Module 7 - Processing Benefit Plan Claims

Question 1

Outline the main steps in the claims process (4)

Answer 1

The main steps in the claims process are:

(a) The covered individual submits the claim.

(b) The insurer/third-party administrator (TPA) receives the claim and adjudicates the claim.

(c) The insurer/TPA either approves and pays the claim, denies the claim and notifies the plan member of the denial, or requests additional information.

(d) If additional requested information is received, the insurer/TPA either approves and pays the claim or denies the claim.

Question 2

Outline information that must be confirmed in order to process a claim under a group insurance contract.

Answer 2

(a) The group contract was in force at the time the loss/expense was incurred.

(b) The plan member/dependent was insured (i.e., either enrolled for coverage under the plan and a member of an eligible classification at the time the loss/ expense was incurred or covered under an extension provision of the group contract, such as the waiver of premium provision under life insurance coverage).

(c) The insurer/TPA received proof of loss within the time frame the group contract specifies.

(d) There is sufficient information to determine liability for paying the claim, the type of benefit and the amount, who should receive the payment and what payment options apply to settling the claim.

(e) Whether the insurer/TPA is responsible only for the administrative aspects of payment (e.g., when the plan sponsor issues payments and the insurer/TPA only handles adjudication).

Question 3

Explain why accurate and current supporting information on payments and claims relating to each plan member/dependent is retained by the insurer/TPA.

Answer 3

(a) The insurer/TPA must retain supporting documentation for each claim processed for as long as necessary to administer benefits for that plan member and satisfy regulatory requirements. The system checks subsequent claims against documented history to determine whether frequency limits, maximums and deductible amounts have been reached and to prevent duplicate payments.

(b) Claims data is useful for monitoring trends and patterns that can identify plan abuse and fraudulent claiming by plan members and service providers.

(c) Claims data informs the financial reporting the insurer/TPA provides at periodic intervals to the plan sponsor (e.g., special reports and statistical information on plan utilization, such as drug utilization reviews), which helps the plan sponsor identify design issues with the plan and modify it accordingly.

(d) A plan member can sue the insurer if they disagree with the adjudication and/or payment of a claim. In these cases, accurate claims processing information is necessary so the insurer can defend itself. Generally, a plan member sues an insurer on the grounds that it did not fulfill its contractual obligation to pay the benefits. If the claimant succeeds, the insurer must pay the benefit amount owed and may also be liable for extra damages, such as a claimant’s legal fees. Accurate claims processing information is necessary so the insurer or plan sponsor can defend itself if this happens.

Question 4

Although some claims still require paper submission, indicate the types of claims plan members can generally submit online.

Answer 4

Plan members can generally submit many extended health care, prescription drug, dental care and health spending account claims through insurer/TPA password-protected websites or mobile applications. For online claiming, the documentation is retained by the plan member for 12 months since the insurer retains the right to audit the claim and request documentary proof of the claims that have been submitted.

Question 5

Describe the documentation necessary to process a death benefit claim.

Answer 5

To settle a death benefit claim under a life insurance plan, it is necessary to submit to the insurer a completed claim form and written proof that the insured individual has died (i.e., a death certificate or funeral director’s statement). A coroner’s report may also be required, depending on the exclusions in the plan (e.g., suicide occurring within 24 months of commencement of coverage).

The insurer must receive proof of loss by the deadline the group contract specifies. Some insurers impose no time limit on death claims; however, when there is a limit, it is typically 12 months after the date of death. If it is believed the insured has died but the body has not been recovered, the death claim is not paid until after the individual has been declared legally dead, generally seven years after disappearance or presumed date of death. In this case, it is also necessary to obtain a court order (i.e., declaration of death) to settle the claim.

Claims submissions for specialized types of death benefits such as accidental death and dismemberment (AD&D) must include proof (such as medical documentation, coroner’s reports and police reports) that the loss was the result of an accident. Under AD&D plans, when death results from an accident, death benefits are typically payable if death occurs within 12 months from the date of the accident.

Question 6

Describe the facility-of-payment provision in a group life insurance contract.

Answer 6

A facility-of-payment provision allows a portion of the death benefit to be paid to an individual, other than the designated beneficiary, who paid the expenses associated with the plan member’s funeral and/or illness prior to death. The benefit amount may be specified in the contract (i.e., $3,000 to $10,000) or may be limited to reasonable expenses as determined by the insurer.

