Introduction - Medical Billing:
Overview of Insurance Scenario:
Gone are the days when the physician used to accept entire amount due from all the patients directly and immediately
after the services was rendered. In those days medical expenses was affordable. But it is a different scenario now. Costs
of medical expenses are so high that a normal middle class people will not be able to afford the entire cost of medical
expense. Here is where the insurance company comes into picture.
When patient takes policies with a health insurance company, the insurance takes the responsibility of all the financial
risks undergone by the patient in relation to medical treatment for himself or is dependants during the tenure of the
policy. Since insurance companies carry financial risks they are also referred as carriers. The terms and conditions of a
patient ‘s medical policy clearly define its scope. The scope may be limited to a given set of benefits or subject to
certain conditions. Only if the services are within the scope of the policy and only if the conditions, if any, are met will
the services will be covered and reimbursed by the carrier.
In recent times insurance sector has come along way in health care reimbursement.
Concept of Medical Billing
As discussed above, the physician does not get paid for his services immediately after they are rendered. Majority of
the patients has insurance coverage and details of such coverage are provided to the physician before treatment. It is the
responsibility of the physician to submit claims to the insurance company and get paid for his services. Submitting
claims and getting paid is not as simple as it looks. It is a lengthy process and involves a lot of rules and regulations,
systems and is very complicated. The physician cannot provide his entire attention to this activity. Hence the concept of
Medical Billing arose.
Parties in Medical Billing
There are three parties in Medical Billing Process. The PHYSICIAN, The INSURANCE COMPANY and The
PATIENT. The Physician in order to attain his objective both should comply with the rules and regulations spelt out by
various insurance companies in submitting claims and at the same time doe not penalize the patient.
Role of Medical Billing Companies
Physicians appoint Medical Billing Companies to take care of their billing. The Medical Billing Companies should
clearly spell out their duties and responsibilities in their agreement with the physician. The agreement should also
clearly state the process to be adopted by the Billing Office in carrying out the objectives. If there are any assumptions
to be made it should be clearly stated and in case of problematic issues the course of action should be well defined and
the responsibilities should be mentioned. The main objective of the Billing Company is to maximize the collections.
What are the functions of a Medical Billing Company?
In simple term, the main function of a Medical Billing company is to help healthcare providers and organizations
process patient/client information in order to get paid on time. The term quot;healthcare providersquot; means Physicians,
Psychotherapists, Psychiatrists, Chiropractors, Nursing Practitioners, Dentist, Medical Social Workers, Physical
Therapists, Occupational or Speech Therapists. It also include healthcare businesses such as: Ambulatory Services,
Durable Medical Equipment Suppliers, Medical and Surgical Suppliers, Medical Laboratories and Clinics. And
organizations such as Nursing Homes, Home Health Care Agencies, Rehabilitation Centers, Hospice Care Centers, and
Hospitals. Claims filing to private insurance companies and government sponsored programs such as Medicare and
Medicaid consist of the main business of a Medical Billing Service Company. However, we cannot ignore the
importance of good record keeping - medical and otherwise to justify why we bill for whatever condition. Also, part of
Medical Billing company's job is to make sure clients maintain compliance with whatever government rules and
regulations there are.
Trained professional billing centers process and transmit completed claims, via computer modem, to a central
clearinghouse. Claims are audited and forwarded for payment to thousands of commercial, private and government
While paper claims can take months to process, electronic claims are processed in just 14 days. This means a medical
billing service, which provides the electronic claims handling, can ultimately offer a health care practice a better and
more consistent cash flow, which can reduce stress and frustration and improve profitability.
Before being able to understanding how to bill and file an insurance claim, you must understand what health insurance
is? It is imperative that the medical biller understands the various types of insurance and that each insurance company
has its own rules’, regulations, and policy guidelines they are governed by. A medical biller will need to understand the
physician’s responsibilities and obligations to the patients, as well as any agreements the physician has with the
insurance companies regarding, adjustments, charges and coding basics. Without this basic knowledge, a medical biller
will find it difficult to combat the common problems of claims submission.
WHAT IS HEALTH INSURANCE?
The dictionary defines Insurance as: “Protection against risk, loss or ruin by a contract in which an insurer (the
insurance company) guarantees to pay a sum of money to the insured (you) in the event of some contingency (a random
occurrence) such as an accident, a death, or illness, in return for the payment of a premium”. Among the many types of
insurance are health, disability, liability, malpractice, property, auto and life insurance.
Health Care Insurance is a contract between a policyholder* and an insurance carrier (or government program) to
reimburse the policyholder for all or a portion of the cost of medically necessary treatment rendered by health care
professionals. In some policies the contract can include preventive care as well as medically necessary treatment.
(*A policyholder is an individual in most cases. In Group health insurance the policyholder will be the employer the
individual works for who holds the contracted with the insurance company. )
As a medical biller, you need to recognize the various ways in which a patient may obtain health insurance coverage.
There are three way a person may obtain health insurance coverage:
1. Group Health Plan: a plan arranged by an employer or special interest group for the benefit of members and their
eligible dependents. This plan provides maximum benefit packages based on desired coverage and cost factors. Group
policies are often benefits of employment that are provided by the employer with little or no cost to the insured
2. Individual or : a plan issued to an individual. This type of coverage has a high premium with benefits based on the
needs and financial factors of the individual policyholder.
3. Government programs are designed to provide benefits and health care for individuals who would not otherwise be
able to afford them. These programs are Medicare, Medicaid, and CHAMPUS programs.
Health insurance was designed to assist the patient with the expenses incurred for medical treatment. The insurance
company did not design their policies to alleviate the patient of the financial burden of medical care.
