Outline
Basics of Health Insurance-Part II
Medical Billing
Health Insurance Contracts:
Direct Pay-The patient or individual pays the physician or health care practitioner for
provided services.
Indirect Pay- Another term for third party payer.
Prepaid Health Plans-Each member of a group pays a premium in order to be included
in the contract. The contracts outlined the medical services available to group members
and the fees that the physician or hospital would receive for providing the services.
(HMOs)
Employer-Sponsored Health Insurance Plans- Employers offering health insurance
coverage as a benefit of employment.*
Government-Sponsored Health Care Programs- State and Federal governments
provide health insurance to specific populations.*
Individual Policies- Health insurance policies paid for by the individual or family.
Government-Sponsored Health Care Programs
CHAMPVA
Medicaid
Medicare
TRICARE (CHAMPUS)
Workers’ Compensation
Federal health insurance program for spouses
and dependents of veterans with total serviceconnected disabilities or of veterans who have
died because of such disabilities
Combined federal/state health insurance
program that covers people who meet specific
financial need requirements; also called
Medical Assistance Program
Federal health insurance program for people 65
years of age or older and retired on Social
Security, railroad retirees, federal government
retirees, individuals legally disabled for more
than two years, and persons with end-stage
renal disease (kidney failure)
Civilian Health and Medical Program of the
Uniformed Services; federal health insurance
program for spouses and dependents of activeduty uniformed personnel and of personnel
who have died while on active duty, and for
retired personnel, including the spouses and
dependents
Health insurance program that requires
employers to cover medical expenses and loss
of wages for workers who develop job-related
health problems; mandated by federal and state
governments
*2006 Employers or government programs provide most health insurance coverage.
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Health Maintenance Organization Models
Staff Model HMO
Independent Practice Association
Group Model HMO
Network Model HMO
The HMO operated and staffs the facility
or facilities where members receive
treatment. All premiums and revenues
accrue to the HMO. Physicians and other
providers receive a salary and other
incentives.
An HMO that contracts directly with
physicians who continue to practice in their
private offices. IPAs are compensated by
various reimbursement methods, including
capitation, fee-for-service, and discounted
fee-for-service. They usually have a large
network of physicians who agree to treat
IPA members. The IPA also contracts with
other providers such as hospitals and labs,
and pays them on a fee-for-service basis.
Establishes contracts with physicians who
are organized as a partnership, professional
corporation, or other association. The
group model HMO compensated the
medical group for contracted services at a
negotiated rate. The medical group is
responsible for compensating its physician
members and contracting with hospitals for
patient care. A group model contract is
usually subject to renewal on an annual
basis.
Contracts with more than one physician
group and it may contract with single- and
multi-specialty groups. Any number of
group practices, IPAs, and staff models can
be joined together by a management HMO
to form a network model HMO. The
different groups are coordinated to allow
patients to use any physician within the
network. Each physician works out of his
or her own office and may share in
utilization savings, but the physician does
not necessarily provide care exclusively for
the network model members.
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More Managed Care Organizations
Preferred Provider Organization (PPO)
*Note-Fee established by a PPO is the
maximum allowable fee or allowed amount.
Exclusive Provider Organization (EPO)
Integrated Delivery System (IDS)
Managed Care Organization that contracts with
a group of providers, who are called preferred
providers, to offer services to the managed
care’s members. Providers are willing to accept
a reduced payment in return for a high patient
volume. A PPO encourages members to seek
services from the preferred providers by
eliminating or reducing the member’s copayment. If a member elects to receive services
from a nonparticipating provider, the member
must pay a high co-payment. PPOs have grown
in popularity because they provide the benefits
of HMOs in reducing health care costs and the
preserve the ability of the individual to choose
a provider. The fee established by a PPO is
called the maximum allowable fee.
Similar to a PPO in that the MCO contracts
with health care providers to obtain services for
members. However, exclusive provider
organizations restrict members to the
participating providers for all health care
services. If an EPO member receives services
from a non-EPO provider, the member is
responsible for paying the bill. Employers
whose primary objective is to reduce health
care benefit costs usually select an EPO
managed care system. Employees are more
likely to accept the restrictions of an EPO,
since the employer is paying for the health care
benefit at little or no cost to the employee.
