UT Southwestern Medical Center wants to make sure our patients understand the billing and insurance aspects of their visit. The glossary below explains some of the more common billing and insurance terms that patients see.
A term used for discounting the amount billed for a medical service in accordance with the contract between UT Southwestern and an insurance company.
Advance Beneficiary Notice (ABN)
A form signed by patients that lets them know that certain tests or services planned by the doctor may not be covered by Medicare. The ABN also informs patients they may be responsible for paying these charges.
Even though health care providers do not have to give patients an ABN for services that Medicare never covers, some may still choose to give patients an ABN for services not covered by Medicare. Medicare does not pay for:
- Dental services
- Hearing aids
- Routine eye exams
- Routine foot care
- Routine physical exams*
*Medicare Part B covers a first time "Welcome to Medicare" physical exam within the first six months of having Medicare Part B. The patient may have to pay some costs for this physical exam. The ABN was previously known as the Medicare Medical Necessity Waiver.
The payment a participating provider agrees to accept for a service. The approved amount is decided by insurance company fee schedules, Current Procedural Terminology (CPT®) coding standards, and generally accepted insurance reimbursement rules.
Assignment of Benefits
This term means that the facility or the physician agrees to accept payment from an insurance company first and bill the patient for any after-insurance amounts due. Patients "assign" the rights for payment when they sign the consent for admission or treatment.
The term "benefit" is used for the medical services that are paid for under a patient's insurance plan.
Used to decide the primary and secondary insurance coverage for dependent children's medical charges. The word "birthday" refers only to the month and day in a calendar year, not the year in which the person was born.
If the parents are not separated or divorced and both carry insurance coverage for their children, the insurance of the parent whose birthday occurs first in a calendar year is considered the primary insurance. The other parent's insurance is considered the secondary coverage.
If both parents have the same birth date (month and date), the health plan in effect for the longer period of time is the primary insurance. The Birthday Rule is endorsed by the National Association of Insurance Commissioners (NAIC).
Example: Mr. and Mrs. Smith have two children ages 4 and 9. Mr. Smith has family insurance with Blue Cross and Blue Shield through his work. Mr. Smith has been in this insurance plan since May 2005. Mrs. Smith is covered by an HMO through her place of employment. She has had her coverage since June 2006.
Mr. Smith's birth date is March 4 and Mrs. Smith's birth date is January 22. If either of the Smith children needs medical services, their mother's plan would be the primary insurance company. If both Mr. and Mrs. Smith had birthdays on March 4, then the father's insurance would be the primary one, because he had it since 2005.
Refers to the form submitted to the insurance company for payment of benefits.
A method used by insurance companies to review bills for a patient's health care services before payment is made. The purpose of claims review is to make sure the service provided was medically necessary, billed according to industry standards, and paid according to the company's fee schedule.
An arrangement where patients and their insurance company share payment of a health care service. Coinsurance takes effect after the deductible amount has been paid. The coinsurance usually is a percentage of the cost of medical services after the deductible is paid until the annual maximum out-of-pocket expense is reached.
Example: A patient has a $500 deductible and a 20 percent coinsurance with an annual maximum out-of-pocket amount of $5,000. This patient must pay $500 with his/her own money before the insurance company starts to pay. When the insurance company does pay, it will pay 80 percent of the approved amount.
The patient pays the remaining 20 percent with his/her own money. The patient will keep paying at 20 percent until he/she spends $5,000 of his/her own money and reaches the annual maximum out-of-pocket amount. At this point, the insurance will pay 100 percent of the approved amount.
Contractual Allowance (Contractual Adjustment)
The difference between what an insurance company approves according to its contract and what the health care provider charges for the procedure. If the provider is under contract to accept the patient's insurance plan, the patient is generally not responsible for this difference. A contractual allowance shows up on a billing statement as an adjustment required and decreases the balance.
Coordination of Benefits (COB)
An agreement on how to process charges when more than one health insurance company is involved.