The carrier cannot be expected to provide reimbursement for which coverage has not been purchased. This refers to a
benefit that is not in the contract, such as an individual who purchases a policy with only hospital coverage, the carrier
can not be expected to reimburse the physician’s charges.
WHO IS THE INSURANCE CARRIER
The insurance company, which writes and administers the policy, is commonly referred to as the CARRIER. It is also
known as the insurer, underwriter or administrative agent. Carriers are responsible for providing coverage as outlined in
the contract between the company and the insured (an individual person) or contracting group (an employer group or
So who are the insurance carriers by name? There are so many I can’ t name them all. A few examples are Blue
Cross/Blue Shield, Aetna Health Plans, Cigna Health Plans, Health Choice, etc. Currently there are over 2000 health
insurance carriers in the United States. There is a book that can be purchased, Health Insurance Carrier Directory, by
PMIC. This book is updated every year, it lists each company address and phone numbers and it can be purchased at
Each insurance carrier offers many different types of plans and will at times customize a plan for a large corporation. It
is also known that the major insurance companies (except for Medicaid programs, which are managed, by data
processing companies) administer most government health care programs. Thus a single carrier may sell individual
policies and group plans, and administers a government program such as Medicare.
TYPES OF HEALTH INSURANCE COVERAGE
The major types of health insurance coverage fall neatly into seven categories: Commercial, Blue Cross and Blue
Shield, Medicare, CHAMPUS, Medicaid, Worker’ s Compensation and Health Maintenance Organizations (HMOs).
This is not to say that the following seven health insurance types are the only types of insurance coverage.
Commercial carriers offer contracts to individuals and groups, mostly groups, under which payments are made to the
beneficiary (or to the providers if they have accepted assignment of benefits) according to an indemnity table or
schedule of benefits for medical services. Commercial plans generally do not have special contract agreements with
physicians. In commercial plans it up to the patient to file their claims. It should be noted that not every service is
covered under commercial plans; each one has it own benefits and exclusions. In general, most commercial plans use
UCR as a basic for maximum payment cost. Most commercial plans conform to one of three basic types:
Basic Medical Plans
These pay total costs up to a maximum (usually around $5000) for all but a few exclusions such as cosmetic surgery
and mental disorders. There are no deductibles or co-payments and all benefits are usually a small amount of the actual
fee but the benefit amount that is paid is a 100%. These benefits include hospital, office, physician and lab charges.
These types of plans cover minor health problems.
Major Medical Plans
These policies are designed for catastrophic situations only, and there is no payment under such plans for minor health
problems. They usually take up where basic plans leave off, and almost always have large deductibles and copayments.
Comprehensive Medical Plans
These plans consist of combinations of Basic and Major Medical benefits. It combines the best of both plans, giving the
insured a small benefit payable at 100% for the minor illness’ that occur with the balance of all charges being applied to
the major medical portion of the plan, where its subject to the deductible and a coinsurance.
Blue Cross pertains to inpatient hospital services, nursing homes, and home health care services to their subscribers.
Independent, generally non-profit community service organizations that provide prepaid health care services to their
subscribers. They are called “prepayment” plans because individuals pay in advance for the health services they may
need. In many states the Blues’ (Blue Cross and Blue Shield) have merged, to provide comprehensive coverage for
hospital and non-hospital services. Some Blue Cross plans have over time converted to “for profit”.
Blue Shield is the portion of a patient’ s insurance providing financial assistance with outpatient costs for services,
physician charges, etc. There are many different programs within the system. A review of a few of the programs most
common to the medical biller’ s area will help the medical biller become more familiar with the groups with whom the
local providers may participate. Blue Shield has provisions for two types of providers:
1. Indemnity providers – this provider has a contract to see Blue Shield patients, the physician is not obligated to file
insurance claims or write off the difference of the actual charge and the allowed charge. The providers office may
collect in full from the patient at the time service is rendered.
2. UCR providers – this provider has a special contract with Blue Shield whereby the physician agrees to see Blue
Shield patients, file insurance claims and wait for the payment before collecting from the patient. The physician also
agrees to write off the difference between the actual charge and the Blue Shield allowed charge.
Blue Cross and Blue Shield also administer Medicare, Medicaid, and CHAMPUS programs in many states.
Medicare is a health insurance program under the Social Security Administration’ s Health Care Financing
Administration (HCFA) and it consist of two parts.
Medicare part ‘A’
This is hospital insurance (including skilled nursing facilities and home health care) for almost everyone over the age of
65, the permanently disabled, and those with chronic renal disease. Coverage under Part ‘A’ Medicare is automatic.
The fiscal intermediary for Part ‘A’ Medicare is the National Blue Cross Association, who in turn subcontracts
payment responsibilities to its member agencies.
Medicare part ‘B’
This is known as Supplementary Insurance. It covers physicians’ services, laboratory test and x-rays. It is an elective
service, the recipient must pay a monthly premium for Part ‘B’ coverage. Therefore not all Medicare recipients may not
have Part ‘B’ coverage. The Medicare ID card determines the exact coverage of the patient. If a date of eligibility is not
listed on the member’ s card for Part ‘B’ , then the patient is not eligible for Part ‘B’ coverage. Medicare Part ‘B’
program is administered by private insurance carriers who place bids with the government to become fiscal
intermediaries. A few districts are under the direction of large, commercial carriers, most of Part ‘B’ program is
administered by Blue Shield. There is an annual deductible and a 20% co-payment.
