Comprehensive Guide to Health Insurance Systems and Medical Billing and Reimbursement
Foundations of Health Insurance and Coverage Verification
Health insurance functions as a financial mechanism designed to allow individuals to prepay for health care services that may be required at a future date. To facilitate this process, administrative protocols must be strictly followed during patient intake. It is mandatory to request a current insurance card from the patient and to copy both the front and back of the card to ensures all necessary billing information is captured. Verification of the patient’s insurance should occur at every visit to ensure the correct insurer is billed, thereby securing timely reimbursement for the provider. This verification is typically performed by accessing the insurance company's official website. Common categories of specialized care that interact with these insurance frameworks include Ophthalmology, Cardiology, and Dentistry.
Managed Care Delivery Systems and Commercial Insurance
Managed care is a comprehensive health care system that integrates the delivery and payment of services for covered individuals by contracting with select providers. These systems aim to provide high-quality care at a reduced cost. A primary objective of managed care is an emphasis on preventative medicine and wellness. Within this system, the person who is insured or holds the policy is referred to as the subscriber. Commercial health insurance, by contrast, is owned and operated by private companies. These private entities maintain control over the price of premiums and specify the exact benefits provided under their plans. Prominent examples of such private organizations include Blue Cross and Blue Shield.
Indemnity-Type Insurance and Health Maintenance Organizations
Indemnity-type insurance offers the greatest freedom of choice for patients, as it features the least amount of structural guidelines. Patients under this model may see any provider of their choice and are not required to obtain referrals for specialists. However, this flexibility often comes with higher premiums, and an annual deductible must be fully satisfied before the insurer begins payment.
Health Maintenance Organizations (HMOs) are plans that require patients to designate a primary care provider (PCP), often referred to as a gatekeeper. The PCP is responsible for managing the patient's entire course of care and must provide a referral for the patient to see a specialist if needed. HMOs prioritize wellness and preventative care, covering services such as annual physicals, PAP tests, and well-child care. In a Staff-model HMO, providers are direct employees of the HMO, and all services, excluding emergencies, are provided within the practice. This model requires preauthorization for care when a patient is traveling. In a Group-model HMO, multispecialty practices contract with the HMO and may receive reimbursement on a capitated basis. Preferred Provider Organizations (PPOs) consist of a network of providers offering services at a discounted in-network rate. While members must select a PCP, they retain the option to see out-of-network providers, though this results in higher out-of-pocket costs.
Specialized Provider Networks: EPOs, POS, and IPAs
Exclusive Provider Organizations (EPOs) operate similarly to HMOs, requiring patients to use the health plan’s provider network exclusively. There is no partial coverage provided for out-of-network care. Unlike standard HMOs, EPOs do not always require patients to have a primary care physician, and referrals are not necessary to see specialists within the network. Point-of-Service (POS) plans and Independent Practice Associations (IPAs) offer different levels of flexibility. IPAs involve providers who practice in their own offices with their own staff. In some POS models, members do not have to select a PCP and can self-refer to specialists. However, seeking care outside of the specified network or without following plan guidelines usually results in higher costs to the member in the form of deductibles and coinsurance.
Consumer-Driven Health Plans (CDHP)
Consumer-driven health plans are designed to provide members with greater flexibility and involvement in health care decision-making. These plans include three primary types of accounts. A Health Savings Account (HSA) must be paired with a qualified high-deductible health plan. A Health Reimbursement Arrangement (HRA) is funded exclusively by employers, and employees do not contribute to it. A Flexible Spending Arrangement (FSA), often referred to as a cafeteria plan, is usually funded by the employee using pretax dollars. FSAs are categorized as ‘use it or lose it’ plans, meaning funds not utilized within the plan year are generally forfeited.
Medicare Eligibility and Plan Structures
Medicare was created by the Social Security Act in and is currently administered by the Centers for Medicare & Medicaid Services (CMS). Eligibility for Medicare includes individuals over the age of who meet specific requirements and have filed for benefits, as well as individuals who are disabled, receive Social Security benefits, or suffer from end-stage renal disease (ESRD).
