Training Module I

Health Insurance Concepts

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Objectives
Understand Health Insurance Concepts and type of contracts.
Understand the Payer Structure.
Identify the major Public Insurance plans and know the eligibility
criteria for it.
Know what is Workers’ Compensation.
Know what is Managed Care and describe the most common types
of Managed care Programs.
Know the difference between Health Maintenance Organization
(HMO), Preferred Provider Organization (PPO) and Point Of Service
(POS) plans.
Identify the most common cost control and quality Improvement
methods of Managed Care.
Understand Health Insurance Portability Accountability Act
(HIPAA), Coordination of Benefits (COB) and Consolidated Omnibus
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Budget Reconciliation Act (COBRA).
Content
Health Insurance
Medical Encounter and Claim Flow
Insurance Contract
Contract Types
Payer Structure
Major Public Insurance Programs
Medicare
Medicare Supplemental Plan
Medicaid
Other Public Insurance Programs
Workers’ Compensation
Commercial Insurance
Plan Types
Fee for Service
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Managed Care
Content

Commercial Insurance
Managed Care
Managed Care
Defining Managed Care
Managed Care Plan Characteristics

Managed care coverage types

Health Maintenance Organization (HMO)
Primary Care Physician
Preferred Provider Organization (PPO)
Exclusive Provider Organization (EPO)
Point of Service (POS)
Medicare and Managed Care
Medicaid and Managed Care
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Content

Cost Control and Quality Improvement Methods of Managed Care

Coordinating With Providers
Credentialing
Pre-authorization
Utilization Management
Case Management and
Disease Management
Health Insurance Portability and Accountability Act
(HIPAA)
Coordination of Benefits (COB)
Consolidated Omnibus Budget Reconciliation Act (COBRA)

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 HEALTH
INSURANCE
HEALTH INSURANCE

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Health Insurance

Helps pay medical bills and protects from large

financial losses due to illness or injury.
Provides benefits for medical services for persons covered
under a health insurance contract.

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Medical Encounter and the Claims flow
John fixes up an
appointment The documents are scanned to the
with the doctor Billing Company.

The provider
provides appropriate
treatment to John.

CLAIM
John takes up a plan
from Universal The billing company
Healthcare submits claim to Universal
Healthcare
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--contd--
--contd--

Medical Encounter and the Claims flow

The claim
gets denied
DENIED A ‘Remittance
Advice’ is sent to the
provider

Remittance
Advice

Universal Healthcare
processes the claim.

The claim gets

paid

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Insurance Contract

An insurance contract is a legally binding agreement

between an insurance company and another party.

The contract specifies covered medical expenses and the

conditions under which benefits are paid.

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Type of Contracts

Individual Health Insurance Contract

A contract of insurance made with an individual called the
insured, which normally covers such individual and, in certain
instances, members of their family.

Group Health Insurance Contract

A contract of insurance made with an employer or other entity
that covers a group of persons identified as individuals within
an entity.

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PAYER STRUCTURE
PAYER STRUCTURE

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 PAYER STRUCTURE

SELF PAY

PAYER
PAYER

COMMERCIAL PUBLIC
INSURANCE INSURANCE

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 MAJOR PUBLIC
INSURANCE PROGRAMS

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Major Public Insurance Plans
MEDICARE
It is a federal health insurance program.
It is an insurance program for
People who are 65 years of age or older,
People of any age with permanent kidney failure,
Certain disabled people under 65.
Administered by the Centers for Medicare and Medicaid
Services (CMS), Department of Health and Human Services.
It has two parts:
Part A – Hospital insurance
Part B – Medical Insurance.
Part C
Part D

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Major Public Insurance Plans

MEDICAID
Insurance program jointly funded by the State and the
Federal Government.
Provides healthcare to the low-income group.
Termed as the ‘Payer of the last resort’.
Pays the premium, deductible of MCR Part A & B for
Qualified MCR beneficiaries.
Differs from State to state

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 Other Public Insurance programs

CHAMPVA (Civilian Health and Medical Program of the

Department of Veterans Affairs)

A program of healthcare benefits for dependents of veterans who are

totally disabled due to a service connected disability
Survivors of persons who died in the line of duty while serving in the
armed forces.
TRICARE (Formerly known as CHAMPUS)
Program for active duty military personnel, their dependents and
military retirees
The TRICARE program is managed by the military in partnership with
civilian contractors.

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Workers’ Compensation

Administered by the States.

Covers workers injured in job-related accidents.
Pays benefits to employees who have suffered job related
injury, disease or death.
In some states the state is the insurer, in other states
insurance has to be acquired from commercial insurance
firms.