Medi-Medi (Medicare-Medicaid cross-over)
A cross-over patient, is one who has Medicare as primary coverage and Medicaid as secondary coverage due to low
This is health care assistance program administered jointly by the federal and state governments. Each state sets up and
operates its own program within the general guidelines set down by the federal government. This is not an insurance
program. It is a state funded assistance program. Eligibility is month-to-month and based on the income of the
The claim forms used must be those designated by the carrier. They must be submitted within certain dates, complete in
every detail, and routed first to all other possible sources of payment.
Civilian Health and Medical Program of the Uniformed Services. This program that makes health care benefits
available to dependents of active military personnel, as well as retired military personnel and their families. These
people can go non-military doctors for medical services and have part of the cost paid by the Federal government. At
age 65, all CHAMPUS beneficiaries are transferred to the Medicare program. CHAMPUS is similar to Medicare, but
there are differences in the deductible and co-payments.
This covers medical expenses and disability benefits for workers whose injuries or illnesses are the result of doing their
jobs. All employer with over a specific number of employees is required to carry Workers Compensation insurance
with a carrier of the employer’ s choice. Worker’ s Compensation insurance and its billing are highly specialized and it is
not covered in this textbook.
HEALTH MAINTENANCE ORGANIZATIONS
The previous six lists deal with organizations which pay for medical services but do not provide it. Health Maintenance
Organizations (HMO) are prepaid group practice plans where the patient or patient’ s employer pays monthly
premiums. When services are rendered to the patient the patient does not pay any additional payments, co-payment or
There are four types of HMO’ s:
Prepaid group Practice Model
this type of HMO delivers medical services at one or more locations through a group of physicians who contract with
the HMO to provide care or thorough its own physicians, who are employees of the HMO. Kaiser-Permanente is the
most well known HMO of this type.
This type hires physicians directly and pays them a salary instead of contracting with a medical group.
Independent Practice Association (IPA)
In this type of plan the physicians are not employees and are not paid salaries. They are paid fees for their services out
of a fund drawn from the premiums collected by the organization that markets the health plan. An IPA makes
contractual arrangements with physicians in the community who provide services from their own offices.
In this type of plan the HMO contracts with two or more group practices to provide health care services to its members.
TYPES OF INSURANCE PLANS
Each insurance carrier offers many different types of plans, many carriers will customize a plan for a large groups
and/or corporation. There are many forms of health insurance plans currently in effect in the United States. Some
examples of these are, Blue Shield who has hundreds of plans throughout the U.S., or Alliance and Alliance Plus, who
is part of a PPO network that Blue Shield pays 90% of the allowed charge and the patient paying a 10% co-payment.
Blue Choice is an HMO program incorporated by Blue Shield in 1988. Plus Blue Shield has numerous comprehensive
commercial programs known as fee-for-service programs. There are Central Certification Programs that cover major
corporations with employees all across America. This program allows these employees to receive benefits of the
contract regardless of
the state where the service is preformed.
Each and every insurance carrier has their own versions of IPA’ s, PPO’ s, HMO’ s, Comprehensive plans, major medical
and basic plans.
What does this mean to you as a medical biller? As a medical biller you should be aware that not all insured’ s under
Blue Cross or Blue Shield has the exact same coverage. Each of these policies will have different rules and regulations
it is governed by, with different Exclusions and Limitations. This goes for any insurance carrier, each having hundred’ s
of plans all with different individual Exclusions and Limitations.
If you are a medical biller in a provider’ s office, request a copy of the patient’ s policy handbook. This handbook is
always given by the insurance carrier or the patient’ s employer (if a Group Plan). Photocopy the policy provisions and
benefits, write down phone numbers of where benefits are to be verified and if pre-authorizations are required.
I know this all sounds so overwhelming right now. But by the end if this text book it will all make sense. All these
details will be presented and covered in later chapters.
If you plan on being an independent biller for several providers, knowing the patient’ s exact benefits is not a major
necessity, the pre-authorizations, benefits, deductibles and request for additional information are the responsibility of
the provider’ s office staff, since they are the ones receiving the payments and EOB’ s directly.
WHAT IS A CONTRACT?
The contract (or policy) is the document that describes the plan benefits, eligibility, effective date, termination of
coverage and Exclusions.
Basic health insurance coverage includes benefits for hospital, surgical and other medical expenses. These contracts or
policies are designed to offset large medical expenses caused by prolonged illness or serious injury.
When a policy is issued, the applicant becomes part of the insurance contract or plan. An insurance policy is a legal
document between the insured, which can be an individual person or an employer group. Each party must abide by the
terms set forth in the contract. The insured receives a formal written policy from the insurance carrier in legal language
that needs an attorney to interpret. Whereas, most insurance carriers also give the insured a coverage booklet, this is
especially true in the case of an employer group. The booklet is a simplified explanation or interpretation of the actual
policy or contract. The booklet gives general information of the contract or policy.
I’ m sure many of you have received these type booklets from previous employers when you became eligible for your
group medical benefits.
The contract is also known by other terms such as ‘plan’ or ‘policy’ . The insurance carriers structure the contract or
plan to ‘spell-out’ the benefits available to the insured and his dependents. The insurance carrier uses this contract or
plan as a guideline to determine a patient’ s benefits and payments. Not every minuet detail or service can be predicted
or written into a plan, if it were, the document would read like a never-ending soap opera!
The contract or plan does give exact amounts in terms of the deductibles, coinsurance, and maximums. But where it
comes to specialized procedures and services, questionable types of providers, and individual insurance carrier rules
and regulations, these areas are not always “ so exact” and sometimes not even mentioned in the plan.