MCO that brings together physicians, physician
groups, hospitals, HMOs, PPOs, insurance
companies, management services, and
employers to integrate all aspects of patient
care into one comprehensive system. In
addition to basic health care services, the
system may include physician services,
hospitalization, dental care, vision care,
prescription drugs, billing services, and
Workers’ Compensation.
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Provider Reimbursement Methods
Salaried
Capitation
Fee-For-Service
Negotiated or Discounted Fee
Providers, including physicians, are
employed to work a specific number of
hours per week. Benefits include
malpractice insurance, life insurance, a
retirement plan, and incentives for
increased productivity.
Applies primarily to physician providers,
who receive a set fee per month per
enrolled member, regardless of the number
of patient visits or frequency of services
provided.
Providers are reimbursed for each
individual service.
Providers agree to treat members
(enrollees) of a managed care plan for a
reduced fee.
Terms Associated with Purchasers of Health Insurance
Applicant
Dependent
Individual applying for health insurance
Person(s) financially supported by the
insured----i.e., spouse, children, and others
as described in the policy.
Group Contract
Health insurance policy purchased by an
organization or corporation that covers a
defined group of individuals and eligible
dependents; i.e., the employees of an
organization/corporation or members of a
union professional association.
Individual Contract
Health insurance purchased by an
individual; usually includes dependents.
Insured
Person or organization that purchases the
health insurance and is protected against
financial loss due to illness.
Member, policyholder, recipient, subscriber Other terms for insured.
Personal Contract
Another name for individual contract.
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Health Insurance Company Terms
Insurance Carrier
Insurance Company
Insurer
Private Insurance Carrier
Third-Party Payer
*Note-Also known as Indirect Payer
Insurance company that sells the health
insurance policy and administers the terms
of the policy.
Organization that sells the health insurance
policies; also known as the insurance
carrier or insurer.
Another name for insurance carrier.
Nongovernmental insurance company—
e.g., Aetna Insurance, Metropolitan
Insurance, and Wausau Insurance
Individual or corporation that pays all or
part of a patient’s medical bills; the
insurance company/carrier.
Health Insurance Policy General Terms
Premium
Grace Period
Guaranteed Renewable
Conditionally Renewable
Optionally Renewable
Cancelable Policy
Noncancelable Policy
Fee paid to the insurance company to keep
the health insurance policy active; paid
monthly, quarterly, or annually by the
insured (individual) or group.
Number of days allowed between the
premium due date and cancellation of
health insurance coverage; usually 10-30
days.
Insurance company must renew the health
insurance policy as long as the premiums
are paid; renewal may be limited by age or
may be for life.
Insurance company may refuse to renew
the health insurance policy at the end of a
payment period; reasons stated in the
policy often include age or employment
status.
Insurance company may or may not renew
the health insurance policy on a specified
date; may increase rates and decrease
coverage.
Insurance company may cancel the health
insurance policy at any time for any reason
Insurance company must renew the health
insurance policy and cannot increase
premium rates; the policy may have agerelated limitations.
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Health Insurance Coverage Terms
Benefit
Hospital Benefit
Surgical Benefit
Major Medical Benefit
Extended Care Benefit
Exclusions
Preexisting Conditions
Waiting Period
Waiver
Amount paid by the insurance company for
covered medical expenses; either a percentage
of the charge or a specific dollar amount may
be paid to the insured or to the health care
provider.
Amount paid by the insurance company for
hospital expenses; either a percentage of the
charge or a specific dollar amount; may be paid
to the insured or to the hospital.
Amount paid by the insurance company for
expenses related to a surgical procedure; either
a percentage of the charge or a specific dollar
amount; may be paid to the insurer or to the
health care provider.
A fixed amount of money available for the
lifetime of the insured and any dependent; used
to pay for unusually large medical expenses
resulting from continued illness or serious
injury.
Amount paid by the insurance company for
nursing facility or long-term care expenses.
Situations that are not covered by the health
insurance policy; examples may include selfinflicted injury, work-related injury, and
injuries due to military service; expenses
arising from exclusions are not paid by the
insurance company.