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COMMERCIAL
PLANS

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 COMMERCIAL INSURANCE PLAN TYPES

COMMERCIAL
INSURANCE

MANAGED FEE for

CARE SERVICE

HMO PPO EPO POS

Note: Click on the underlined words for more information on it. 20

 Commercial Insurance

Fee For Service (Indemnity Insurance)

Unlimited Choice -Participants choose their own doctors
and hospitals.
Large out of pocket expenses.
Patients pay medical bills upfront and then submit bills for
reimbursement.
Preventive Services usually are not covered.
Expensive.

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Note: Click on the arrow to go back to the Commercial Insurance Plan Types chart
 Commercial Insurance

Managed Care
Managed Care is defined as providing quality care
at reduced costs through a network of providers to the
members,

Manages the use of services and

Measures the performance of health care providers

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 Commercial Insurance

Affordable
price Managed
at
Care

Quality Healthcare

DEFINING MANAGED CARE

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 Managed Care Plan Characteristics

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Note: Click on the arrow to go back to the Commercial Insurance Plan Types
 MANAGED CARE
COVERAGE TYPES

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 Coverage Types – Managed Care
Health Maintenance Organization (HMO) Characteristics

Selection of a Primary Care Physician (PCP) by the member.

Primary care Physician (PCP) coordinates and directs healthcare.

PCP should issue a referral if the member wants to see a specialist.

You may be charged a small copayment each time you utilize an HMO
covered service.

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Note: Click on the arrow to go back to the Commercial Insurance Plan Types
 Coverage Types – Managed Care
 Member must approach the provider in the network except in the case
of an emergency or urgent care.

 Open access HMO plans allow members to see specialists without a

primary care doctor referral.

 Gatekeeper HMO plans require members to obtain a referral from

the primary care physician before seeing a specialist.

 Termination of certain services - Home health care - appeal

 age, disability or health status - no discrimination

 No - pre-enrollment health screenings

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 Primary Care Physician
Central to the concept of Primary care is the patient.

Primary care physician is also known as the gatekeeper.

Primary Care Physician is a generalist physician who provides

definitive care to the patient at the point of first contact and takes
continuing responsibility for providing the patient’s care.

Primary care Physician makes a referral when a specialist is needed

by the patient.

Primary Care Physicians are advocates for the patient in

coordinating the use of entire health system to benefit the patient.

Internists, General Practitioners, Pediatricians, Obstetricians and

Gynecologists are primary Care physicians.
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Note: Click on the arrow to go back to the HMO plan characteristics slide
 Coverage Types – Managed care
Preferred Provider Organization (PPO) characteristics

Contracts with providers at discounted rates.

Offers in- network and out-of-network levels of benefits.
Member may go to any specialist without a referral as long as the
provider participates in the network.
High coinsurance and deductible for out of network usage.
Will pay for out network emergency services.
More flexible than other plans
No PCP required
works like traditional indemnity plan
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[Link]
Medicare and Managed Care program
• Medicare Advantage Plan (Formerly Medicare + Choice)
• Established under the Medicare Prescription Drug,
Improvement and Modernization Act (MMA) of 2003.
• The program replaces and expands the Medicare + Choice
program.
• Medicare + Choice was created to allow the Centers of
Medicare and Medicaid Services (CMS) to contract with a
variety of different Managed Care and Fee for Service entities
to provide Medicare services to beneficiaries.
• Persons eligible for Medicare Parts A and B and persons not
having End Stage Renal Disease (ESRD) are also eligible for
Medicare Advantage.
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[Link]
 Medicare HMO
• Medicare HMOs are run by private companies that are paid by the
federal government to provide Medicare-covered health care.

• Member must have both Medicare Part A and Part B to enroll in a

Medicare HMO.

• Unlike Original Medicare, a Medicare HMO will only let the

member see certain doctors or hospitals within your area unless
you have an emergency.

• These doctors and hospitals are part of what is called the HMO’s
network.
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Medicare HMO

• The member must choose a primary care physician (PCP)

from the network.

• That doctor decides when the member can see a specialist.

• A Medicare HMO could save the member’s money

because some do not charge premiums, deductibles or
coinsurance.

• The member may only have to pay a small copayment

each time he/she sees a doctor, as long as the member uses
the HMO’s doctors and follow HMO rules. 32
Medicare HMO
You can get all your Medicare benefits, including drug
coverage, through a Medicare HMO.

Medicare HMOs must cover the same kinds of care that

Original Medicare covers, but they decide when you need
it.

