There’s much more to medical billing than meets the eye. Even though the CMS 1500 from the U.S. Centers for Medicare and Medicaid Services mainstreamed the claim form, the world of medical claims billers (MIBs) is full of corporate and governmental entities whose main goal in life often appears to be obstructing easy claims processing.
Keeping up with changes -- an important part of the medical billing industry -- is easier when you understand where insurers are going, as well as where they’ve been. It’s also extremely necessary to speak the lingo, to be able to rattle off information about carriers, administrators, beneficiaries and comprehensive plans and actually know what you’re talking about.
Who’s who in insurance
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The Carrier. This refers to the insurance company that writes and administers the insurance policy. The carrier is also known as the insurer, underwriter or administrator.
Each carrier can offer a variety of insurance plans. A single carrier might sell individual policies and group policies and administer a federal program such as Medicare. These plans -- which can be worded as craftily as a government foreign aid policy -- fall into three basic groups:
1. Individual policies. These are purchased by individuals rather than by or for groups, although they can cover an individual and spouse, or an individual and family. Homeowners and vehicle insurance policies also provide health-care benefits to cover, for example, an auto accident, a dog bite or a fall on a frozen front walk.
2. Group policies. This is the package deal concept. Most group policies are provided by employers for their employees. In some cases, it’s a freebie; in others, the employees pay for the insurance with the idea that their cost is lower than it would be if they purchased the policy on their own. Group policies are also purchased by groups for their members, such as the Romance Writers of America or the Good Sam Club.
3. Government programs. Although Medicare, Medicaid (including the Affordable Care Act), the Children’s Health Insurance Program (CHIP) and TRICARE provides civilian health benefits for military personnel, retirees and dependents) are government entities, they’re administered by the private sector-insurance companies or data processing firms.
The Provider. This refers to the person who provides health-care services and/or supplies. A provider can be a physician, pharmacist, physical therapist, outside laboratory performing various tests or a medical supply company that rents or sells wheelchairs or walkers.
The Beneficiary. This is the person eligible to receive benefits under the health insurance policy; simply, the patient.
The Insured. This is the policy holder, the person who’s covered by the insurance program and who makes it possible for their family to be covered. In other words, the insured is the employee whose employment makes the group coverage available. The insured can also be referred to as the enrollee, certificate holder or subscriber.
The Dependents. These are the children (including step-children, legally adopted children or foster children) and spouse -- or in some areas the domestic partner -- of the insured. Policies define covered dependents using these criteria:
- Spouse. The insured’s spouse (or domestic partner, if applicable) must not be legally separated from the insured and must not be in the armed forces.
- Child(ren). The Affordable Care Act now extends coverage for young adult children under their parent’s health care plan up to the age of 26, regardless of their financial dependency, residency with parent, student status, employment and/or marital status.
Now that we’ve established who the players are, let’s look at who’s making the rules. There are more than 1,000 health insurance companies in the United States, with different types of plans. Health insurance coverage falls into several categories including private, employment-based, Medicaid/CHIPS, Medicare, military (i.e., TRICARE) and workers’ compensation.
Commercial carriers offer health insurance contracts to individuals and groups. Think of the big traditionals -- Aetna, Humana and United Healthcare -- for an idea of what we’re talking about here. But, of course, there are thousands of smaller carriers as well. As opposed to various altruistic government or nonprofit carriers, commercial carriers are in the health insurance business to make money.
Some commercial plans are indemnity policies, in which the carrier indemnifies or reimburses the patient for covered services up to a limit set in the policy. For example, it might pay for mental health services up to a yearly limit of $1,000 or a lifetime limit or cap of $10,000. This type of plan assumes that the patient is going to pay the doctor when services are rendered.
Then there’s the policy that bypasses the patient and sends the check directly to the doctor. For the provider, this is a sort of good news/bad news option. The good news, of course, is that the physician receives direct payment; the bad news is that the doctor is paid in accordance with what the carrier considers usual and customary fees, which might not necessarily be what the doctor considers fair compensation.
To make matters more complicated, various policies limit coverage to various disorders or types of service. Some might not cover maternity services, others might exclude mental disorders and still others might not allow treatment by chiropractors, optometrists or dentists.
