CHAPTER
17
Insurance and
Billing
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17-2
Learning Outcomes (cont.)
17.1 Define the basic terms used by the
insurance industry.
17.2 Compare fee-for-service plans, HMOs, and
PPOs.
17.3 Outline the key requirements for coverage by
the Medicare, Medicaid, TRICARE and
CHAMPVA programs.
17.4 Describe allowed charge, contracted fee,
capitation and formula for RBRVS.
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17-3
Learning Outcomes (cont.)
17.5 Outline the tasks performed to obtain the
information required to produce an insurance
claim.
17.6 Produce a clean CMS-1500 health insurance
claim form.
17.7 Explain the methods used to submit an
insurance claim electronically.
17.8 Recall the information found on every
payer’s remittance advice.
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17-4
Introduction
• Health care claims
– Reimbursement for services
– Accuracy = maximum appropriate payment
• Medical assistant
– Prepare claims
– Review insurance coverage
– Explain fees
– Estimate charges
– Understand payment explanation
– Calculate the patient’s financial responsibility
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17-5
Basic Insurance Terminology
• Medical insurance
• Benefits
• Policy holder
• Dependents
• Premium
• Lifetime maximum
benefits
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17-6
Basic Insurance Terminology (cont.)
• Three participants in an insurance
contract:
– First party ~ patient
– Second party ~ healthcare provider
– Third-party payer ~ health plan
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17-7
Basic Insurance Terminology (cont.)
• Deductible ~ met annually
• Coinsurance ~ fixed percentage
• Copayment
– Managed care plans
– Preferred provider
• Exclusions
• Formulary
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17-8
Basic Insurance Terminology (cont.)
• Elective procedure
• Preauthorization ~ medically necessary
• Predetermination
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17-9
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.
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17-10
Private Health Plans
• Insurance companies ~ rules about
benefits and procedures
• Sources of health plans
– Group policies
– Individual plans
– Government plans
• National Provider Identifier (NPI)
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17-11
Private Health Plans (cont.)
• Healthcare Legislation - 2010
– Extend insurance coverage to all Americans
– Ban on
• Lifetime limits
• Denial of coverage for pre-existing conditions
• Policy cancellations for illness
– Children on family policy until 26 years old
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17-12
Fee-for-Service and Managed Care Plans
• Fee-for-service
– Policy lists covered medical services
– Amount charged for services is controlled by
the physician
– Amount paid for services is controlled by the
insurance carrier
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17-13
Fee-for-Service and Managed Care Plans
(cont.)
• Managed Care Plans (MCOs)
– Controls both the financing and delivery of
healthcare
– Enrolls
• Policy holders
• Participating physicians
– MCOs pay physicians in two ways
• Capitation
• Contracted fees
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17-14
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 are often paid a capitated rate
– Patients pay premiums and a copayment for each
office visit
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17-15
Commercial Payers
• Blue Cross Blue Shield
• Private Commercial Carriers
– Rules and regulations vary
– Covered services and fees vary
• Liability insurance
• Disability insurance
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17-16
Apply Your Knowledge
Matching:
ANSWER:
B. Participating physician
E nationwide federation of organizations
B enroll with managed care plans
C. PPO
A repay policyholders for healthcare
A. Fee-for-Service
costs
D. HMO
G does not cover medical expenses
E. BCBS
C network of providers who care for
F. Liability insurance
subscribers
G. Disability insurance
F covers injuries caused by the insured
D subscribers pay premiums and a
copayment but no other fees for
covered services
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17-17
Government Plans
• Health care
– Retirees
– Low-income and disadvantaged
– Active or retired military
personnel and their families
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17-18
Medicare
• The largest federal program
• Managed by the Centers for Medicare and
Medicaid Services (CMS)
• Medicare Part A
– Hospital insurance
– Financed by Federal Insurance Contributions
Act (FICA) tax
– Covers anyone with Social Security benefits
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17-19
Medicare (cont.)
• Medicare Part B
– Covers outpatient services
– Voluntary program
– Participants pay a premium
• Medicare health insurance card
– Medicare number
– Indicates eligibility
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17-20
Medicare (cont.)
• Part C – 1997
– Provides choices in
types of plans
• Part D – prescription
drug plan
– Medicare Advantage
plans
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17-21
Medicare (cont.)
• Medicare plan options
– Fee-for-Service: The Original Medicare Plan
– An annual deductible
– After deductible, the patient pays 20 percent
– Medigap plan – secondary insurance
• Medicare Administrative Contractor
(MAC) Jurisdictions
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17-22
Medicare (cont.)