Medicare HMO - Hospice

They may also offer additional benefits like:
Dental Care
Eye Glasses
Hearing aids
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Physical exams
 Medicare PPO
• Medicare PPOs are private insurance products, much like
Medicare HMOs.

• The member must have both Medicare Part A and Part B to enroll
in a Medicare PPO.

• The member will be responsible for paying fixed copays if he/she

uses in-network providers, but they will also get some coverage
if you go out of network.

• They provide Medicare benefits, including Medicare drug

coverage, and may offer some additional benefits. For example,
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the PPOs may have some kind of prescription drug coverage.
Difference between MCR PPO & MCR HMO

• PPOs differ from HMOs in only two key ways:

– Medicare PPOs will likely charge higher monthly

premiums than Medicare HMOs.

– But, Medicare PPOs will cover some of the costs of

your care if you use doctors and hospitals outside the
network.

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Medicaid and Managed Care Program
States make prospective payments to managed care
plans to provide or arrange for all services to enrollees.
Person who receives limited benefits and is not otherwise
eligible for Medicaid is not eligible to receive services from
a Medicaid Managed Care program.
Person must live within the service area covered by the
Managed Care program.
These programs are delivered through an HMO structure,
with some additional features, unique to Medicaid.
Offers more choices and sometimes extra benefits like
extra days in the hospital
Medicaid HMOs employs enrollment brokers.
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 Cost Control and
Quality Improvement
Methods: Managed Care

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 Cost Control and Quality Improvement methods
in Managed Care

Contracting with Providers

Credentialing

Pre - Authorization

Utilization Management

Case Management

Disease Management

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Note: Click on the underlined words for more information on it.
 Contracting with providers
Contracting with providers to provide care for members at
reduced rates.
Capitation- It is a kind of provider reimbursement
methodology. A fixed amount of money is paid to the
provider per member per month (PMPM) by the Insurance
company in return for a large volume of referrals.
Providers have a vested interest in keeping the
members healthy and
Controlling access to more expensive tests and
procedures.

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Note: Click on the arrow to go back to the Cost control and Quality Improvement methods in Managed Care
 Credentialing and Recredentialing

Credentialing is a process for validating the

background and assessing the qualifications of health
care professionals to provide patient care services
Setting criteria for selection of providers.
Recredentialing: Practitioners are regularly and
rigorously monitored to ensure they continue to meet high
standards set by the Credentialing Department.
Establish formal programs to monitor the amount
and quality of care being given .

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Note: Click on the arrow to go back to the Cost control and Quality Improvement methods in Managed Care
 Pre - Authorization
A cost containment feature

Emergency Services do not need a pre- authorization.

Pre - Authorization Vs Pre - Certification

Pre-certification refers to obtaining authorization for the
hospital stay (number of days) and typically refers to hospital
reimbursement only.

Prior authorization is the verification of benefits and

determination of coverage for the procedure to be performed.
This refers to both physician and hospital reimbursement.
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[Link]
Utilization Management (UM)
Utilization: The extent to which the members of
a covered group use a program or obtains particular
service or category of procedures over a given period of
[Link] expressed as number of services per year.
Utilization Management (UM) is a critical process utilized
by hospitals and managed care systems to assess and evaluate
the resources that are devoted to patient care.
Utilization Management (UM) staff use the criteria chosen
by the healthcare system to ensure the necessity and
appropriateness of the care provided.
Utilization Management (UM) is achieved through
Prospective, Concurrent and Retrospective techniques.
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Utilization Management (UM)
Review Processes
Prospective Review
Review of elective procedures/tests, both inpatient and outpatient, to
determine the medical necessity and appropriateness of such
procedures/tests by establishing if the procedures/tests meet medically
established criteria and are being performed in the most cost-effective
and appropriate setting.

Pre admission Certification determines the actual need for a

patient’s admission or treatment into a hospital.

Second Opinions A cost management strategy that encourages

patients to obtain the opinion of another doctor after a physician
has recommended that a non- emergency or elective surgery be
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performed.
Utilization Management

Concurrent Review: Concurrent reviews of patient

care are performed during the patient’s hospitalization.
It is a review of ongoing medical care to ensure that the
level of care is appropriate, that confinement is medically
necessary and that the care is being delivered in the most
efficient and cost-effective setting.
Retrospective Review:
Involves evaluation of the care that is already
delivered.
Review to determine if care was provided in
accordance with medically established standards of
care in the most appropriate and cost-efficient setting
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 Discharge Planning
Involves the patient, family or legal guardian who have
participated in supporting the consumer’s treatment course.
Promotes continuity of patient care through the facilitation and
coordination of patient services to ensure a smooth transition
for members across the continuum of healthcare.
Facilitates timely and appropriate discharge and post-discharge services.
Includes the identification of personal, familial, community and other
support systems to help improve and maintain healthy lifestyles.
Includes identification of a case manager or primary provider to act as
the single point of responsibility for coordinating care.
Includes an assurance to patients who fail to return to treatment will
receive active follow up to assure their level of care needs are met.

