Class Five

1. CLAIMS
• The basic processes of claims assessment;
• The reasons and methods of controlling claims costs;
• The principles on which the concept of managed care is based;
• Discuss the use of procedure codes.

2. The basic processes of claims assessment.
• The tangibility of the insurance service is seen at the point of claim
when the client receives service or when money is paid.
• Ideally, a company should have a claims department that is
responsible for handling claims.
• A seamless service will ensure that clients get medical treatment and
drugs when they want them.
• Much as there is need for prompt settlement of claims, Health
insurance claims present difficulties in assessment because of the
following reasons:

3. • The possibility of the service providers treating members that are not covered
under the medical scheme;
• Where there are claim limits, the possibility that a member exceeded the
claim limit;
• Where the ailment treated is not covered under the insurance policy;
• Where the cost of treatment has been inflated;
• The possibility of fraud resulting from collusion between the provider and
member.

4. • Determining whether the premiums have been paid;
• Determining whether a policy exclusion does not apply;
• Determining whether a member is covered;
• Determining whether a member got treatment at designated outlets;
• Determining whether the ailment treated is covered;
• Determining whether the limit has not been exceeded;
• Appropriate agreed upon charges have been used; and
• The applicable excess, if any.

5. • The information for assessing a claim will be obtained from a claim
form.
• information in the claim form should be compared with the
underwriting information on the application form and the insurance
contract to determine whether the claim is genuine or not.
• The claim form should enlist as much information as possible
including the following:

6. • The membership number of the member;
• The date of commencement of cover;
• The date of expiry of the cover;
• The type of plan
• Total claim amount
• The applicable excess.
• The claim date
• The signature of the beneficiary confirming that treatment has been
received.

7. Reasons for Controlling Claims Costs
• Because of rising medical costs, healthcare insurers are now seeking to
control the health insurance costs. Medical cost inflation is the increase
year- on- year of the cost of delivering medical services. Medical cost
inflation has led to premium increases.
• Another reason for controlling claim costs is that some claims may not be
genuine.
• The rising high loss ratios in this class of business necessitates that costs be
controlled.
• Medical insurance is cash intensive. The risk of a person falling sick during
the insurance period is high. Therefore, there is need to control claim costs.

8. Methods of controlling claims costs
• The methods of controlling Claims Costs include the following:
• Entering into pricing agreements with hospitals, clinics, pharmacies,
laboratories and other medical establishments. The pricing agreed
upon will include: cost of consultation, drugs, laboratory charges and
bed fees. The prices agreed upon will be checked against the prices
that are actually charged.
• Clinical guidelines – some health care insurers employ medical
professionals such as Doctors, Nurses and other professionals to
assist in checking the medical insurance claims by use of the medical
notes/medical forms/prescriptions.

9. • Use of Technology – Smartcards and Electronic Data Interchange
(EDI). EDI is a system where hospitals or specialists enter details of a
claim and their costs on a computer terminal situated in their
premises and this data is directly transmitted to the healthcare
insurers. Smart cards are used to store the biometrics of a member
such as finger print and facial features.

10. • MANAGED CARE
• A system of health insurance characterized by a network of contracted providers
providing health services to a defined population for a fixed payment.
• Managed care places special emphasis on the appropriate use of inpatient settings,
evidence-based decision making, cost- effective diagnosis and treatment, population
based planning, and health promotion.
• Principles on which managed care is based.
• Employers pay a pre-defined amount for healthcare;
• There has to be a large number of participants in the scheme;
• There has to be a good working relationship between the provider and the employer;
• Utilization of provider networks;
• Data has to be availed to the provider.

11. • THE USE OF PROCEDURE CODES
• A code is a number or letter or a combinations of numbers and letters that
may be used to identify a parameter or variable.
• In medical insurance, they may be used to assist in the rapid assessment of
claims and also help insurers to plot the frequency and incidence of
disease.
• Initially, claims were processed against textual descriptions of both
impairments and surgical procedures and much was left to the claims
assessor on how to categorise the severity of the condition. It became
increasingly important for accurate data to be provided to enable
healthcare insurers to understand the changing nature of the industry.
Computerized claims processing could only be driven by coded data.

12. Examples of Procedure Codes
Description Code
• Transplantation of Kidney M0100
• Partial Excision of Kidney M0300
• Providers have chosen to adopt these codes and are encouraged to
incorporate the codes on their bills.