When verifying patients’ insurance benefits the insurance carrier is very important. In Appendix II you will find several
types of Insurance Benefits forms. These forms are used by the doctors’ office to verify the patients’ insurance
benefits. Asking question such as plan deductibles, maximums, percentages, and second surgical opinions.
Health insurance plan provisions cover items as renewals, coordination of benefits with other carriers, assignments,
plan limitations, case management, and exclusions.
Here we will go over a few of the key terms that you will see throughout this textbook, as well as hearing them
constantly in the insurance industry.
Assignment of Benefits: this term means the insurance carrier will send the payment directly to the provider. To
determine where and who the payment will be sent the insurance carrier refers to Block 13 on the HCFA-1500 form.
If Block 13 on the HCFA-1500 form is signed by the patient or insured (if patient is a minor), this informs the
insurance carrier that the patient knows the payment will be sent directly to the provider, for all the services referenced
in Block 24A – 24K of the HCFA-1500 form.
Accepting Assignment (Do not get this term confused with assignment of benefits.) Accepting assignment for some
plans carries a high degree of liability for the provider to abide by the rules set by the plan. When a provider “ accepts
assignment” from a specific carrier such as Medicare, the provider is accepting the amount that the carrier deems
allowable for the billed services AND the provider cannot bill the insured the amount difference of the billed charge
and the allowed charge. The provider Accepting assignment entails agreeing with many special rule and regulations set
by a specific plan or program. “ Accepting assignment” will be discussed in greater detail in a later chapter in regards
to Medicare and Medicaid. Accepting Assignment is marked in Block 27 of the HCFA-1500 form.
Authorization for certain treatments or visits, a prior authorization for the service and approval for that service must
be obtained from the payor. This is usually attached to a document, which is used in connection with the billing to the
payor. Either a numeric entry on the HCFA-1500 claim form for electronic transmission or as a document attached to a
paper claim when mailed to the insurance carrier.
Pre-certification or Predetermination many private insurance carriers and prepaid health plans require one or the other,
before they will approve certain hospital admissions, inpatient or outpatient surgeries and elective procedures. The
carrier can refuse to pay part or the entire fee if this requirement is not met.
Pre-certification refers to discovering whether a treatment (surgery, hospitalization, tests) is covered under the patient’ s
Pre-determination means discovering the maximum dollar amount that the carrier will pay for primary, consulting
services, postoperative care, and so on.
Pre-authorization relates not only to whether a service or procedure is covered but also to finding out whether it is
Coordination of Benefits is a process that occurs when two or more group plans provide coverage on the same person.
Coordination between two plans is necessary to allow for payment of 100% of the allowed expenses, without allowing
the member to ‘make’ money over and above the total cost care.
Primary plan benefit plan determines and pays its normal benefits first without regard to the existence of anyother
Secondary Plan pays after the primary plan has paid its benefits. The benefits of the secondary plan takes into
consideration the benefits and payment of the primary plan and reduces its payment so that only 100% of allowed
expenses are paid.
Basic Coding Terminology
Diagnosis: ICD-9-CM Codes
ICD or International Classification of Diseases is a cluster of codes defined to describe the symptoms and ailments of
patients. Originally based on a list of codes published by WHO (World Health Organization), this is recognized by the
US Department of Health and Human Services.
ICD-9-CM refers to International Classification of Diseases, Ninth Revision, Clinical Modification.
ICD-9-CM codes are 3,4 or 5-digit numerical codes from 001-999.9. The three-digit code is the parent code giving the
name of the disease. The supplemental four or five digit codes under that three-digit code are more specific. When there
are more specific codes for a particular disease, we need to use that code only. We should use the three-digit code only
where the fourth or fifth digit is not available.
In addition there are V-codes and E-codes. V Codes are Supplementary of Factors Influencing Health Status and
Contact with Health Services (V01-V82). E Codes are Supplementary Classification of External Causes of Injury and
Procedures: CPT-4 Codes
CPT of Current Procedural Terminology is a set of codes defined to describe the procedures / treatment rendered to the
patients. Developed by the American Medical Association, this coding system has been acknowledged by the Health
Care Financing Administration and all Insurance Carriers. This is a Five digit numeric code starting from 10000-99999.
The entire set of codes from 10000-99999 is subdivided into various ranges of codes covering various body sites /
specialty of treatment such as Integumentary (Head), Musculoskeletal, Female Genital, Male Genital, Cardiovascular,
Radiology, Nuclear Medicine etc.
HCPCS Codes are codes designed by Health Care Financing Administration Common Procedure Coding System. They
are alphanumeric codes, which are accepted by certain limited carriers and are used in cases where no appropriate code
figures in CPT-4.
ASA Codes developed by the American Society of Anesthesiologists are codes that need to be used for anesthesia
billing. The code range from 00100 through 01999.All Medicare carriers and certain Medicaid carriers accept these
RVU are Relative Value Units assigned to CPT codes for reimbursement.
A modifier provides the means by which the reporting physician can indicate that a service or procedure that has been
performed has been altered by some specific circumstance but has not changed in its definition or code. The judicious
application of modifiers obviates the necessity for separate procedure listings that may describe the modifying
circumstance. Modifiers may be used to indicate to the recipient of a report that:
A service or procedure has both a professional and technical component
A service or procedure was performed by more than one physician and/or in more than one location
A service or procedure has been reduced or increased
Only part of a service was performed
An adjunctive service was performed
A bilateral procedure was performed
A service or procedure was provided more than once
Unusual events occurred
Place of service
Place of Service denoted the place where the service was rendered within the facility. For e.g. the patient may be an
inpatient or in an emergency room or in an ambulatory surgical center. Certain carriers adopt the Medicare coding for
Place of Service while certain other have their own coding systems. For e.g. Medicare places of service for inpatient is
21, outpatient is 22, office consultation is 11, emergency room is 23, ambulatory surgical center is 24 and so on.
