8.2 Health Insurance Components

Various countries handle medical costs differently. In the United States, every person must enroll in some form of health insurance coverage. Health insurance helps patients cover incurred medical costs for such items as pharmaceuticals, physician visits, laboratory costs, and hospitalization. In Canada, health care is funded and administered by each province and territory. The Canadian government ensures that coverage is made available to every Canadian citizen. Insurance in Canada is used for out-of-system services and expenditures.

Healthcare coverage in the United States may be provided by commercial insurance paid by the individuals, or through their employers (with shared premium costs), or by one of the state or federal programs:

• Medicare (Parts A, B, C, and D) for those over 64 or disabled, administered through the US Department of Health and Human Services and contracted private insurers

• Medicaid for low-income patients and their dependents, administered by individual states

• Children’s Health Insurance Programs (CHIPs) and affordable care health exchanges, primarily administered by individual states

• Tricare for active military (including National Guard and Reserves), veterans, and military dependents, administered through the Defense Health Agency

The components and payment structures of each health insurance plan are determined both by the type of insurance provider and the individual insurer.

Commonly, patients have only one primary health insurance plan, which pays up to its coverage limits. Some patients also have a secondary health insurance plan, which pays what the primary does not—if the service is covered under the secondary plan. The patient may still have out-of-pocket costs even with two insurance plans. Some patients who have excessive drug needs have to combine more than one healthcare insurance program with a specific prescription drug insurance policy.

There are several important concepts and terms the pharmacy technician must understand related to insurance coverage. These include responsible payment parties, coinsurance, copayments, catastrophic insurance, health savings accounts, flexible spending accounts, pharmacy benefit managers, and insurance billing codes.

Responsible Payment Parties

The first party responsible for covering a medical bill is typically the person who directly receives the benefits, services, or product. In some cases, a parent, guardian, or other responsible party is considered the first part. The second party is the healthcare provider. The third party is an organization other than the patient or healthcare provider involved in paying for medical expenses. Third party payers include insurance companies, government agencies, or individual employers.

To receive health insurance coverage, the patient pays a monthly premium, or enrollment fee. This fee may be paid directly to the insurer or more commonly is deducted from one’s paycheck to be paid by the employer to the insurance company along with an employer subsidy (offered as an employee benefit).

Pharmacy technicians need to understand insurance terms and types of policies so that they can answer patients’ questions intelligibly.

The monthly premium allows the patient access to the health services and products outlined in the specific insurance policy, or plan. These specific health services and products are called benefits. The policy describes the specific circumstances under which the policy will cover these expenses. The plan includes the processes, rates, rules, and restrictions. Many policies, especially with Medicare, cover preventive office visits, such as annual physicals and well-baby checks without additional costs above the premium.

Most health insurance plans include some combination of individual and/or family annual deductible levels. The deductible is the designated amount of annual medical costs that must be paid by the patient before the full coverage by the insurance company kicks in. So in that sense, this amount is deducted from coverage benefits. For instance, if a plan designates a $5,000 deductible for an individual, the patient must pay for a large portion or all of the medical costs up to $5,000 before the insurance company will consider paying the full or majority portion of each expense. In this high deductible plan, the patient may have numerous office visits and tests done and perhaps an emergency room visit before the insurance company will cover much or anything at all.

The higher the deductible, the lower the monthly premium because the patient is assuming much of the risk. Lower deductible plans often start at a $250 or $500 annual deductible with higher monthly premiums. The designated annual deductible levels and monthly premiums are reviewed annually and often change year by year to meet rising costs (like the collision insurance on your car).

IN THE REAL WORLD

Patient Coinsurance Payments

For some policies, when patients receive a medical service or drug product, they must immediately pay a certain percentage of the cost, or coinsurance payment, with any potential further billing to come later. Coinsurance payments and percentages vary with the service provided and the insurance policy. Coinsurance payments remain an element of Medicare Part A but are less common today in other government and private insurance programs.