Health conditions that were treated or existed
before the individual was covered by the health
insurance policy; expenses arising from
preexisting conditions are not usually paid by
the insurance company.
Period of time before specified illnesses or
accidents are covered by the insurance policy;
expenses arising from illnesses or accidents
during the waiting period are not paid by the
insurance company until the waiting period has
expired; also known as an elimination period.
An attachment to the insurance policy that
excludes conditions that would otherwise be
covered by the insurance policy; expenses
arising from conditions identified in a waiver
are not paid by the insurance company.
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Health Insurance Payment Terms
Assignment of Benefits
Claim
Time Limit
Deductible
Coordination of Benefits
Primary Payer
Secondary Payer
Preauthorization
Precertification
Predetermination
Reimbursement
Accepts Assignment
Birthday Rule
Co-payment (Copay)
Permission granted by the insured that allows the
insurance company to send payments directly to the
physician, health care provider, hospital, or nursing
facility.
Request for payment of a covered medical expense,
sent to the insurance company; may be submitted by
the insured or by the agency or individual that
provided the medical care.
Number of days allowed to submit a claim (request
for payment)
Specified amount of money that the insured must
pay for covered medical expenses before the
insurance policy begins to pay; usually an annual
amount per individual or family.
Health insurance policy clause that applies to an
individual covered by more than one medical
insurance policy; requires that the combined
benefits paid by the policies do not exceed 100% of
the medical expenses.
Term used to describe which health insurance
policy will pay “first” when an individual is covered
by more than one health insurance policy.
Term used to describe which health insurance
policy will pay “second” when an individual is
covered by more than one health insurance policy.
Determination of whether a particular treatment is
medically necessary and covered by the insurance
policy; required by many insurance companies.
Determination of whether a particular treatment is
covered by the insurance policy; required by many
insurance companies.
Determination of the potential dollar amount the
insurance company will pay for a particular
treatment.
Receiving payment for services rendered.
Term used to identify physicians and providers who
accept the benefit paid by the insurance company
for a specific service as payment in full for that
service.
Determines the primary payer when the patient is a
child living with both parents and each parent
carries health insurance. Under the birthday rule, the
primary payer is the parent whose birth month and
date comes earlier in the calendar year. Only month
and date are considered under the birthday rule.
(NOT YEAR)
The dollar or percentage amount that the
patient must pay the provider for each visit.
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Health Insurance Provider Terms
Admitting Physician
Physician who arranges the patient’s hospital
admission; may not be responsible for patient’s care
during the hospital stay.
Attending Physician
Physician responsible for the patient’s care during the
hospital stay.
Case Manager
Health care professional who coordinates the care of
patients with long-term problems.
Three or more health care providers who share
equipment, supplies, and personnel; usually refers to a
physician group practice.
Group Practice
Health Care Specialist
In-Network Provider
Limited License Practitioner
Nonparticipating Provider
Out-of-Network provider
Participating Provider
Physician
Physician Specialist
Physician Extender
Primary Care Manager
Primary Care Physician
Referring Physician
Health care provider other than the primary care
physician; may refer to physician specialist or others
such as an optometrist, a podiatrist, and a chiropractor.
A health care professional who provides services to
individuals covered by a particular health insurance
policy and who accepts the insurance company’s
approved fee for each service; also known as a
participating provider.
Nonphysician health care professional licensed to
perform specific services; examples include clinical
social workers, and clinical psychologists.
A health care professional who does not contract with
insurance companies and does not accept an insurance
company’s approved fee for services; also known as
an out-of-network provider.
Another term for nonparticipating provider.
Another term for in-network provider.
Health care professional licensed to practice as a
medical doctor (MD) or an osteopathic doctor (OD).
Physician who provides health care services related to
a specialty or subspecialty such as cardiology,
oncology/hematology, endocrinology, or
gastroenterology.
Nonphysician health care professional licensed by the
state to perform specific procedures under direct
physician supervision; includes physician assistants,
nurse anesthetists, nurse practitioners, nurse
midwives.