Type of Service
Type of Service is the specialty in which the service is rendered. For e.g. if the specialty is anesthesia the type of
service is 7, if the specialty is radiology the type of service is 4 and so on.
Provider enrollment is the crux of a proper billing set up. Before we send claims to insurance companies, we should
ensure that all provider (doctors) are enrolled with the respective carriers, all providers are contracted.
The process is as follows:
For Federal carriers such as Medicare and Medicaid, we need the provider # to submit the claims. Otherwise they
would get denied. In order to get this; we need to act at the inception itself.
When a new provider has joined the group, we need to ensure the following:
Does the provider have all the credentials.
Does the provider have a State License. Without the State License the doctor cannot perform in that State.
Does the provider have a contract with the major carriers in the State. If so we can just write a letter to the carrier
saying that this provider has joined the group and request them to merge the provider with the group.
Where the provider does not have a contract with a carrier, a fresh application for enrollment is required.
A Fresh application in Form 855 is filled and signed by the doctor and sent to the carrier. This form should be filled up
with the details such as the doctor’ s name, his Social Security Number (SSN), his State License Number, the name and
address of the facility in which he is or will be providing services, the name and address of the group of which he has
become a member, the name of the owner of the group, the pay-to address of the group etc.
The carrier processes it and sends in intimation mentioning the provider #. This provider # becomes the individual
provider # for that doctor and needs to be stated in Box 24K and Box 33 – PIN# in the HCFA.
Box 33 of the also contains the Pay-to address where the checks and EOBs need to be sent by the carriers. But
Medicare and Medicaid do not go by what is mentioned in the box with regard to pay-to address. Based on the pay-to
address mentioned in Form 855 at the time of enrollment the carrier records it in its system. All checks and EOBs will
be sent to this address. If there is a change of address , the carriers need to be notified in Form 855-C. Based on this ,
the carriers update this information in their system.
EDI is Electronic Data Interchange. Certain carriers have the facility to accept claims electronically. For this purpose
we need to enroll the providers with the EDI Department of the insurance carriers. This is mandatory requirement in the
case of Federal Carriers such as Medicare and Medicaid. This is a separate process apart from the above Provider
Enrollment process. We need to fill in a separate EDI enrollment form for providers and send them to the carrier. The
carrier will then add the provider in the EDI database. Only then can we submit claims to that carrier for that provider
Definitions of Insurance Terms
The following are general definitions of some common insurance terms related to insurance
companies and medical insurance policies.
A claim is a request for payment from your insurance company for medical expenses incurred due to an illness or
injury covered under the terms of the policy. Each company has requirements for how a claim is to be made; what
forms must be completed by you and your doctor(s); and what additional information, forms, or reports are required
before payment can be made. One of the biggest problems with claims made by students is that forms are not
completely filled out. This means the insurance companies (or claim administrators) cannot pay the claim. Some
insurance companies require you provide the original bill(s) along with the claim form. You should keep photocopies
of all the documents you submit for a claim.
This is an injury that occurs while your insurance policy is in force and for which you have received medical services,
supplies or treatment after the accident. A bacterial infection that occurs through an accidental cut or wound of from a
medical or surgical treatment of a sickness may be a covered injury.
This is a sickness which is first diagnosed or treated while your insurance policy is in force.
The co-insurance clause requires you to pay a percentage (or a fixed dollar amount) of your covered medical expenses.
The percentage is usually expressed as quot;80/20quot; co-insurance. This means after you have paid the deductible amount (if
any) as stated in your policy, you will pay 20% of the medical bills and the insurance company will pay the remaining
80% of the covered medical expenses. When your total expenses reach a dollar amount stated in your policy, the
insurance company pays 100% of the covered expenses up to the maximum benefit of your policy (from $2000 to
This is the amount you pay before the insurance company pays anything. There are two types of deductibles: an annual
deductible and a per occurrence deductible.
Under an annual deductible, you will pay all expenses up to the amount of the deductible. Once you have paid the
deductible during the policy year, the insurance company will pay for covered medical expenses for the rest of the
policy year in accordance with the terms of the policy.
Under a per occurrence deductible, you must pay the deductible amount for each separate sickness or injury. If you
have five claims in one year, you would have to pay the deductible five times.
Example #1: Your total medical expense is $12,000. Your policy has a deductible of $100. The co-insurance clause is
80/20 up to $5000. You must pay the $100 deductible. Then, you will pay 20% of the $5000, or $1000. Your
insurance company will pay 80% of the $5,000, or $4,000. The insurance company will pay for 100% of the remaining
$6900 in costs.
Example #2: Your policy may state you have to pay $20 per each physician office visit. The insurance company will
pay its share of any additional expense.
These state the types of injuries or illnesses that are not covered. All policies have exclusions. The most common types
of exclusions are pre-existing conditions, self-inflicted injuries, and injuries incurred while committing a criminal act.
Injuries resulting from some specific activities may also be excluded. For example, if you plan to drive a car or snow
ski, these activities may be excluded. Never assume you will always be covered. Check the exclusions before you
Health Maintenance Organization (HMO):
Under this alternate type of health care, you receive all medical services from the HMO for a pre-determined fee. If you
do not use the medical services from the HMO to which you belong, you will have to pay for your medical care. If the
HMO ceases to operate, you will also have to pay for your own medical care.
