Does the requirement of referral from the primary care physicians (gate keeper) for a specialty doctor keep costs down?
The United States Health Care System:
Combining Business, Health, and Delivery
Third Edition
Chapter 3
The Payment Process:
Insurance and Third-Party
Payers
Copyright © 2017, 2012 Pearson Education, Inc. All Rights Reserved
Figure 3.1 The Simple
Payment Process
What Is Health Insurance?
Insurance: the business of shifting the risk
of loss from the individual to a third party.
The insurance company is predicting they
will make a profit by taking in more
money than they will have to pay out.
The process is known as risk pooling.
Who Is Insured?
5% of Americans under age 65 purchase
private individual health care insurance.
How do the other 95 percent pay for
health care services?
Americans under the age of 65 are:
covered by insurance as part of an
employer-sponsored plan.
covered by Medicaid, Medicare, and
other government programs.
do not have health insurance.
Who Is Insured?
What did the Affordable Care Act
require?
Companies must offer insurance that
will pay for up to 60 percent of
expenses.
The premium cannot exceed 9.5
percent of family income.
Employees can opt not to participate
in their employer’s plan.
Who Is Insured?
Health care is an expensive benefit for an
employer to offer to its employees.
In 2014, the average premium for
single coverage was $6,025
For family coverage it was $16,834.
Who Is Insured?
In 2014 the average employee contribution
for single coverage was $1,081.
For family coverage the average was $4,823.
It is higher today
Most plans cover common areas of
preventive care.
Uninsured are twice as likely to postpone or
go without care due to cost.
More likely to do without prescription drugs
Most of the uninsured are from low-income
families.
How Does “Insurance” Work?
The Patient/Employer–Third-Party Payer Relationship
Insurance company, government agency, or
managed care organization (MCO) is known as the
third-party payer.
The third-party payer will set a price for the benefit
package.
The price is determined by the number of people being
insured and the general state of their health.
Once the employer has negotiated an agreement with
the insurer, the employer can offer health care benefits
to its employees (they also decide what portion of the
premium to pay for their employees)
How Does “Insurance” Work?
The insurance plan is a legally binding
contract known as a policy.
If an individual purchased the
insurance directly they are the insured.
Enrollment period: time period when
employees can take advantage of the
benefit being offered by the
employers.
If they take the benefit, they are known
as enrollees.
How Does “Insurance” Work?
Figure 3.2 The Third-Party Payer Process
How Does “Insurance” Work?
The Patient–Provider Relationship
Even if a patient has insurance there are
still some out of pocket expenses that
occur
Deductible
Copayment
A patient may be insured under
more than one policy.
A coordination of benefits clause will
determine which third party pays for
services.
How Does “Insurance” Work?
The Provider–Third-Party Payer
Relationship
After services have been rendered,
the provider files a claim with the
insurance company
A health insurance claim is a request for
reimbursement for the services that
have been provided.
This is where coding becomes vital
How Does “Insurance” Work?
The Provider–Third-Party Payer Relationship
ICD-10-CM
International Classification of Diseases, 10th
Revision, Clinical Modification
Used in physician’s offices
HCPCS
Healthcare Common Procedure Coding System
Consists of two levels:
Current Procedural Terminology (CPT)
National codes (HCPCS level II codes)
Used in hospitals/outpatient facilities and clinics
How Does “Insurance” Work?
The Provider–Third-Party Payer Relationship
Billing
Process of charging the
patient/employer for services
Claims are transmitted to the thirdparty payer.
The third-party payer sends the insured
an explanation of benefits (EOB).
Tells insured how much they are
going to pay and if any part of the
claim has been denied
Payment is sent to provider.
Types of Third-Party Payers
Indemnity Insurers
The insurance carrier agrees to pay
(indemnify) the insured loss.
With health insurance, the loss is the need
to obtain health care services.
Once the patient has paid the provider for
services, the insurance company
reimburses the patient.
The insurance company may also
reimburse the provider directly.
Payment is not made to the provider of
services until covered services are used.
Types of Third-Party Payers
Self-Insurers
The employer assumes the risk of loss for
medical costs instead of a commercial
insurance company or MCO.
Often a third-party administrator (TPA) is
hired by the employer to administer the
health care benefits and process claims.
Self-insured plans are exempt from state
insurance regulation.
They are regulated by Employee
Retirement Income Security Act of 1974 (ERI
SA).
Types of Third-Party Payers
Blue Cross/Blue Shield
Teachers started Blue Cross in the 1920s.
Paid monthly sum in return for 21 days in
yearly hospitalization.
In 2015, more than 106 million Americans were
enrolled.
Was originally not for profit; some plans
converted to for-profit in the 1990s.
Individuals subscribe to a plan.
A prepaid service; the subscriber is still
responsible for deductibles, copayments, and
any noncovered services.
Types of Third-Party Payers
Managed Care Models
Gatekeeping
Patient can only access certain
services from the primary care provider.
Can only obtain specialist and
rehabilitative services if referred by the
primary provider.
Almost all workers covered by an
employer plan are enrolled in managed
care.
Types of Third-Party Payers
Managed Care Structures
Health Maintenance Organizations
(HMOs)
Preferred provider organizations (PPOs)
Exclusive provider organizations (EPOs)
In 2009, the majority of employees were
enrolled in one of these variations.
Health Maintenance Act of 1973 was a
strong incentive for the growth of HMOs.
Types of Third-Party Payers
Health Maintenance Organizations (HMOs)
Prepaid health plans (PHPs)
Traditionally hire physicians and staff to work
for them
Pay for services by capitation
Each patient or group has a fixed dollar
amount of services provided over a time
period.
Types of Third-Party Payers
Health Maintenance Organizations
Structures (HMOs)
Staff model HMO
Prepaid group practice model
Network HMO
Independent practice association (I
PA) model
Types of Third-Party Payers
Managed Care Structures
Preferred provider organizations (PPOs)
A delivery network.
Patient may choose his or her physician or hospital.
If insured goes to a PPO, the cost of care is lower
Exclusive provider organizations (EPOs)
Patient must select his or her care providers from
those in the network.
If the patient chooses to go outside the network,
then those services are not covered.
Regulation of Third-Party
Payers
Insurance companies are regulated by
state and federal rules.
Insurance companies must be licensed.
HMOs and other managed care
organizations are regulated differently.
HIPAA regulates portability, access, and
mandated benefits.
Regulation of Third-Party
Payers
Consolidated Omnibus Budget Reconciliation Act
COBRA
Employees may continue health benefits after
leaving employer for a time period and self
pay
The 2010 Patient Protection and Affordable Care
Act has numerous provisions that regulate the
actions of insurers.
The law requires that states establish American
Health Benefit Exchanges and Small Business
Health Options Program Exchanges so that the
uninsured and small businesses can obtain
coverage.
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