Example: A man has family insurance with Blue Cross and Blue Shield through his job. His wife is covered by an HMO through her place of employment. The wife sees a doctor for a medical condition. The COB agreement determines which insurance company has first responsibility to pay the wife's medical bill and which insurance company has secondary responsibility.
Out-of-pocket (amount the member pays per year excluding copays and deductibles) expense may be reduced by coordinating benefits between insurance companies.
A common term for the fixed amount set by an insurance company and paid by a patient for a specified medical service. A copayment is often connected with a physician office visit or an emergency room visit. Copayments are collected at the time the services are provided. Amounts of $15, $25, or $30 are common for copays.
Refers to a service, test, supply, or procedure that an insurance company pays the patient or the health care provider. Covered services consist of a combination of mandatory and optional services and vary by state and employer contract.
CPT® Codes (Current Procedural Terminology)
Current Procedural Terminology codes, also known as CPT® codes, constitute a set of five-digit codes used to describe the medical, surgical, and diagnostic services done. CPT codes allow physicians, patients, counsel, insurance companies, and others to communicate effectively throughout the United States.
The date a patient received health care services. For an inpatient or hospital stay, the dates of service are the date of admission through the date of discharge. For outpatient services, the date of service is the date of the visit.
Deductible (Insurance Deductible, DED)
The minimum amount of money patients must pay before their insurance company pays any health care expenses. Usually, the deductible needs to be met and paid by patients each year.
DRG (Diagnosis Related Groups)
A payment system developed for Medicare. It classifies a hospital stay into one of approximately 500 categories of illnesses. Because patients in each illness category are similar clinically, they are expected to use the same level of hospital resources. The DRG system has been used since 1983 to determine how much Medicare pays hospitals.
Exclusive Provider Organization (EPO)
A type of managed care plan in which patients must select a Primary Care Physician (PCP). The primary care physician must give authorization to receive services from a specialist. Some EPO plans require members to see physicians only in their primary care physician's group practice.
Explanation of Benefits (EOB)
An Explanation of Benefits is a document provided by the insurance company that tells how a claim was processed. It also explains why a claim was or was not paid, and what portion the patient is responsible for. Other terms that mean the same thing are EOP (Explanation of Payment), EOMB (Explanation of Medicaid Benefits), and MSN (Medicare Summary Notice).
A listing of the maximum amounts that a health insurance plan will pay for certain services. A fee schedule is based on CPT® codes.
Refers to the person responsible for receiving and paying the bill for medical services. The guarantor may or may not be the patient. A parent or legal guardian/trustee is the guarantor for patients 18 years old and under. This is also the case for patients with a decreased mental capacity.
Health Maintenance Organization (HMO)
Refers to a health care plan in which all care is guided by a primary care physician (PCP). The insurance company will not reimburse for services outside the HMO contract. HMOs can be either an open panel or closed panel. An open-panel HMO allows physicians to see patients not covered by the HMO. A closed-panel HMO uses physicians who see only HMO patients. UT Southwestern HMO participation is "open panel."
ICD Codes (International Statistical Classification of Diseases and Related Health Problems)
Provides codes to classify diseases and a wide variety of signs, symptoms, abnormal findings, complaints, social circumstances, and external causes of injury or disease. Every health condition can be assigned to a unique category and given a code up to six characters long. Revised periodically, the ICD is used worldwide for statistics, reimbursement systems, and automated decision support in medicine.
A general term that refers to a system of health care delivery in which cost, quality, and access to care are "managed" through insurance companies. Common parts of managed health care include a restricted group of contracted providers, some limitations on benefits to members who use non-contracted providers (unless authorized to do so), and some type of authorization system.
Managed care is a variety of systems, ranging from so-called managed indemnity to PPOs (Preferred Provider Organizations), POS (Point of Service), open-panel HMOs, closed-panel HMOs, and others.