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Note: Click on the arrow to go back to the Cost control and Quality Improvement methods in Managed Care
 Case Management
System of patient care delivery that focuses on
the achievement of outcomes within effective time frames and
with appropriate use of resources.
Begins with patient admission to the hospital system and ends at
discharge.
Care provided to the patient is planned based on the individual’s needs.
Educates the patient and also his family on the goal of treatment.
Evaluates all the treatment options available.
Facilitates communication among members, families and providers.
Care is monitored and evaluated on a continuous basis.
Ensures that there are no variances from the treatment plan charted out
for the patient.
Variances from the plan of treatment is taken care of by timely
interventions.
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Note: Click on the arrow to go back to the Cost control and Quality Improvement methods in Managed Care
Disease Management
A coordinated pro active disease specific approach to patient care
that seeks to produce optimal clinical outcomes in a cost efficient
manner.
Targets members with chronic diseases.
Improvement of member’s health : Focuses on arresting,
retarding or even reversing disease progression.
Emphasis on Long term results primarily by reducing the need for
emergent/urgent or hospital care.
Specialized educational programs geared towards the patient’s
level of understanding and interest.
One of the tools that disease management uses to identify
members who can be helped by this method is:
Health Risk Assessment Forms- Members to identify specific
diagnosis, specific events or other risk factors.
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HIPAA

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Objectives of HIPAA

Protects health insurance coverage for workers and their

families when they change or lose their jobs
Improve the effectiveness and efficiency of the US
healthcare system through standardization of transactions
Increase the protection and confidentiality of individually
identifiable health information by mandating security and
privacy standards

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HIPAA
This law applies to all healthcare organizations (both
private and government) which deal with PHI, or
individually identifiable personal health information
Health Plans
Clearing Houses
Providers
Business associates and vendors

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HIPAA

HIPAA LAW

Title I TITLE II
Health Insurance Administrative
Reform Simplification

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Health Insurance Portability and Accountability Act (HIPAA)

HIPAA Title I - Health Insurance reform

Portability
Accountability
HIPAA Title II – Administrative Simplification
– Administrative Simplification
– Electronic Transaction and Code sets
– Privacy and Confidentiality Standards
– Unique Identifiers
– Security standards for integrity, availability and confidentiality of
Protected Health Information (PHI)

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 Health Insurance Portability and Accountability Act (HIPAA)
• What is continuous coverage?
Continuous coverage under one plan, or under several plans, as long as
you don't have a lapse of 63 or more consecutive days.
Example
Take Art, who has diabetes. Ajax Company covered him under its
group health plan for 9 months, but he lost his job and health
coverage. Then, 45 days later, Art found a new job at Beta
Corporation and had health coverage for 9 more months. Art
changed jobs again. His new company, Charter, has a health plan
that covers care for diabetes but excludes pre-existing conditions for
12 months. Charter must cover Art's diabetes care immediately,
because his 18 months of prior continuous coverage are credited
against the 12-month exclusion.
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Health Insurance Portability and Accountability Act (HIPAA)

Now consider a slightly different situation. Assume Art

was uninsured for 90 days between his jobs at Ajax and
Beta. In this case, charter will credit coverage only under
Beta's plan toward the 12-month pre-existing condition
exclusion period. Charter's plan will begin paying for Art's
diabetes care in 3 months (1 year minus 9 months). Art
does not get credit for his coverage at Ajax since he had a
break of more than 63 consecutive days.

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HIPAA Transactions

There are three categories of technology requirements:

Transaction Sets: Address the key business interactions
among health care providers, health plan payers and health plan
sponsors.
Code Sets: Define the data element values used in the
standard transactions I.
Identifiers: Uniform data values used to uniquely identify
the key participants in the standard transactions.