• Medicare Managed Care Plans
• Medicare Preferred Provider Organization
Plans (PPOs)
• Medicare Private Fee-for-Service Plans
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17-23
Medicare Plans (cont.)
• Recovery Audit Contractor (RAC) Program
– Designed to guard the Medicare Trust Fund
– Identify improper payments
Overpayment
Underpayment
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17-24
Medicaid
• Health cost assistance program not an
insurance program
• Federal funds for mandated services
• States – additional optional services
• Accepting assignment
• Dual coverage
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17-25
Medicaid (cont.)
• State guidelines
– Verify Medicaid eligibility
– Ensure that the physician signs all claims
– Preauthorization required except in an
emergency
– Verify deadlines for claim submissions
– Treat Medicaid patients with professionalism
and courtesy
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17-26
TRICARE and CHAMPVA
• TRICARE
– Healthcare benefit
– Eligibility – enrollment in the
Defense Enrollment
Eligibility Reporting
System (DEERS)
• CHAMPVA
– Civilian Health and Medical Program of the Veterans
Administration
– Eligibility determined by the VA
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17-27
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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17-28
Workers’ Compensation
• Covers employment-related
accidents or illnesses
• Laws vary by state
• Verify with employer before treating
and obtain a case number
• Records management
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17-29
Apply Your Knowledge
A 72-year-old disabled patient is being treated at an
office that accepts Medicare. The total office visit is
$165, but Medicare Part B will only reimburse a set fee
of $90. In this situation, what is the most likely
solution?
ANSWER:
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.
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17-30
Fee Schedules and Charges
• Resource-based relative value scale
(RBRVS)
• Formula uses:
– Nationally uniform relative value unit (RVU)
– Geographic adjustment factor (GAF)
– Nationally uniform conversion factor (CF)
• CMS updates annually
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17-31
Payment Methods
• Allowed charges
– The maximum amount the payer will pay a
provider
– Equivalent terms
– Balance billing
– Adjustment
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17-32
Payment Methods (cont.)
• Contracted fee schedule – fixed fee schedules
• Capitation – fixed prepayment
• Calculating patient charges – may include
– Deductibles
– Copayments
– Coinsurance
– Excluded and over-limit services
– Balance billing
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17-33
Communication with Patients About Charges
• Remind patients of financial obligation
• Notify office financial policy
– Post
– Information packet
• Notify of uncovered services
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17-34
Apply Your Knowledge
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 or coinsurance, if the service is excluded,
or if the patient is over his/her limit for services.
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17-35
The Claims Process: An Overview
• Physician’s office
– Obtains patient information
– Delivers services and determines diagnosis
and fees
– Records payments; prepares and submits
healthcare claims
– Reviews the processing of a claim
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17-36
The Claims Process: An Overview (cont.)
• Electronic billing programs
– Streamlines process
• Creating claims
• Follow-up
• Bills sent to patient
– Electronic data exchange (EDI)
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17-37
Obtaining Patient Information
•
• Insurance
Basic
–
–
–
–
Contact information
DOB
SSN
Emergency contact
– Employer information
– Insurance carrier
information
• Release signatures
– To insurance carrier
– Assignment of benefits
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17-38
Obtaining Patient Information (cont.)
• Eligibility for services
– Scan or copy card
– Signed release
– Check effective date of
coverage
• Preauthorization
– Phone or online
– Authorization number
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17-39
Obtaining Patient Information (cont.)
• Coordination of benefits
– Prevents duplication of
payment
– Primary insurance plan
pays first
Birthday Rule
The insurance plan of the
person born first becomes
the primary payer.
– Secondary plan pays the
deductible and
copayment
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17-40
Delivering Services to the Patient
• Physician’s services
– Documents visit in medical record
– Completes superbill or charge slip
• Medical coding
– Compare superbill to medical record
– Translate procedures on charge slip
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17-41
Delivering Services to the Patient (cont.)
• Referrals and Authorizations
– Obtain authorization number
– Enter into billing program
• Patient checkout
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17-42
Apply Your Knowledge
Prior to submitting an insurance claim, what do you
need to do?
ANSWER: You should have verified eligibility and
obtained the patients signature on appropriate
releases. You need to be sure you have the correct
patient and insurance information to correctly
complete the claim form. You should compare the
superbill to the medical record. If a charge slip is
used, you will need to determine the correct codes
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17-43
Preparing and Transmitting the
Healthcare Claim
• Filing Limits
– Vary from company
to company
– Start with date of service
• Electronic Claims transmission – X12 837
Health Care Claim
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17-44
Electronic Claim Transmission
• Preparing electronic claims
– Information entered – data elements
– Data must be entered in CAPS in valid fields
– No prefixes or special characters allowed
– Use only valid data
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17-45
Electronic Claim Transmission (cont.)