If you receive medical care at a hospital or clinic for at least one full day and are charged room and board, you are an
All insurance policies in the USA have stated limits for the medical benefits they will pay. They also have maximum
limits for what will be paid for certain services. For example, the policy may state limits to what it will pay for a daily
hospital room, surgical or physician fees.
Medical Evacuation and Repatriation:
Evacuation means the company will pay the cost of transporting you to a special medical facility or to your home
because of a covered medical condition. Repatriation means the insurance company will pay transportation costs to
return your remains home if you die while in the USA. These are both important forms of coverage for cultural
This is medical or dental treatment that is (a) consistent with generally accepted medical practice for the covered injury
or covered sickness; (b) in accordance with quot;approvedquot; and generally accepted medical, surgical or dental practice as
determined by the insurance company; (c) accepted as safe, effective and reliable by a medical specialty or board
recognized by the American Board of Medical Specialties; and (d) not quot;experimental or investigationalquot; treatment as
determined by the insurance company.
If you receive medical treatment from a physician or in a hospital or clinic, but are not confined or charged room or
board, you are an outpatient.
This refers to any medical conditions that existed before your policy goes into effect. If you are to arrive in the USA on
August 1 and your policy goes into effect that day, any medical condition that existed before August 1 would not be
covered. Some policies have a waiting period (such as 6 months) after which pre-existing conditions may be covered.
Preferred Provider Organization (PPO):
This is a network of physicians, hospitals and clinics that provide services for pre-negotiated fees. When you need
medical care, you can go to a PPO or a non-PPO provider. The insurance company will pay a greater portion of your
medical expenses if you go to the PPO.
This is the amount of money you will be required to pay for your insurance coverage. It is generally expressed in
monthly terms. You will pay the monthly premium in US dollars for each month of coverage you purchase. If the
premium is not paid, the policy will not be in force.
This is the reasonable and customary fee or charge for services, supplies and treatment in the area in which they are
What is the difference between a participating and a nonparticipating provider?
A participating provider has signed a participation agreement with Medicare to submit only assigned claims and follow
all the regulations for assigned claims. The provider has agreed to accept as payment the Medicare allowed amount for
a given service.
A nonparticipating provider has not signed a participation agreement with Medicare and can submit either assigned or
nonassigned claims. This can be done on a claim-by-claim basis. A nonparticipating provider must follow all the
regulations that apply to the type of claim submitted.
Will Medicare always be my primary insurance?
Yes, unless you or your spouse are working. If you or your spouse are still working in a company with 20 or more
employees, the employer group health plan would be the primary insurer. Medicare is also primary if you are disabled.
If you are disabled and under 65 years of age, and you or your spouse are currently employed by a company with 100
or more employees, Medicare is secondary to the employer group health plan.
Medicare is secondary in the following situations:
Worker’s compensation pays for a work-related injury or illness.
Auto/liability insurance pays claims related to an accident.
Black Lung benefits pay claims related to black lung illness or injury.
In End Stage Renal Disease (ESRD) situations, Medicare is secondary until after a
coordination period; generally 30 months.
What services will Medicare Part B cover?
Medicare Part B pays for the cost of medically necessary doctor’s services and other medical services and supplies.
The following is a partial list of services that Medicare Part B covers based on medical necessity:
Ambulance transportation (limited benefit)
Artificial limbs and eyes
Bone mass measurements
Breast prostheses following a mastectomy
Colorectal cancer screening
Durable medical equipment
Flu, pneumonia and hepatitis B immunizations
Mental health services
Outpatient hospital services
Pap smear and pelvic examination
Prostate cancer screening
X-rays and laboratory tests
* Medicare will also pay for a limited amount of chiropractic and podiatry services.
What are services that Medicare Part B will NOT cover?
The following is a partial list of services that Medicare Part B does not cover:
Most dental care and dentures (we do not cover any dental services related to the
care, treatment, filling, removal or replacement of teeth, or of structures that directly
support the teeth)
Eyeglasses (except following cataract surgery with an intraocular lens)
Health care while traveling outside of the United States
Routine eye care
Routine foot care (in most cases)
Routine or yearly physical exams
Capitation: A method of paying medical providers through a pre-paid, flat monthly fee for each covered person. The
payment is independent of the number of services received or the costs incurred by a provider in furnishing those
COBRA: The Consolidated Omnibus Budget Reconciliation Act of 1985, commonly known as COBRA,
requires group health plans with 20 or more employees to offer continued health coverage for you and your dependents
for 18 months after you leave your job. Longer durations of continuance are available under certain circumstances. If
you opt to continue coverage, you must pay the entire premium, plus a two percent administration charge.
Fee-for-Service: A payment system for health care where the provider is paid for each service rendered.
Health Maintenance Organization (HMO): Prepaid health plans in which you pay a monthly premium and the HMO
covers your doctors’ visits, hospital stays, emergency care, surgery, preventive care, checkups, lab tests, X-rays, and
therapy. You must choose a primary care physician who coordina tes all of your care and makes referrals to any
specialists you might need. In an HMO, you must use the doctors, hospitals and clinics that participate in your plan’s
Lifetime Limit: A cap on the benefits paid under a policy. Many policies have a lifetime limit of $1 million, which
means that the insurer agrees to cover up to $1 million in covered services over the life of the policy.
Medical Savings Accounts (MSAs): These health insurance plans provide incentives for individuals to
replace high premium, low-deductible policies with affordable, high deductible catastrophic coverage. Premiums for
this coverage are lower and the savings may be used to fund a tax-pre ferred medical savings account
from which you can pay on a pre-tax basis for qualified medical care and expenses, including annual deductibles and
Out of-Pocket Maximum: The most money you will be required to pay in a year for deductibles and
coinsurance. It is a stated dollar amount set by the insurance company, in addition to regular premiums.
