Health Informatics: Week 4

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CHAPTER

8 Third-Party Payers

Learning Outcomes

When you finish this chapter, you will be able to:

8.1 Compare the major features of PPO, HMO, and

POS health plans.

8.2 Identify the two parts of CDHPs.

8.3 Discuss the organization and regulation of employer-

sponsored group health plans and self-insured

plans.

8.4 Explain the purpose of Medicare Parts A, B, C, and

8.5 Describe the fee structures that are used to set

charges.

8-2

Learning Outcomes (Continued)

When you finish this chapter, you will be able to:

8.6 Identify the three methods most payers use to pay

physicians.

8.7 Maintain insurance carrier information in the

PM/EHR.

8-3

Key Terms

• allowed charge

• balance billing

• Blue Cross and Blue

Shield Association

(BCBS)

• capitation (cap) rate

• Civilian Health and

Medical Program of the

Department of Veterans

Affairs (CHAMPVA)

• consumer-driven

(directed) health plan

(CDHP)

8-4

• disability compensation

programs

• discounted fee-for-

service

• dual-eligible

• Employment Retirement

Income Security Act of

1974 (ERISA)

• Federal Employees

Health Benefits (FEHB)

• fee schedule

• flexible savings account

(FSA)

Key Terms (Continued)

• group health plan (GHP)

• health maintenance

organization (HMO)

• health reimbursement

account (HRA)

• health savings account

(HSA)

• high-deductible health

plan (HDHP)

• individual health plan

(IHP)

• Medicaid

8-5

• Medicare

• Medicare Part A,

Hospital Insurance (HI)

• Medicare Part B,

Supplementary Medical

Insurance (SMI)

• Medicare Part C,

Medicare Advantage

• Medicare Part D

• Medicare Physician Fee

Schedule (MPFS)

• Medigap

Key Terms (Continued)

• Medi-Medi beneficiary

• Original Medicare Plan

• point-of-service (POS)

plan

• preferred provider

organization (PPO)

• primary care physician

(PCP)

• relative value scale

(RVS)

• resource-based relative

value scale (RBRVS)

8-6

• self-insured health plans

• third-party payer

• TRICARE

• usual, customary, and

reasonable (UCR)

• usual fees

• workers’ compensation

insurance

• write off

8.1 Types of Health Plans 8-7

• Third-party payer—private or government

organization that insures or pays for health care

on behalf of beneficiaries

• Preferred provider organization (PPO)—

managed care network of health care providers

who agree to perform services for plan members

at discounted rates

– The policyholder pays an annual premium and a

yearly deductible.

– A PPO may offer either a low deductible with a higher

premium or a high deductible with a lower premium.

8.1 Types of Health Plans (Continued) 8-8

• PPO features (continued):

– Members typically pay a copayment at the time of

service, and coinsurance may also be charged.

– Patients may see out-of-network doctors without a

referral or preauthorization; the amount they have to

pay will be higher.

• Health maintenance organization (HMO)—

managed care system in which providers offer

health care to members for fixed periodic

payments

– This type of health plan has the most stringent

guidelines and the narrowest choice of providers.

8.1 Types of Health Plans (Continued) 8-9

• HMO features (continued):

– A Primary care physician (PCP) is a physician in a

managed care organization who directs all aspects of

a patient’s care; members are assigned to a PCP.

– Members must use their HMO’s network except in

emergencies or pay a penalty.

– HMOs are organized around one of three business

models: the staff model, the group or network model,

and the independent practice association model.

8.1 Types of Health Plans (Continued) 8-10

• Point-of-service (POS) plan—managed care

plan that permits patients to receive medial

services from nonnetwork providers

– A POS plan is a hybrid of HMO and PPO networks.

– Members may choose from a primary or secondary

network.

– This kind of plan charges annual premiums and

copayments for office visits.

• Indemnity or fee-for-service plans require

premium, deductible, and coinsurance

payments.

8.2 Consumer-Driven Health Plans 8-11

• Consumer-driven (directed) health plan

(CDHP)—medical insurance that combines a

high-deductible health plan with one or more

tax-preferred savings accounts that the patient

directs

• High-deductible health plan (HDHP)—health

plan that combines high deductible insurance

and a funding option to pay for patients’ out-of-

pocket expenses up to the deductible

– First part of a CDHP

– Annual deductible over $1,000

8.2 Consumer-Driven Health Plans

(Continued) 8-12

• The second part of a CDHP involves one of

three types of funding options:

– Health reimbursement account (HRA)—CDHP

funding option where an employer sets aside an

annual amount for health care costs

– Health savings account (HSA)—CDHP funding

option under which funds are set aside to pay for

certain health care costs

– Flexible savings account (FSA)—CDHP funding

option that has employer and employee contributions

8.3 Private Insurance Payers and Blue

Cross and Blue Shield 8-13

• Group health plan (GHP)—plan of an employer

or employee organization to provide health care

to employees, former employees, and/or their

families

– Human resource departments manage the health

care benefits.

– Riders, or options, are often offered for vision and

dental services.

– During open enrollment periods, employees choose

the plans they prefer for the coming benefit period.