• Data elements – major sections
– Provider – taxonomy code
– Subscriber (policyholder)
– Patient (subscriber or another person) and payer
– Claim details
– Services
• Other standard transactions include
– Claim status
– Payment status
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17-46
Paper Claim Completion
• CMS-1500 (CMS-1505) paper form
• May be mailed or faxed to the third-party payer
• Not widely used
• CMS-1505 requires 33 form locators
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17-47
Paper Claim Completion (cont.)
Block 1 – 13: patient
and insurance
information
Block 14 – 22: provider
information
Block 1
Block 14
x
Block 1a
04
15 20XX
Block 15
IN00011123
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17-48
Apply Your Knowledge
What are the major data element sections
required by the X12 837 transaction?
ANSWER: They are
•
•
•
•
•
Provider
Subscriber
Patient and payer
Claim details
Services
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17-49
Transmitting Electronic Claims
• Three methods
Transmitting
claims directly
Offices and payers
exchange
information directly
by electronic data
interchange (EDI)
Using a
clearinghouse
Using direct data
entry
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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17-50
Generating Clean Claims
• Carefully check claim before submission
– Missing or incomplete information
– Invalid information
• Rejected claims
– Provide missing information
– Submit new claim
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17-51
Claims Security
• The HIPAA rules
• Common security measures
– Access control, passwords, and log files
– Backup copies
– Security policies
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17-52
Apply Your Knowledge
What are the three methods for electronic
transmission of insurance claims?
ANSWER:
• Direct transmission to insurance carrier using EDI
• Using a clearinghouse that translated information into
standard formats and “scrub” claims prior to
submission
• Direct data entry into the insurance carrier’s system
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17-53
Insurer’s Processing and Payment
• Claims Register
– Created by billing program or clearinghouse
– Track submitted claims
• Review for medical necessity
• Review for allowable benefits
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17-54
Payment and Remittance Advice
• With payment of a claim – Remittance
advice (RA)
– Amount billed
– Amount allowed
– Amount of patient liability
– Amount paid
– Services not covered
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17-55
Reviewing the Insurer’s RA and Payment
• Review line by line
– If correct, make appropriate entry in claims
log
– If unpaid or different than records
• Trace
• Place a query
– If rejected ~ review claim for accuracy
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17-56
Apply Your Knowledge
When reviewing the RA, you note that several claims were
rejected and one was not paid. What should you do?
ANSWER: You need to review the rejected claims to be
sure all information was correct. Either resubmit with
corrected information or submit a new claim, depending
on the carrier’s policy. You would have to call the
insurance company to trace the claim that was not paid.
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17-57
In Summary
17.1
There are a variety of terms used by insurance
companies, knowledgeable medical assistants,
medical billers, and coders.
17.2
Fee-for-service plans are traditional plans where the
insurance plan pays for a percentage of the charges.
HMOs are prepaid plans that pay the providers
either by capitation or by contracted fee-for-service
A PPO is a managed care plan that establishes a
network of providers to perform services for plan
members..
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in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
17-58
In Summary (cont.)
17.3
Medicare provides health insurance for citizens aged
65 and older as well as certain categories of others.
Medicaid is a health benefit plan for low-income
and certain others with disabilities.
TRICARE is a healthcare benefit for families of
uniformed personnel and retirees .
CHAMPVA covers the expenses of the families of
veterans with total, permanent, service-connected
disabilities as well as expenses for survivors of
veterans who died in the line of duty or from serviceconnected disabilities
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17-59
In Summary (cont.)
17.4
An allowed charge is the maximum dollar amount an
insurance carrier will base its reimbursement on. A
contracted fee is negotiated between the MCO and
the provider. Capitation is a fixed prepayment paid
to the PCP. RBRVS stands for resource-based
relative value scale. Its formula is RVU X GAF X CF.
17.5
The claims process includes: obtaining patient
information; delivering services to the patient and
determining the diagnosis and fee; recording
charges and codes; documenting payment from the
patient; and preparing the healthcare claims.
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17-60
In Summary (cont.)
17.6
The student should be able to produce a legible,
clean, and acceptable CMS-1505 claim form.
17.7
The three methods used to submit claims
electronically are: a directly to the payer’s website;
the use of a clearinghouse; and the use of
direct data entry or DDE.
17.8
Although the format may vary from payer to payer,
all RAs (EOBs) contain similar information.
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17-61
End of Chapter 17
I am always doing
that which I can not
do, in order that I may
learn how to do it.
~
Pablo Picasso
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