Paul Sanchez
Understanding health insurance benefits can be challenging, and it is important to know the meaning of terms that insurance companies use. This knowledge will help you choose a plan that best meets your needs and avoid unexpected out-of-network medical bills. In this discussion, we will explore key medical terms that insurance providers should be familiar with, including in-network and out-of-network, deductible, coinsurance, copayment, preauthorization, and benefit. By understanding these terms, insurance providers can better navigate the complex world of healthcare billing and insurance, ensuring that their customers receive the coverage they need and deserve.
| Characteristics | Values |
|---|---|
| Health Insurance Provider | An entity that provides health insurance plans to individuals, families, and organizations. |
| Health Insurance Plan | A contract that outlines the covered health care services and associated costs. |
| In-Network Provider | Doctors, hospitals, and other health care providers that contract with the insurance company to provide services at discounted rates. |
| Out-of-Network Provider | Health care professionals, hospitals, or pharmacies that are not part of the insurance plan's network of providers. Services from out-of-network providers are generally more expensive. |
| Deductible | The amount an individual must pay out-of-pocket before the insurance company starts paying for covered services. |
| Copayment (Copay) | A fixed amount an individual pays for covered health care services, usually at the time of service. |
| Coinsurance | The percentage of the allowed amount for a covered service that an individual pays. |
| Benefit | Any service or supply covered by the health insurance plan, including office visits, surgical procedures, prescription drugs, and medical equipment. |
| Preauthorization/Precertification | The process of obtaining approval from the insurance company for coverage of a specific medical procedure or prescription drug. |
| Credentialing | The process of verifying a doctor's credentials, including professional background, licenses, and certifications. |
| Explanation of Benefits | A written explanation from the insurance company detailing how a medical claim was paid and the portion of costs the individual is responsible for. |
| Fee Schedule | A document stating the amounts the insurance company is willing to pay for specific services provided by the health care provider. |
| Accounts Receivable (AR) | The balance of money due to the provider for services delivered. |
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What You'll Learn
Deductibles and out-of-pocket expenses
Out-of-pocket expenses refer to costs that an individual must pay out of their own pocket, which may or may not be reimbursed later. In the context of health insurance, out-of-pocket expenses include deductibles, copays, and coinsurance. These expenses are the policyholder's non-reimbursable share of medical costs.
A deductible is the amount you must pay each year for covered costs before your insurance coverage begins contributing. For example, if you have a $1,000 deductible, you will be responsible for paying the full cost of covered medical services until you reach $1,000 in expenses. Once you meet your deductible, your insurance company will start sharing the costs with you.
Copays, or copayments, are fixed amounts you pay out of pocket for covered healthcare services. For example, your plan may require you to pay $20 for each visit to a specialist doctor.
Coinsurance is the portion of the insurance bill that you are responsible for paying after meeting your deductible. It is typically expressed as a percentage. For example, with 20% coinsurance, you pay 20% of the total bill.
The out-of-pocket maximum is the cap on how much you must spend on covered health care services in a plan year before your insurance takes over. This limit resets at the start of each new policy year. Once you reach your out-of-pocket maximum, your insurance will pay 100% of the covered costs for the remainder of the year. It is important to note that some expenses, such as non-covered services, costs above the allowed amount, and out-of-network care, may not count toward your out-of-pocket maximum.
The out-of-pocket maximum and deductible vary depending on the type of plan chosen. Group insurance plans through an employer typically have lower out-of-pocket maximums and deductibles compared to individual plans. High-deductible health plans (HDHPs) often have lower monthly premiums, which can result in overall cost savings if you have minimal unexpected doctor visits.
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Coinsurance and copayments
Copayments, or copays, are fixed-cost payments made by the insured for specific services covered by their insurance. This means that the insured pays a set dollar amount each time they receive treatment or services. Copayments can vary depending on the service, with different copays for emergency room visits, general provider office exams, and prescription drugs. Copays are usually negotiated by the insurance company with in-network providers, and they typically do not count towards the deductible.
Coinsurance, on the other hand, is a percentage of the cost of a covered service that the insured pays. For example, if the insurance plan covers 80% of a surgery that costs $8,000, the insured would be responsible for paying 20% or $1,600. Coinsurance only takes effect after the insured has met their deductible for the year, and it does not contribute towards the deductible. The coinsurance rate remains the same regardless of the service or procedure.
Both copayments and coinsurance bring the insured closer to their out-of-pocket maximum. Once this maximum is reached, the insurance provider is responsible for 100% of the costs of covered services for the remainder of the policy year. It is important to note that not all insurance plans require copayments or coinsurance, and the specific details of these expenses can vary across different plans.