Medicare is divided into four distinct parts. Part A covers inpatient hospital care, skilled nursing facility care, rehabilitation services, hospice care, and specific home health services. Part B covers provider visits, outpatient hospital care, and other services not covered by Part A, including X-rays, laboratory services, and initial preventive physical examinations. Part C, also known as Medicare Advantage, allows beneficiaries to select a managed care plan as their primary coverage. Part D provides coverage for both generic and brand-name prescription drugs.
Medicare Claims Processing and Medical Necessity
Providers must remain current with Medicare requirements, including the mandatory use of the CMS-1500 form for claims. Medicare claims must be submitted electronically. Under Physician Payment Reform (PPR), there have been significant changes to how Medicare Part B services are paid. For reimbursement, Medicare typically pays of the allowed amount once the annual deductible is satisfied, leaving the remaining to be paid by the patient or their supplemental insurance. Medicare only reimburses for services or supplies deemed reasonable and necessary for a diagnosis. If a provider intends to perform a service that Medicare is unlikely to cover, an Advance Beneficiary Notice (ABN) must be completed and signed by the patient prior to the procedure to acknowledge their financial responsibility.
Medicaid and Workers' Compensation
Medicaid provides health care coverage for individuals with limited or low income and is funded jointly by state and federal governments. Beneficiaries must seek care from participating providers. Some states have unique versions of the program, such as Medi-Cal in California. Related programs include the State Health Insurance Assistance Program (SHIP) and the Children’s Health Insurance Program (CHIP). The Affordable Care Act (ACA) led to a significant expansion of Medicaid enrollees.
Workers' Compensation consists of state laws that cover employees who suffer injuries or become ill as a result of their employment. These plans are paid for by employers. The benefits provided under Workers' Compensation include medical coverage, income replacement (paid weekly or monthly), death benefits, and burial expenses.
Military Health Benefits: TRICARE and CHAMPVA
TRICARE, formerly known as CHAMPUS, provides coverage for active-duty service personnel and their dependents, retired active service personnel and their dependents, and the dependents of service personnel who died while on active duty. Specifically, beneficiaries include active service members, retirees, and their eligible family members. The Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA) is reserved for the spouses and dependent children of veterans who have total, permanent, service-connected disabilities, or for the survivors of veterans who died as a result of such disabilities.
Coordination of Benefits and Secondary Insurance
Patients may be covered by more than one insurance plan, requiring a coordination of benefits to determine the order of payment. Charges are filed first with the primary carrier and subsequently with the secondary carrier. For dependent children covered by both parents, the birthday rule is applied, which dictates that the parent whose birthday falls earlier in the calendar year holds the primary policy. Many Medicare patients carry supplemental or Medigap insurance to cover the coinsurance and deductibles. If a person qualifies for Medicare but remains employed, specific rules dictate whether Medicare or the employer's plan is primary. Patients without any insurance coverage are classified as self-pay and are generally expected to pay out-of-pocket at the time services are rendered.
Fee Schedules and Reimbursement Methodologies
Fee schedules are established by payers to identify the maximum amount they will pay for covered services. Providers in a network agree to treat subscribers at these discounted rates. When a provider accepts assignment, they agree to accept the allowed amount as the full rate for service; any difference between the charged amount and the allowed amount is a disallowed amount that must be written off as an adjustment. Reimbursement methodologies include Usual, Customary, and Reasonable (UCR) charges and the Resource-Based Relative Value Scale (RBRVS). RBRVS is the most common method for calculating fee schedules and uses Relative Value Units (RVUs) assigned to three factors: work experience, practice expense, and malpractice expense. These values are further adjusted based on the geographic region of the country.
Other reimbursement methods include Prospective Payment Systems (PPS), where Medicare payments are based on a predetermined, fixed amount. Diagnosis-Related Groups (DRGs) are a method used by Medicare and other carriers to reimburse inpatient hospital care based on the patient's diagnosis rather than the actual cost of services provided.
Utilization Review and Management
Utilization review involves several processes to ensure medical necessity and cost-effectiveness. Preauthorization or precertification must be obtained before certain services to avoid payment denials. Predetermination is a review of a recommended medical procedure, treatment, or test to ensure it meets the requirements for medical necessity. Concurrent review provides the opportunity to evaluate the ongoing medical necessity of care while it is being administered. Finally, discharge planning is a process utilized to determine the specific type of care a patient will require after leaving the hospital setting.