TRICARE term for primary care physician
Physician responsible for providing all routine health
care and determining the need for referrals to
physician specialists; usually includes family practice,
internal medicine, and pediatric physicians.
Physician who arranges for the patient to see another
physician or health care provider.
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Review Exercises
MATCHING
Match the terms in Column A with the definitions in Column B.
Column a
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
Benefit
Claim
Coverage
Dependent
Direct pay
Exclusion
Insured
Premium
reimbursement
Waiver
Column B
1. noncovered situation
_____
2. payment for services
_____
3. policyholder
_____
4. amount paid by insurance _____
5. request for payment
_____
6. an attachment to the policy _____
7. cost of insurance policy _____
8. person supported by the insured
_____
9. patient pays the bill
_____
10. Included and excluded conditions
_____
FILL IN THE BLANK
Write the correct insurance term or phrase for each statement.
1. An HMO that contracts with physicians who continue to practice in their private
offices is called a (n) _______________.
2. A (n) _______________encourages member to receive services from
participating providers by reducing the member’s co-payment amount.
3. The most restrictive type of managed care organization is a (n) ______________.
4. An HMO that owns operates, and hires personnel for its healthcare facilities is
called a (n) _______________.
5. The fee established by a PPO is called the _______________.
6. Another term for indirect pay is _______________.
7. The ___________ is the number of days allowed between the premium due date
and cancellation by the health insurance policy.
8. A _______________ is the time that must pass before certain illnesses or
accidents are covered by the health insurance policy.
9. The number of days allowed for submitting a claim is called the
_______________.
10. The _______________ is responsible for providing all routine health care and
determining the need for referrals to physician specialists.
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IDENTIFICATION
Identify the correct government-sponsored health care program associated with each
statement: TRICARE, CHAMPVA, Medicaid, Medicare, Workers’ Compensation.
1. Based on financial need ________________________________
2. Job-Related health problems ____________________________
3. Covers people age 65 or older___________________________
4. Uniformed personnel and dependents _____________________
5. Employers must provide this insurance ____________________
6. Uniformed services-related disabilities ____________________
7. Covers end-stage renal disease ___________________________
8. Also called Medical Assistance Program ___________________
9. Active-duty and retired military personnel __________________
10. Covers railroad retirees _________________________________
CRITICAL THINKING EXERCISES
Read each case summary and answer the questions that follow.
CASE SUMMARY A
Towanda recently visited her family physician. As she reviews her bill, she notices
that each service has a separate fee. Towanda is grateful that she has health insurance
through her job. At the billing desk, Towanda signs a form that lets the insurance
company pay the physician directly. She leaves the office feeling confident that the
bill will be paid.
1. What type of insurance does Towanda have?
2. Name the reimbursement method described in the case.
3. Why can the insurance company pay the physician directly?
CASE SUMMARY B
Roberto has just learned that his prostate must be removed. He is concerned about the
cost, and his physician refers him to the billing specialist. Roberto is relieved when he
learns that the preoperative office visit, surgery, and normal postoperative care are
included in one fee. The billing specialist calls the insurance representative and finds
out about how the insurance company must pay for Roberto’s treatment. In addition,
the billing specialist informs Roberto that his supplemental insurance can be billed for
the remaining balance. Roberto is relieved that finances won’t be a problem.
1. Did the billing specialist do a predetermination for Roberto’s treatment? How can
you support your answer?
2. Why doesn’t the billing specialist submit the full claim to both of Roberto’s
insurance companies?
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CASE SUMMARY C
Elmer has been to his physician at least six times this year. At every visit, at least four
blood tests are done, and he often has one other problem taken care of. Elmer’s health
insurance plan uses a reimbursement method that depends on the number of
individuals covered by the insurance contract.
1. What type of reimbursement method is described in this case?
2. Does the number of services affect the reimbursement amount?
3. Could Elmer belong to a health maintenance organization?
SHORT ANSWER
1. Describe what is meant by the terms preauthorization, precertification, and
predetermination. How are these activities related?
2. What is the difference between a primary payer and a secondary payer?
3. Explain the terms participating provider and nonparticipating provider. Include
any alternate terms for each.
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