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Claim and adjudication
Claims and adjudication are integral parts of the medical billing process. A medical claim is a bill that healthcare providers submit to a patient's insurance provider. This bill contains unique medical codes that detail the care administered during a patient visit, including any services, procedures, or supplies used. The medical codes are transcribed from the care provider's notes and clinical documentation. These codes are standardised so that insurance companies can use them to pay claims.
The claim adjudication process in medical billing is when the insurance payer reviews a claim submitted by the healthcare provider and determines the extent of their responsibility to pay for the medical services. This is done by comparing the claim to any benefit requirements, reference files, or coverage. The payer evaluates the claim and decides whether the claim is valid and how much of the claim they will reimburse. If the claim is invalid or contains errors, the payer has the authority to deny paying for it. The payment provided by the payer after adjudicating a claim is called the explanation of payment or remittance advice, and includes reasons for denial or reduction of the claim.
Adjudication occurs once the payer has received a medical claim. Some insurance providers process medical claims through software for adjudication purposes, also known as auto-adjudication. Healthcare providers can use medical claims adjudication software to save costs, improve accuracy, and provide better service to patients. This software can also help to identify fraudulent claims and streamline the claims processing workflow.
In some cases, claims do not get rejected throughout the adjudication process, but the insurance payer may conduct secondary auditing of the claims. This ensures that the claims are in compliance with any state or federal regulations. At this stage, the payer determines whether the claim is reimbursable or not, and can decide to downcode the billed amount if it is too high. If a claim is rejected, the patient may have to submit an appeal to gain coverage for the care costs.
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Credentialing and underwriting
Credentialing is the process of applying to health insurance networks for inclusion in their provider panels. It is a way for insurance companies to verify that medical providers are legitimate and qualified to receive reimbursement for services provided. Credentialing is not the same as being licensed, and it is not a one-time process. Credentialing must be renewed regularly, and the timeframe varies by company and state. In the United States, a medical license indicates that an individual has completed the necessary education, training, and examinations to practice medicine. On the other hand, credentialing allows providers to be reimbursed for a diverse array of treatments and expand their patient base by accepting various insurance plans.
The credentialing process typically involves two steps: credentialing and contracting. During the credentialing phase, providers submit a participation request to the health plan using their credentialing application process. This includes completing a unique credentialing application, using CAQH, or accepting a state-standardized credentialing application. The health plan then performs a thorough credentials verification to ensure the provider meets their requirements. Once credentialing is complete, the provider's file goes to the Credentialing Committee for approval.
The contracting phase involves the provider signing a participating provider agreement that defines the terms of participation for receiving in-network reimbursement for their claims. Without this agreement, providers will not receive in-network reimbursement. It is important to note that government health plans such as Medicare and Medicaid will not pay for any out-of-network services. The entire credentialing process can be lengthy, ranging from 30 to 45 days, or even up to 60 days in the case of Medicare.
To ensure a smooth credentialing process, providers should research which local insurance companies to credential with, gather all required documents, and stay organized with calendars and file systems to track credentialing timelines. Additionally, providers should maintain their CAQH profile and NPPES records to keep their information up to date. Outsourcing the credentialing process to a specialized company can also help streamline the procedure and avoid potential errors that could lead to claim rejections.
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Medicare and Medicaid
Medicare is a federal insurance program that covers:
- Prescription drugs
- Surgery and related follow-up procedures
- Medically necessary services or supplies to diagnose or treat an illness, injury, condition, or disease
Medicare Advantage Plans, also known as Medicare Part C, are "all-in-one" alternatives to traditional Medicare plans, offered through private insurance companies. Medicare Part A covers hospital insurance, while Medicare Part B covers medical insurance.
Medicaid, on the other hand, is a joint federal and state program that helps cover medical costs for certain low-income individuals, families, and children, pregnant women, the elderly, and people with disabilities. Each state has its own Medicaid program, following general rules set by the federal government. As a result, eligibility requirements and benefits vary across states. Medicaid covers expenses such as:
- Nursing home care
- Personal care services
- Prescription drugs not covered by Medicare
In cases where an individual has both Medicare and full Medicaid coverage, they are considered "dually eligible". Medicare pays first in such cases, and Medicaid pays last, after any other health insurance the individual might have.
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Frequently asked questions
A deductible is the amount of money you must pay out of pocket before your insurance company covers the remaining costs. For example, if your deductible is $1,000, your insurance won't cover any expenses until you've paid $1,000 toward your healthcare costs.
In-network providers are contracted with your insurance company to provide services at
A copayment or coinsurance is a fixed amount you pay for covered health care services, usually at the time of service. For example, if your health plan's allowed amount for a doctor's office visit is $100, your copayment might be $20.