Patient Copayments

A different shared approach is the copayment (copay). It is a flat out-of-pocket fee that the patient is required to pay for each health visit, service, or product at the time of delivery. For instance, a copay could be $20 per office visit and $10 per generic prescription. The remaining costs would either be covered by the insurance company or by the patient until the annual deductible level is reached, when the insurance will pay a higher percentage. Copays vary by insurance company, as outlined in the policy of each company. Plans with higher premiums often have no copayments or a lower copayment and deductible.

Healthcare plans may have a tiered copayment system, such as $20 per non-emergency office visit and $200 per emergency room visit. Prescription drug insurance companies also often establish a dual copay with one flat fee for generic drugs versus another fee for brand name drugs. There can also be a three- or four-tiered copay program, having different copays for generics, preferred brands, nonpreferred brands, and specialty drugs.

Catastrophic Insurance

Catastrophic insurance is an insurance plan that is used only when a person has experienced a severe accident or unexpected debilitating illness or disease. It has very low monthly premium payments but a very high deductible (e.g. $5,000-$10,000) and few preventive services. It also generally has no copayments or coinsurance payments, putting the full weight upon the patient for every medical expense until the annual high deductible level is reached. Young, healthy people who rarely visit the doctor often rely on this kind of insurance. It’s considered a “safety net” for people who don’t expect to have many medical bills but want coverage in case a “catastrophe” strikes.

Health Savings Accounts

To assist people in putting money away for healthcare costs not covered in high-deductible insurance plans, there are Health Savings Accounts (HSAs). These are savings accounts that can be started by patients or their employers to set aside tax-deferred money specifically for healthcare costs not covered by insurance. The money is deposited before taxes and can be used only for legitimate health bills. HSAs are particularly helpful for individuals with high-deductible insurance plans or enormous annual health costs that go beyond the maximum levels paid by the insurance company in a year. The unused deposits in the HSA may accumulate from one year to the next.

Flexible Spending Accounts

In flexible spending accounts (FSAs), patients, through their employer, can also place pretax dollars aside for medical expenses and child and dependent care. However, these dollars must be carefully predicted and spent within the year (though under certain circumstances, $500 a year may be carried over).

Pharmacy Benefit Managers

Nearly all insurance companies and plans that handle prescriptions work with a pharmacy benefit manager (PBM), a division of the insurance company or a separate company that processes patient prescription claims (explained in more detail in a later section).

Insurance Billing Codes

Insurance companies all use established coding systems for billing claims so that the computers can speak to each other and the electronic health records (EHRs) can be consistently communicated across providers and insurance plans. These coding systems use combinations of numbers to designate the diagnoses and the associated prescription claims. Three kinds of billing code systems are used for different kinds of billing:

• ICD-10 (International Classification of Diseases, 10th edition), to record diagnoses and disorders

• HCPCS (Healthcare Common Procedure Coding System—Level II), to record supplies, equipment, and devices supplied for medical purposes

• CPT (Current Procedural Terminology), to record procedures and services

The pharmacy software will translate and check the coding. As a pharmacy technician, you will make sure that the HCPCS coding from the physician is present to bill Medicare Part B for all diabetes test supplies, including blood glucose monitors, test strips, lancets, and syringes as well as respiratory solutions and nebulizer equipment and tubing. If the coding is not present, you will have to call the physician’s office for it. Also, if a pharmacy has a Medicare Part B contract (contracts will be explained later in this chapter) for supplying large durable medical equipment (DME)—such as hospital beds, wheelchairs, and walkers—the technician will need the HCPCS supply code plus an ICD-10 diagnostic code from the physician. These coding systems are also necessary in the claims processing for the DME and specified pharmacy services of Medicare Part D patients.

Technicians may be involved in using the CPT coding system to bill PBMs for the medication therapy management (MTM) and patient care services provided by the pharmacist. These billing procedures are processed separately from the on-the-spot online processing of drug prescriptions.