The deductible is the amount the patient must pay before the insurance coverage kicks in. If the policy specifies a $500 deductible, for example, and the patient racks up $600 worth of medical expenses, the carrier will pay toward the last $100, leaving the patient to take care of the balance. If the patient is a basically healthy type and never reaches the $500 mark, the insurance company isn’t going to cough up a dime.
Most policies have an allowable amount for covered services. This means the insurer pays a portion -- usually 70 to 80 percent -- of the doctor’s fee, and the patient pays the balance, which is called the co-payment or co-insurance. If the policy above has a $500 deductible and the allowable amount is 80 percent, the insurance carrier will pay $80 of the total $600 bill.
In deference to the insured who’s having a run of poor health, many policies also include a stop-loss provision, which limits the total co-payments the policy holder must make in a given year. Once the insured has paid $1,000 in co-payments, for example, the carrier forgoes any further co-payments and picks up 100 percent of the tab for any and all remaining covered services.
The big three
There are three main types of commercial health insurance plans.
1. Basic. These plans pay total costs up to a maximum (usually around $5,000) for all but a few exclusions such as cosmetic surgery and mental disorders. They might or might not have a deductible. Costs can be incurred in the hospital, at the doctor’s office or at home.
2. Major medical. These policies are designed for catastrophic situations such as extended hospitalization, which might give you another major medical catastrophe if you saw the bill and didn’t have the insurance coverage. They don’t pay for minor health problems or office visits and they almost always feature large deductibles and co-payments.
3. Comprehensive. These plans, the combo plate on the commercial carrier’s menu, are composites of both basic and major medical coverage.
At this point, you might be asking yourself “Just what the heck are HMOs and PPOs?”
HMO stands for Health Maintenance Organization and is a sort of privatized version of a national health-care plan. There are various permutations of HMOs, but the gist is that patients pay a monthly fee to belong. When they need medical care, they present a membership card and see a preassigned physician, called the primary physician, within the organization and pay either a nominal fee per visit or no fee at all.
The HMO system insists that the patient see only their primary doctor. They can’t choose another doctor within the HMO or pick one outside of the system. HMOs also demand that patients see a specialist only upon the authorization and referral of the primary physician.
The upside of the HMO system is that because the organization is trying to whittle down major medical costs by concurrently whittling away at major medical problems, it will pay for a lot of preventive services (such as well-baby checkups, well-adult physicals, mammograms and immunizations) that traditional fee-for-service carriers won’t cover.
Because of all the taboos, however, HMOs receive a lot of flak from the public, who often feel that their power of choice has been taken away and that the HMO isn’t providing optimal care. Doctors aren’t wild about HMOs, either, for the same reasons and for many others, including, of course, money.
Providers who work for HMOs are usually paid on a capitation basis. This refers to the practice of counting heads. The HMO decides how many patients the doctor is likely to see in their office in a given month and then pays them for treating that number regardless of how many patients actually cross their threshold.
The PPO, or Preferred Provider Organization is a group of doctors who cooperate with an insurance plan by accepting fee-for-service payments at less than the usual and customary rate. Unlike most of their HMO brethren, PPO doctors are allowed to see nonplan patients and charge their own fees. PPO patients are granted more autonomy as well and can choose a doctor outside the plan, although they then have to pay a larger chunk of the bill.
High-deductible health plans (HDHPs) feature higher deductibles ($1,000 to $10,000) than traditional insurance plans, and are growing in popularity because of their lower premiums. Combining them with a Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA) will help policy holders pay for out-of-pocket medical expenses with pre-tax dollars.
Swimming around in the alphabet soup of managed care organizations are a bevy of other crossbreeds. There is the IPA, or Independent Practice Association; the EPO, or Exclusive Provider Organization; the POS, or Point of Service plan; and the MSO, otherwise known as the Managed Services Organization.
So long as you don’t confuse MSO with MSG or IPA with the IRA, you should be able to wade your way through this lot. As with all other insurance plans, the important thing to be aware of is what and how the particular plan pays the physician.