Point-of-Service (POS) Plan: A type of managed care plan combining features of health maintenance organizations
(HMOs) and preferred provider organizations (PPOs), in which individuals decide whether to go to a network provider
and pay a flat dollar copayment (say $10 for a docto r’s visit), or to an out-of-network provider and pay a deductible
and/or a coinsurance charge.
Pre-authorization: A cost containment feature of many group medical policies whereby the insured must contact the
insurer prior to a hospitalization or surgery and receive authorization for the service.
Pre-existing Condition: A health problem that existed before the date your insurance became effective. Many
insurance plans will not cover preexisting conditions. Some will cover them only after a waiting period.
Premium: The amount you or your employer pays in exchange for insurance coverage.
Primary Care Physician: Under a health maintenance organization (HMO) or point-of-service (POS) plan, usually
your first contact for health care. This is often a family physician, internist, or pediatrician. A primary care physician
monitors your health, treats most health p roblems, and refers you to specialists if necessary.
Provider: Any person (doctor or nurse) or institution (hospital, clinic, or laboratory) that provides medical
Third-Party Payer: Any payer of health care services other than you. This can be an insurance company, an HMO, a
PPO, or the federal government.
Usual and Customary Charge: The amount a health plan will recognize for payment for a particular medical
procedure. It is typically based on what is considered quot;reasonablequot; for that procedure in your service area.
Utilization Review: A cost control mechanism by which the appropriateness, necessity, and quality of health care
services are monitored by both insurers and employers.
The primary goal of the AR is to identify and collect insurance reimbursement from third party insurance carriers. After
identification, confirmation, and submission of claims to carriers, aggressive follow-up is critical to the success of the
AR Dept.. Often claims are lost, delayed or misdirected. When that happens, for whatever reason, the insurance carrier
will assume the claim was never submitted and deny payment based on non-receipt of the claim. At other times,
carriers might underpay on submitted claims. For underpaid claims and claims not received, proper follow-up and
perseverance by AR can dramatically improve third party collections. Effective claims follow-up can even result in
payment for claims which would otherwise be written-off.
REASONS WHY CLAIMS ARE NOT PAID
Insurance companies handle thousands of pieces of paper every day. If an insurance carrier claims a 95% processing
rate (high for the industry) and handles 5,000 bills and claims daily, they lose 250 bills and claims every day. Over the
260-days work year, that means they lose 65,000 bills and claims a year. All too often, your bills and claims are part of
that loss percentage. As stated previously, the insurance carrier assumes no responsibility for lost claims; they just
assume the claims were never sent by the provider.
2.Missing or Incorrect Information
Insurance carriers have stringent requirements for processing claims. To complicate things even further, insurance
carriers have different claim forms, different information requirements, and different payment standards. All requisite
information must be on the claim for it to be paid. Incorrect or missing information will result in non-payment of your
claim. Experts estimate that over 30% of all claims submitted to commercial carriers contain missing or incorrect
Due to the high volume of claims, insurance carriers rarely supply detailed explanations on unpaid claims. If the AR
makes no follow- up on this claim, no further action is taken, and the claim is literally forgotten. Following-up serves
as a reminder to the insurance carrier that they have received the subject claim and payment is expected. If the carrier
does not indicate a reason for non-payment or underpayment, the AR must determine what information is missing or
3.Time Requirements for Filing
One of the primary reasons for timely follow-up of non-paid claims is the strict time requirements insurance carriers
place on receiving claims. Often, insurance carriers require providers to submit claims within 30, 60 or 90 days.
Submitting the claim within that time period is usually not a problem for most Billers. In reality, however, the
insurance carrier is stating that the claim must be received and processed within these time constraints. Again, there are
many reasons why claims are not received or processed. If you do not make timely follow-up on those unpaid claims,
then insurance carriers will often deny payment, stamping on the returned claim, quot;CLAIM RECEIVED AFTER
Due to stringent filing requirements imposed by insurance carriers, claims are often denied because of simple errors.
Some of the most common simple errors are:
Incorrect patient identification code Plans only pay benefits for a valid ID number.
Incomplete or incorrect dates of service Month, date and year are required.
Incorrect or missing place of service Plans accept two digits or two letters; each plan has
Incomplete or unrecognizable code numbers Plans install and delete codes at their own pace; the
AR must be aware of the codes the plan accepts, as
well as the modifiers it uses.
Incorrect provider number Some plans may require different provider numbers.
Missing name and address of facility
where services where rendered
Plans require this for medical resource monitoring
Missing plan code or group number Some plans require a plan code or group number.
Wrong or missing revenue code Plans require correct revenue codes.
Missing occurrence code Plans require correct occurrence codes.
SUGGESTED FOLLOW-UP METHODS
It is essential for the AR to follow-up promptly and efficiently on outstanding claims (now accounted for as accounts
receivable). Telephone and written communications are effective ways to contact insurance carriers about outstanding
Telephone contact is the best way to obtain information about the status of outstanding claims. Speaking with an
insurance representative allows for interactive communication, important for determining the exact requirements for
payment of the outstanding claim. Ask all the pertinent questions necessary for you to ascertain why the claim was not
paid in a timely fashion and what the insurance carrier requires to process and pay the claim. To save time and effort
when telephoning insurance companies, gather all outstanding claims from a particular insurance company so that you
can discuss them at one time. Also, ask to speak with the insurance claims supervisor, not just a clerk. Supervisors and
others in authority can actually impact the claims payment process; clerks can usually only give you an update on the
status of your claim. Never take quot;Noquot; from someone who is not authorized to tell you quot;Yes.quot;
The main disadvantages of telephone contact is the time and cost involved obtaining the information. Many insurance
companies do not have toll-free numbers for their claims departments, and often it is difficult to reach the person who
can help with a particular claim. To reduce the time and cost associated with telephone contacts, find out if the
insurance carrier has a toll-free number and, if possible, designate one person to call each time follow-up is done on
outstanding claims from a particular carrier. That way, the insurance company’s claims department will be familiar with
your staff person, which might lead to more successful interaction and quicker remuneration.
