This chapter discusses commercial healthcare insurance plans, including individual and employer-based plans. It describes the major types of commercial plans like HMOs, PPOs, and high-deductible plans. The chapter also covers risk pools, provisions of insurance policies like benefits, premiums, and cost-sharing. Elements of insurance identification cards and the claims submission and adjudication process are explained. The effects of rising healthcare costs like medical bankruptcy and value-based insurance models are also summarized.

1. © 2018 American Health Information Management Association© 2018 American Health Information Management Association
Principles of Healthcare Reimbursement
Sixth Edition
Anne B. Casto, RHIA, CCS

2. © 2018 American Health Information Management Association
Chapter 3
Commercial Healthcare Insurance Plans
• Learning Objectives
– Discuss major types of commercial healthcare insurance
plans
– Differentiate individual healthcare plans form employer-
based healthcare plans
– Describe state healthcare plans for the medically
uninsurable
– Explain the provisions of healthcare insurance policies and
the elements of a healthcare insurance identification card
– Describe the filing of a healthcare insurance claim
– Discuss remittance advices and explanations of benefits
– Appraise the effects of increasing costs in the commercial
healthcare insurance market
2

3. © 2018 American Health Information Management Association
Commercial Healthcare Insurance
Individual
-purchased by
individual or family from
an insurance agency
Employer-Based
-individual or family obtains
as part of an employment
benefit package
3

4. © 2018 American Health Information Management Association
Types of Commercial Insurance
Single
Coverage
Insured
4
Family
Coverage
Insured
Spouse Children
Young
Adult
Disabled
Person

5. © 2018 American Health Information Management Association
Risk Pool
• Group of individual entities whose
healthcare costs are combined for
evaluating financial history and estimating
future costs
– May combine
• Individuals
• Employers
• Associations
5
Risk – the probability of
incurring loss

6. © 2018 American Health Information Management Association
Types of Risk Pools
Individual Pool
• Self-employed
people
• Employer does
not offer
insurance
• Least diverse
pool
Large-employer
pool
• Employees of one
employer
• Pools are large
and diverse
Multiple-employer
pool
• Employees from
several midsize
employers or
small employers
or groups of
associations
• Smaller and less
diverse than large
employer pools
but larger and
more diverse than
individual pools
6
At risk for adverse
selection: Having
disproportionate numbers
of sick people

7. © 2018 American Health Information Management Association
Insurance Plan Terminology
Benefits
(aka covered services)
Healthcare services for which the insurance
company will pay as outlined in the policy
(contract)
Policyholder
Individual or entity that purchased the healthcare
insurance plan
Alternative terminology includes: insured,
certificate holder, member, subscriber and
beneficiary
Premiums
Payments that the policyholder must make to an
insurer in return for healthcare coverage
Cost sharing provisions
Out-of-pocket expenses that the insured must
pay. Deductible is an annual amount of money
that the policyholder must pay before the
insurance will assume its share of liability
Insurance Plan Terminology
7

8. © 2018 American Health Information Management Association
Medically Uninsurable
• State healthcare insurance plans
– Provide access to healthcare insurance
coverage for medically uninsurable
• Pre-existing condition
• Chronic disease
• Both
– Use healthcare services more than healthy
people and their healthcare costs are higher
8
Cancer
Chronic kidney disease
Cystic fibrosis
Genetic disorders

9. © 2018 American Health Information Management Association
Provisions of Insurance Plans
• Policy – formal contract between insurance
company and individual/group for whom the
company is assuming risk
– aka Certificate of insurance
• Stipulate covered conditions
– Health conditions, illnesses, diseases, or
symptoms for which the healthcare insurance
company will reimburse for treatment that
attempts to maintain, control, or cure said
conditions
9

10. © 2018 American Health Information Management Association
Sections of Healthcare
Insurance Policy
Definitions
Vary from everyday
definitions
Example: Emergency
-Prudent layperson
standard
Eligibility and
Enrollment
-Eligible dependents
-Guaranteed Issue
-Waiting period
Qualifying life events
(QLE)
Loss of coverage,
marriage, divorce, birth,
adoption
Benefits
Specify types of services,
types of providers, types
of medical equipment
*Essential health benefits:
10 categories required by
ACA
-Stop-loss benefit
-Maximum out-of-pocket
-Catastrophic expense
limit
10

