event of a work-related injury, illness, or death

• Eligibility- Federal coverage—federal employees, coal

miners, and maritime workers- State coverage—all workers not covered by

federal statutes• Benefits

- Medical treatment related to disability, including prostheses

- Temporary disability payments- Permanent disability payments- Death benefits to survivors



■ Fee schedule—list of a physician’s customary charges; may incorporate insurance plan–specific discounts

■ Resource-based relative value system or scale (RBRVS)—a method used to establish physician fees for specific medical services by assigning worth to a relative value unit (RVU)

• RVU—a component (e.g., time) that is multiplied by a monetary conversion factor to establish physician payment; it includes the physician’s:

❍ Service❍ Overhead❍ Cost of malpractice insurance

• Relative value studies (RVS)—relative values listed by health care procedure codes; allow comparison of reimbursement for different codes

Common Methods of Determining Insurance Payment


Common Methods of Determining Insurance Payment, cont’d.


■ Usual, customary, and reasonable (UCR)—a method used by insurance carriers to establish provider payments based on a fee compendium of other like providers

• Prevailing fee—the usual, customary, and reasonable fees of like providers in the same geographic area

• Copayment—a portion of the cost to the provider (usually a flat fee) owed by the insured at the time of service; may also be called coinsurance; routine waiving of copayment by the medical office is against federal guidelines for Medicare and Medicaid

■ Capitation—payment made to a provider based on a fixed amount per enrollee assigned to that provider regardless of services provided



■ Diagnostic-related groups (DRG) —a classification of diagnoses used to determine hospital payment for Medicare inpatients; this method does not take into account length of stay (LOS)

■ Preauthorization/Precertification—under some health plans, individuals are required to receive advance authorization from the insurance provider for particular medical services; usually required for referral to a physician specialist



■ Claims are transmitted electronically from the provider’s computer to the Medicare contractor’s computer

■ When submitting electronic claims, the provider must use a computer with software that meets electronic filing requirements and national standards established under Health Insurance Portability and Accountability Act (HIPAA)

■ Claims are reviewed by the Medicare contractor for accuracy of submission, and the entire batch of submitted claims may be denied and returned for correction even if one claim is found with an area of noncompliance with submission standards

Electronic Health Care Claims

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