Additionally, a telephone call is not a tangible document that can be produced to prove follow-up on a claim.
Therefore, it is important for the MTF to keep detailed logs documenting every telephone contact made to insurance
carriers. Unless you keep a record of your follow-ups, if the carrier does not have the means to document telephone
conversations in the electronic claim file, there is no proof of contact once the phone call has terminated.
Written follow-up provides a low-cost alternative to telephone contact. The follow-up letter should contain all relevant
claim information (including the original claim filing date) and a copy of the original claim. This approach is very
effective for claims the insurance carrier has lost, delayed or misdirected. Because of filing requirements set by
insurance carriers, follow-up letters should be sent as soon as a reasonable period of time has elapsed without receipt of
payment from the carrier (usually 30 or 45 days). Written follow-up letters are also effective because they give the
provider proof of follow-up, showing that there has been a good faith effort to resolve the problem. Check with your
regional or local program manager for copies of existing claim follow-up letters.
The main disadvantage of written follow-up is that it does not provide the opportunity for feedback from the carrier. If
information is missing or incorrect, the follow-up letter does not add or correct this information. Also, there is no
guarantee (unless sent with a return receipt or faxed with confirmation) that your follow-up letter will not be lost,
delayed or misdirected.
To counter the disadvantages of telephone and written follow-ups, a combination of methods is the best way to ensure
payment of claims. Your first attempts to follow-up should be written; the majority of claims 30-45 days old will be
paid once the first written follow-up is received. Written follow-up should be used until the claims are 90 days past due.
If the insurance carrier has indicated that information is missing or incorrect, send the proper information and note the
date the information was sent.
Once a claim has reached the 90 days past due point, and no response has been received from the carrier, you should
start telephone follow-up. Telephone contact should be initiated on claims for which no payment or explanation of
delay is received from the carrier for 90 days. At this point, it is necessary to obtain information directly from the
carrier regarding the status of the claim. You should continue making telephone contact on a regular basis (every 30
days) until payment is received, the claim is written-off, or the claim is referred to the Staff Judge Advocate or Judge
Advocate General (SJA/JAG) for collection.
FOLLOW-UP SYSTEM SUGGESTIONS
In order to know when claims are outstanding for a set length of time, a suspense system can be put in place to give
notice when different follow-up actions are required. If possible, the suspense should be initially linked to when the
claim was first submitted to the carrier. At appropriate intervals (see the schedule below), the suspense system will
indicate the need for follow-up on a particular claim.
An aging report will show the length of time a claim has been listed as an account receivable. Divide the report into 30,
60, 90, 120 and 180 days past due intervals and allocate the claims accordingly. Time and dollar amount are two
approaches you can use to collect accounts receivable. Under the time method, take the oldest accounts (those over 180
days) and concentrate on them until resolved. Then concentrate on the 120 days past due accounts, then 90 days, and so
on. When approaching accounts receivable by the dollar amount method, list the highest dollar amount claims
outstanding, regardless of time past due, and take appropriate actions depending on the length of time past due.
3.Aging Report Meeting
Each month, hold a meeting to discuss past due claims and problems the AR is experiencing in receiving payments in a
timely fashion. Give everyone an updated status on your accounts receivable and stress the importance of the meeting
to each attendee. The exchange of ideas between individuals can generate solutions and be a very valuable tool when
CLAIM FOLLOW-UP SCHEDULE
The following schedule is recommended for written and telephone follow-up for outstanding claims:
Mail or fax a follow-up letter containing all relevant claim information (including original filing date) and a copy of the
original claim. Request an explanation for payment delay and state that the original claim was filed in a timely fashion
with all necessary information contained on the claim form.
Indicate that the letter is a 30 day follow-up and additional follow-up will occur if payment is not received promptly.
Send a similar letter and copy of original claim as before.
Indicate that the letter is a second, 60 day follow-up and additional follow-up will occur if payment is not received
Begin telephone contact with the insurance carrier to determine the status of the outstanding claim(s).
Talk to a supervisor or someone with authority.
Note on the patient’s claim folder the contact date, the name of the person contacted, the claim number, and any
relevant information needed by the carrier to process and pay the claim.
Take appropriate action to speed the carrier’s claims payment process.
If telephone contact is not possible, send another letter and claim as before. Indicate that the letter is a third, 90 day
follow-up and additional follow-up will occur if payment is not received promptly.
Telephone contact is essential. Contact the insurance carrier as noted above.
Stress that the claim is seriously past due and good faith efforts to secure payment have failed.
Take appropriate action to speed the carrier’s claims payment process.
Contact the insurance carrier by phone to determine delay in payment.
At this point, all required information should have been sent to the carrier.
Again, stress the past due status of the claim, determine if additional information is required and take appropriate action
to speed the carrier’s claims payment process.
Over 180 Days
Contact the carrier as often as possible, with no more than 30 days elapsing between communications.
Concentrate efforts on resolving these claims.
Write-offs should only occur if the carrier has indicated refusal (for valid reasons only) to pay the claim.