11. © 2018 American Health Information Management Association
Sections of Healthcare
Insurance Policy
• Limitations: limit the extent of the benefit
11
Cost
Sharing
Provisions
Coinsurance
Preestablished percentage of eligible expenses
after the deductible has been made.
Example: 20 percent of durable medical equipment
Copayment
Fixed dollar amount that may vary by type of
service.
Example: $25 per clinic visit
Tiered benefits
Levels of coverage. Insured will have a different
cost sharing amount per level of service
Example: In-network vs. Out-of-network
Example: Pharmacy formulary

12. © 2018 American Health Information Management Association
Sections of Healthcare
Insurance Policy
Appeals
Appeals process is the
reconsideration of
denial of coverage for
healthcare services
Appeal steps are
outlined in the policy
Typically, an appeal
must be in writing and
initiated within a specific
time frame
Exclusions
Non-covered services
Experimental or
investigational
Medically unnecessary
Cosmetic procedure
Non-FDA approved
medications
Riders and
Endorsements
Rider – an additional
document that provides
details about coverage
or lack of coverage for
special situations
Endorsement –
language within the
policy that adds
information about
coverage or lack of
coverage for special
situations
12

13. © 2018 American Health Information Management Association
Sections of Healthcare
Insurance Policy
Procedures Prior Approval (prior authorization, precertification)
Certain services require prior approval for the service to be covered. Failure to obtain
prior approval will result in the service being denied.
Examples: physical therapy, organ transplants, private nurses
Coordination of Benefits (COB)
Utilized when multiple payers are involved. Services are coordinated so payments do
not exceed 100%
Examples: Primary insurance and secondary insurance (Medicare and Medigap),
divorce agreement is followed
Other Party Liability (OPL)
Utilized when multiple insurers, healthy and nonhealthy, are involved. Ensures health
insurance is not paid for services that are the responsibility of nonhealthy insurance
Examples: health insurance and automobile insurance, health insurance and workers
compensation
13

14. © 2018 American Health Information Management Association
Sections of Healthcare
Insurance Policy
• Sections build upon one another acting as
interlocking pieces of a puzzle (see earlier slide)
• All sections work together to determine coverage
– Definitions
– Eligibility and Enrollment
– Benefits
– Limitations
– Exclusions
– Appeals
– Procedures
14

15. © 2018 American Health Information Management Association
Elements of Health Insurance
Identification Card
Excellent Health Plan
Member Name:
Jane Doe
Member ID:
EDQY43211904
Group No: V730912
RX Bin/Group 15004
$15 Generic
$25 Name brand, preferred
$50 Name brand, nonpreferred
Unknown State University
Prime Care Excellence
Effective Date:
01/01/20XX
In-Network Member Responsibility:
Primary $30
Specialist $70
PT/OT/ST/Chiro $50
BH, SU $50
Urgent Care $85
ED $250
15
BH = behavioral health
SU = Substance use

16. © 2018 American Health Information Management Association
Filing a Health Insurance Claim
• Claim submission – the process of
transmitting claims data to a payer for
processing
– Clean claim
– Dirty claim
• Adjudication – determination of
reimbursement based on the member’s
insurance benefits
16

17. © 2018 American Health Information Management Association
Remittance Advice (RA)
• Detailed report of payment prepared by
the payer and sent to the provider
• RA is sent to the provider at the time of the
electronic fund transfer (EFT)
• Remittance advice are utilized during the
claims reconciliation component of the
revenue cycle and are discussed in more
detail in Chapter 9
17

18. © 2018 American Health Information Management Association
Explanation of Benefits
• Detailed report of payment prepared by
the payer and sent to the patient
• Provides the patient with details about
what services are covered or not covered,
for which portions of the reimbursement
the payer is responsible, and what the
patient’s cost sharing responsibilities are
for the healthcare services
18

19. © 2018 American Health Information Management Association
Explanation of Benefits
• See figure 3.4 in the textbook. Review all
components of the sample EOB together.
19

20. © 2018 American Health Information Management Association
Increasing Costs of Commercial
Healthcare Insurance
• Effects on consumers
– Medical bankruptcy
• Effects of providers
– Cost of collections and non-payment
• Effects on healthcare insurers
– Consumer-directed healthcare plans
– Value-based insurance models (Chapter 10)
– Wellness programs
20

21. © 2018 American Health Information Management Association
Consumer-Directed Healthcare
Plans
• Reduce healthcare costs by providing
consumers with financial incentives to
choose lower-priced packages of benefits
– High deductible plans, health savings
accounts, flexible spending accounts
• Attempt to decrease moral hazard
– Any change in behavior that occurs as a
result of becoming insured
21