Maximum Out-of-Pocket (MAX-OOP)
The maximum out-of-pocket expense is the total coinsurance amount that patients must pay before the insurance pays at 100 percent. Most insurance plans set up a yearly maximum out-of-pocket limit ranging from $1,000 to $5,000.
Some plans may have even higher MAX-OOP. When a patient reaches the set limit through coinsurance, deductible, and copayments, the insurance company pays the remaining bills at 100 percent until the new benefit year begins.
Medicaid is a health insurance program for eligible low-income people. The federal government and each state finance Medicaid jointly. Levels of funding, benefits, and the portion of low-income people covered vary widely from state to state. Most states have strong restrictions on payments made to out-of-state providers. UT Southwestern fully participates in Texas Medicaid.
Medically Necessary (Medical Necessity)
Relates to procedures, treatments, supplies, devices, equipment, facilities, or drugs that are needed to diagnose or treat a medical condition. To be medically necessary, the services must meet the standards of good medical practice in the local area.
In addition, services cannot be mainly for the convenience of the patient or the doctor. Many insurance companies pay only for "medically necessary" services. This means that routine physical exams, cosmetic surgery, or preventive care may not be covered.
A federal health insurance program for people age 65 and older and for individuals with disabilities. Medicare Part A (Hospital Insurance) is for inpatient hospital services, nursing home care, home health care, and hospice care. Patients who get benefits from Social Security or the Railroad Retirement Board (RRB) automatically get Medicare Part A. Medicare Part A coverage starts the first day of the month a person turns age 65. Most people do not pay for Medicare Part A because they paid Medicare taxes while working.
Medicare Part B (Medical Insurance) covers doctors' visits, outpatient hospital services, medical equipment and supplies, and other health services. Participation in Medicare Part B is voluntary. There are monthly fees for Medicare Part B. Patients may also pay a Medicare Part B deductible before Medicare starts to pay its share.
Medicare Part D helps covers certain prescriptions. There is a fee for Medicare Part D. Visit medicare.gov (available in English and Spanish) for more information on Medicare. UT Southwestern fully participates in Medicare Part A and Part B.
Medicare Replacement Plans
Insurance plans that are offered to Medicare-eligible individuals as a replacement for traditional Medicare insurance. There are many Medicare replacement plans offered today. These plans fall into two categories: Managed Medicare Replacement Plans and Private Fee for Service (PFFS) Plans.
Both usually offer added benefits over traditional Medicare: for example, improved vision or prescription benefits. UT Southwestern accepts some Managed Medicare Replacement Plans but does not participate in the Private Fee for Service Plans.
Medicare Supplement Insurance (Medigap)
Defined as a private insurance policy that helps cover the difference between approved medical charges and the benefits paid by Medicare. Medicare pays physicians for services according to its fee schedule, regardless of what the physician charges. This means that the patient may be required to pay the physician the difference, or gap, between the amount Medicare pays and the physician's fee.
Medicare supplement insurance ensures that a Medicare member is not responsible for paying the difference. UT Southwestern accepts all Medicare-recognized supplemental plans.
A service, test, supply, or procedure that is not a benefit in a patient's health insurance policy. Patients are responsible for paying for all noncovered services. The insurance company can give the details of what test, procedure, or service is not covered.
When a physician or facility does not accept a patient's health insurance plan. When the patient receives services from a nonparticipating physician or facility, the patient is billed directly for services and is responsible for payment in full.
Services delivered by a physician or facility that does not have a contract with the patient's insurance company. Typically, managed care plans contract with a panel of providers (group of facilities and physicians). When patients seek care from a physician or facility that is not in the panel, they are getting care out-of-network.
The patient may be responsible for some or all of the costs for out-of-network care. Emergency medical care usually is an exception to the OON rule.
Expenses paid by patients.
A term used when a physician agrees to accept an insurance company's approved amount as payment in full. In this case, the bill for services is sent directly to the insurance company and payment is made directly to the physician.