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HIPAA Transactions
Standard transaction sets are defined for the following:
 Health claims or equivalent encounter (X12N 837)
 Enrollment and Disenrollment in a health plan (X12N 834)
 Eligibility for Health Plan – Inquiry/Response (X12N 270-271)
 Healthcare payment and remittance Advice (X12N 835)
 Health Claims Status – Inquiry/Response (X12N 276-277)
 Coordination of Benefits (X12N 837)
 Health Claim request for Additional information and response
(X12N 275-277)
 Functional Acknowledgement (X12N 997)
 Health Plan premiums (X12N 820)
 Health Claims Attachment (Not in Final)
 First Report of Injury (Not in Final)
 Referral Authorization (X12N 278)
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HIPAA Transactions

STANDARD TRANSACTION RECORD

Code Sets Identifiers

 ICD-9-CM (Diagnosis and  Providers (National Provider
Procedures) Identifier)
 CPT-4 Physician Procedures
 HCPCS Ancillary Services or  Employers (Employer
Procedures Identification Number)
 CDT-2 Dental Terminology  Health plans (Open)
 NDC National Drug Codes
 Individuals (Open)

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HIPAA Terminology
Protected Health Information (PHI): Medical information that
contains any patient identifier
names, geographic sub-divisions, all elements of dates
telephone, fax numbers, email address, SSN, MRN
beneficiary, license, vehicle numbers
finger and voice prints, photos and images
anything else that is uniquely identifying
Covered Entity: Any entity which stores or transmits PHI, for billing,
enrollment, eligibility verification, adjudication, treatment, etc.
Health Plans
Providers
Clearing Houses

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HIPAA Terminology

Business Associate: An entity or organization which works on

behalf of a covered entity. Example: Billing agencies, clearing houses,
claims administrators, consultants, etc. Thus, an organization can be
both a covered entity and a business associate to a covered entity.

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Benefits of HIPAA compliance
Promotes efficiency, reduces paper transactions, quicker
reimbursement
Improved data protection, data quality, and thus better
quality of care
Significant administrative savings due to streamlining of
systems and procedures

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Levels of Compliance
The transaction and Code Sets have upto 4 levels of compliance:
Transaction level, which applies to the use of the applicable
HIPAA transaction when performing the equivalent electronic
business functions
Data element level compliance within an approved transaction set
Code set level compliance with the proposed nationally
maintained coding schemes
Implementation guidelines level compliance.
This covers compliance issues regarding the use of the instructions for
transactions, codes sets and data elements.

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Penalties
Not more than $100 per violation, upto a maximum of
$25,000 per year for all violations of a given standard.
Penalties can be upto $250,000 and jail term upto 10 years
for wrongful disclosure of individually identifiable health
information.

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Impact of HIPAA on Call Centers

Under the law, independent call centers are considered

Business Associates.
Covered entities are required to adopt written privacy procedures.
The privacy procedures may include who has access to protected
information, how it will be used within the entity and when the
information may be disclosed.
In addition, covered entities must take steps to ensure that their
business associates protect the privacy of health information.
As such the Privacy Rule requires providers and health plans to
obtain from their call center, satisfactory assurances, typically through
contract, that the center will use the information only for clearly
defined purposes, safeguard the information from misuse, and help the
covered entity meet HIPAA compliance obligations.
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COORDINATION
of
BENEFITS

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Coordination of Benefits (COB)
Coordination of benefits (COB) applies to a person who is covered
by more than one health plan.
The COB provision and regulations require that all health plans
coordinate benefits to eliminate duplication of payment and assist
patients to receive the maximum benefit to which they are entitled.
By adhering to the COB provisions, the health plans and other
payers can determine which plan will pay for a claim first.
The health plan or payer obligated to pay a claim first is called the
"primary" payer and the other plan or payer is termed "secondary".
Together, the primary and secondary payers coordinate payments
for services up to 100% of the covered charges at a rate consistent with
the benefits.
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 COB
Jane receives a therapeutic massage and is charged $37.50. Her
benefit plan covers $20 per visit to a yearly maximum of $200.
Jane's husband John also has a plan that covers the same service
for the same amount. Both have already satisfied their annual
deductibles and neither of them has reached their yearly
maximums.

In this case, Jane sends a claim form and the original receipts to her
plan, and receives a $20 claim payment and a claim statement.

John then submits a claim for the balance to his benefit plan. He
sends a copy of Jane’s claim statement and the expense receipt.
How much will John’s plan cover?
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 Consolidated Omnibus
Budget Reconciliation Act
(COBRA)

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 Consolidated Omnibus Budget Reconciliation Act (COBRA)

• COBRA is a law that requires employers with 20 or more employees to

let employees and their dependents keep their group health coverage for a
time after they leave their group health plan under certain conditions.
This is called continuation coverage .

• This federal law requires your former employer to allow you to

continue your medical coverage for at least 18 months. Some people can
extend coverage for up to 36 months.

• The law does not apply to plans sponsored by the Federal

Government.
• COBRA Vs EGHP
• COBRA Vs Medicare 68
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