– This kind of health plan must follow federal and state

laws.

8.3 Private Insurance Payers and Blue

Cross and Blue Shield (Continued) 8-14

• Federal Employees Health Benefits (FEHB)—

health care program that covers federal

employees

• Self-insured health plans—health insurance

plans paid for directly by the organization, which

sets up a fund from which to pay

– These do not pay premiums to insurance carriers or

managed care organizations.

– These set up their own provider networks or lease the

use of managed care organizations’ networks.

8.3 Private Insurance Payers and Blue

Cross and Blue Shield (Continued) 8-15

• Employee Retirement Income Security Act of

1974 (ERISA)—law providing incentives and

protection for companies with employee health

and pension plans

– The law regulates self-insured health plans.

• Individual health plan (IHP)—medical

insurance plan purchased by an individual

• Blue Cross and Blue Shield Association

(BCBS)—licensing agency of Blue Cross and

Blue Shield plans

8.4 Government-Sponsored Insurance

Programs, Workers’ Compensation,

and Disability Plans

8-16

• Medicare—federal health insurance program for

people sixty-five or older and some people with

disabilities

• Medicare Part A, Hospital Insurance (HI)—

program that pays for hospitalization, care in a

skilled nursing facility, home health care, and

hospice care

• Medicare Part B, Supplementary Medical

Insurance (SMI)—program that pays for

physician services, outpatient hospital services,

durable medical equipment, and other services

and supplies

8.4 Government-Sponsored Insurance

Programs, Workers’ Compensation,

and Disability Plans (Continued)

8-17

• Original Medicare Plan—Medicare fee-for-

service plan

• Medigap—plan offered by a private insurance

carrier to supplement Medicare coverage

• Medicare Part C, Medicare Advantage—

managed care health plan under the Medicare

program

• Medicare Part D—Medicare prescription drug

reimbursement plans

8.4 Government-Sponsored Insurance

Programs, Workers’ Compensation,

and Disability Plans (Continued)

8-18

• Medicaid—federal and state assistance

program that pays for health care services for

people who cannot afford them

• Medi-Medi beneficiaries—people eligible for

both Medicare and Medicaid

• Dual-eligible—Medicare-Medicaid beneficiary

• TRICARE—government health program serving

dependents of active-duty service members,

military retirees and their families, some former

spouses, and survivors of deceased military

members

8.4 Government-Sponsored Insurance

Programs, Workers’ Compensation,

and Disability Plans (Continued)

8-19

• Civilian Health and Medical Program of the

Department of Veterans Affairs

(CHAMPVA)—health care plan for families of

veterans with 100 percent service-related

disabilities and the surviving spouses and

children of veterans who die from service-related

disabilities

8.4 Government-Sponsored Insurance

Programs, Workers’ Compensation,

and Disability Plans (Continued)

8-20

• Workers’ compensation insurance—state or

federal plan that covers medical care and other

benefits for employees who suffer accidental

injury or become ill as a result of employment

• Disability compensation programs—programs

that provide partial reimbursement for lost

income when a disability prevents an individual

from working

8.5 Setting Fees 8-21

• Fee schedule—document that specifies the

amount the provider bills for services

• Usual fees—normal fees charged by a provider

• Most payers use one of three methods to set the

fees that their plan will pay physicians:

– Usual, customary, and reasonable (UCR)—fees set

by comparing usual fees, customary fees, and

reasonable fees

– Relative value scale (RVS)—system of assigning

unit values to medical services based on their

required skill and time

– Resource-based relative value scale (RBRVS)—

relative value scale for establishing Medicare charges

8.5 Setting Fees (Continued) 8-22

• Medicare Physician Fee Schedule (MPFS)—

RBRVS-based allowed fees that are the basis

for Medicare reimbursements

8.6 Third-Party Payment Methods 8-23

• Payers use one of three main methods of paying

providers:

– Allowed charges

– Contracted fee schedules

– Capitation

• Allowed charge—maximum charge a plan pays

for a service or procedure

• Balance billing—collecting the difference

between a provider’s usual fee and a payer’s

lower allowed charge

8.6 Third-Party Payment Methods

(Continued) 8-24

• Write off—to deduct an amount from a patient’s

account

• Discounted fee-for-service—payment

schedule for services based on a reduced

percentage of usual charges

• Capitation (cap) rate—periodic prepayment to

a provider for specified services to each plan

member

8.7 Maintaining Insurance Information in

the PM/EHR 8-25

• Setting up insurance carriers correctly in the

PM/EHR is essential to getting claims paid in a

timely manner.

• To maintain insurance carrier information in

MCPR:

– Access the information by selecting Insurance on the

Lists menu.

– Select Carriers (to enter, edit, or delete carriers) or

Classes (for reporting) on the submenu that appears.

– Select the Carriers option; the Insurance Carrier List

dialog box is displayed.

8.7 Maintaining Insurance Information in

the PM/EHR (Continued) 8-26

• Maintaining carrier information (continued):

– Use the Edit, New, and Delete buttons to change,

create, and delete insurance carriers.

– Use the Print Grid button to print the information.

– Close the dialog box using the Close button.