The insurance payment for physician participation excludes amounts considered to be a patient’s obligation under the patient's insurance plan. That means coinsurance, deductibles, and noncovered services have to be paid by the patient.
Point of Service (POS)
A dual- or triple-choice insurance plan. In a Point of Service plan, the patient does not have to choose the coverage for services until he/she needs them. The patient has a choice to access health care inside or outside the insurance plan. The most common use of the term POS applies to a plan that enrolls each member in both an HMO (or HMO-like) system and an indemnity plan.
These plans provide different benefits (i.e., 100 percent coverage rather than 80 percent) for members who use the plan or go outside the plan of services. A dual-choice POS, or two-tiered POS, generally offers a PPO (Preferred Provider Organization) and an OON (Out-of-Network) option. A triple-choice plan, or a three-tier POS, offers an HMO, PPO, and OON option.
Pre-Admission Certification (Pre-Cert)
Also known as pre-authorization, pre-admission review, pre-certification, or predetermination. Required by insurance companies to confirm the medical necessity of a service, test, or procedure before being done. It is the patient's responsibility to get pre-certified. Pre-certification or pre-authorization does not guarantee payment.
If a required pre-authorization is not obtained before services are delivered, benefits may be denied or substantially reduced. Patients who do not get a pre-cert can have a higher out-of-pocket expense.
A health problem experienced by a patient before a new insurance policy starts. Each insurance company uses its own particular definitions of pre-existing condition. However, the following statement illustrates most insurance company provisions: "A pre-existing condition is a medical condition that would cause a normally prudent person to seek treatment 12 months prior to the beginning of coverage."
Health care that emphasizes actions to prevent illness. Examples are routine physical examinations, well baby care, immunizations, Pap tests, pelvic exams, flu shots, and screening mammograms.
Primary Care Physician (PCP)
The first doctor who patients see for an illness or health care need. The primary care physician treats patients directly. The PCP also sends patients to a specialist (secondary care) and admits patients to a hospital. PCPs may practice family medicine, internal medicine, pediatrics, or sometimes obstetrics/gynecology.
A term used for the insurance company that has first responsibility for payment of a claim.
Describes services provided by physicians, pharmacists, physician assistants, physical therapists, or nurse practitioners.
Refers to any supplier of health care services. Providers can be physicians, pharmacists, physician assistants, physical therapists, or nurse practitioners. Providers can also be places such as hospitals, ambulatory surgery centers, skilled nursing facilities, or home health agencies.
PPO (Preferred Provider Organization or Arrangement)
An insurance plan that contracts with independent providers at a discount for services. The discounts can be 10 percent to 40 percent below normal fee schedules. Typically, the panel of providers (the participating physicians) is limited. There is usually some type of utilization review system associated with a PPO. Patients can use a physician outside the PPO panel of providers, but they will have to pay a bigger portion of the fee.
A physician's medical order for services or consultations to be provided by another health care provider such as a specialist. Some insurance companies require written approval or consent from a primary care physician (PCP) before a patient can see a certain specialist or receive certain services. These insurance companies may not pay for the specialist's care without first getting an "insurance" referral from the PCP.
Defined as the insurance company that has responsibility for payment after the primary insurance pays or rejects an insurance claim.
The person responsible for payment of premiums, or whose employment is the basis for eligibility for a health plan membership.
Usual, Customary, and Reasonable (UCR)
Describes the preset allowable limits insurance companies use to set the maximum amount they will pay on a given health care service. A common way to set UCR fees is to get a list of existing fees for an area, average them, and choose an amount higher than average, but not 100 percent. UCR is used instead of the term “Fee Schedule” when a provider is not contracted with the health care plan.
The practice of looking at the treatment patterns of particular providers to see how their usage of drugs, X-rays, lab tests, and other services compares with their peers. HMOs use utilization review to determine the amount of income providers will receive from the HMO.