Understanding Reimbursement Terms

Reading the summary of benefits available under your health plan contract can be a bit like reading a foreign language text if it is unfamiliar terminology. Before the advent of managed care, there was indemnity (or traditional) insurance. Under indemnity insurance, the patient was free to see the health care provider of his/her choice. Then, after the medical visit, the patient would file the claim with his/her insurance company. The insurance company would send payment to the patient and he/she in turn, would pay the health care provider. The insurer's payment was based on either the provider's billed charges, or on a usual and customary (UCR) based list of allowable fees per service.& That was how indemnity, or traditional, insurance worked.

For better or for worse, things changed with the introduction of managed care. The process changed, as did the terminology. Instead of the patient having an unlimited choice of providers, managed care plans limit the patient's choice to only those providers who are part of the insurer's network, sometimes referred to as a preferred plan providers, participating providers, or recognized providers (all of which have different definitions). Payments to that limited selection of providers are also more tightly controlled by the insurer. Regardless of the provider's fee, payments are limited to a set maximum allowable amount. Either the provider or the patient is responsible for the difference. If the managed care contract has a "hold harmless" clause, the provider is responsible for the remaining balance and cannot collect that money from the patient. If there is not a hold-harmless clause, the patient can be "balance billed" for the remainder.

In order to make it easier for you to understand your plan and to discuss concerns with our billing department, we have supplied a glossary of commonly used terms.

Allowed amount:
For any given service or supply, the amount these providers have agreed to accept as payment in full pursuant to the applicable agreement between the health care plan and the provider. These providers agree to seek payment from the health care plan when they furnish covered services to you. You will be responsible only for any applicable deductible, copays, coinsurance, and charges in excess of the stated benefit maximums, if any, and for charges for services and supplies not covered under the plan.

Balance Billing:
The administrative practice of holding the patient financially responsible for the remainder of medical service charges, beyond the insurer's allowed amount. This does not apply when a managed care contract contains a "hold harmless" clause.

Coinsurance:
The percentage share payable by the patient on claims for which your health care plan provides benefits at less than 100% of the allowed or contracted amount.

Copay:
The amount which the patient is required to pay for certain services and supplies provided to you under your plan. You are responsible for payment of any copay directly to the provider of the service or supply. This amount is customarily due at the time of service.

Deductible:
The portion of medical costs to be paid by the patient before insurance benefits begin, usually expressed in dollars.

Denial:
Refusal by the insurer to reimburse for services that have been rendered; can be for various reasons.

Eligibility:
The process of determining whether a patient qualifies for benefits, based on factors such as enrollment, date, pre-existing conditions, valid/current referrals or prescriptions, etc.

Fee schedule:
A pre-determined list of payment amounts for various services; may be based on usual and customary rate, Resource Based Relative Value System (RBRVS), or other system.

Hold Harmless:
A hold harmless clause involves the provider agreeing to not pursue a patient for fees in excess of the allowed amount of the managed care health plan.

Participating Provider:
A provider whose name is included in the current list of participating providers for the health care plan. Sometimes, benefits for participating providers will be paid at a lesser percentage than for a Preferred Plan Provider.

Preferred Plan Provider:
Often, when you use the services of a Preferred Plan Provider, most benefits will be paid at a higher percentage than for participating providers.

Provider:
The person who delivers health care services within the scope of a professional license.

RBRVS:
Resource Based Relative Value System. Reimbursement method used by the U.S. Health Care Finance Administration (HCFA) for its Medicare program. Values for each medical procedure are based on the amount of resources required to perform the procedure, then the values are weighted against each other to compute relative values.

Recognized Provider:
A provider who is acting within the scope of that provider's license, who belongs to a category of providers to whom participating agreements are not offered but for whose services the health care plan provides certain benefits only as specified in the plan's payment schedule.

Reimbursement:
Refers to payment by the patient (first party) or insurer (third party), to the health care provider, for services rendered.

UCR:
Usual and customary rate.

UR:
Utilization review. Retrospective review of a patient's course of treatment, to evaluate appropriateness of care based on medical necessity.