Question 7

Under a group life insurance contract, identify considerations when a designated beneficiary is a minor or lacks legal capacity.

Answer 7

If the designated beneficiary is a minor or lacks legal capacity, the insurer must receive written proof of a guardian/trustee, along with a release permitting the insurer to pay the death benefit to the guardian/trustee on the beneficiary’s behalf. If a guardian/trustee is not available, the court appoints one. The insurer cannot pay the death benefit until this release is in place. If there is no release, a minor can demand payment of the benefit amount when they reach the age of majority. In some cases, the insurer may hold the benefit amount on deposit at the minor’s request to earn interest until they reach the age of majority or a suitable guardian is appointed.

Question 8

Identify an adjudication consideration that is unique for dependent life insurance claims.

Answer 8

Claims for specialized types of death benefits such as dependent life insurance have an additional unique adjudication consideration that differs from standard group life insurance contracts. For death benefits payable on the death of the spouse or child of a plan member, the beneficiary is the plan member.

Question 9

Explain how processing group health care and dental care claims differs from processing group life insurance claims. (4)

Answer 9

(1) Volume of claims: Unlike life insurance, which covers only one loss, extended health care and dental care plans provide coverage for many types of products and services, and an individual is likely to submit more than one claim under the plan. As a result, there is a substantially higher volume of claims to process for extended health and dental care than for life insurance.

(2) Proportion of ineligible claims declined for payment:Few claims for life insurance benefits are declined for payment because there are significantly fewer claims, the events covered are narrowly defined and there are few conditions under which a benefit is not payable. A larger proportion of extended health care and dental care claims are declined because the range of possible health care issues covered is broad and plans cover only specific services and products.

(3) Complexity of determining the benefit amount: The calculation of a death benefit is relatively simple, as it is usually a predetermined amount. The calculation of extended health care and dental benefit amounts is more complex. A claim depends on the actual amount of financial loss incurred at the time of loss, and the related expense can comprise costs stemming from more than one element.

(4) Prevalence of auto-adjudication of claims: Death benefit claims are often large, manually adjudicated and paid only by the insurer’s head office or regional head office. The vast majority of extended health care claims are for prescription drugs purchased using pay-direct drug cards, which are auto-adjudicated electronically.

Question 10

Outline the edits or checks usually performed by automated health care claim adjudication systems once all necessary claim documentation is received.

Answer 10

(a) Verification that there are no coding errors

(b) Verification of plan member/dependent eligibility, including the plan member identification number and type of coverage. This involves comparing the plan member/dependent information on the claim to the plan member’s records, including information obtained at enrollment. If the eligibility information does not match, the insurer/third-party administrator (TPA) denies the claim and notifies the plan member. If the comparison verifies eligibility, the adjudication process continues.

(c) Verification that the plan covers the expense. This includes verification of any drug claim by comparing it with the drug identification number (DIN) on the plan’s formulary and checking the adjudication criteria for certain benefits to be payable, such as age limits, and frequency of benefits payable.

(d) Establishing the eligible amount of the expense by running benefits calculations that apply pricing schedules, the plan’s schedule of benefits, reasonable and customary fee limits or pricing schedules in the pharmacy agreement with the insurer/TPA

(e) Determining the final payment amount by running benefits calculations that apply relevant coinsurance amounts, deductibles and maximums.

Question 11

Describe the documentation necessary to process health care claims.

Answer 11

For claims under an extended health care plan, the insurer/third-party administrator (TPA) must typically receive a completed claim and written proof of loss no later than 12 to 18 months after the date of the expense and not more than three months after the group coverage for an individual terminates or the insurance contract terminates with the insurer. The claim form includes information on the type of expense, the provider of the product or service, and the date the product or service was provided. The provider’s bill is also generally acceptable if it includes the following:

(a) Full name of the plan member

(b) Date the service/product was provided

(c) Description of the related medical condition, if required

(d) Description of the service/product, including itemized costs

(e) Name, address and phone number of the provider

(f) Attending physician’s referral or description of the service if provided by a practitioner other than the physician.

Question 11

Describe the documentation necessary to process health care claims.

Answer 11

For claims under an extended health care plan, the insurer/third-party administrator (TPA) must typically receive a completed claim and written proof of loss no later than 12 to 18 months after the date of the expense and not more than three months after the group coverage for an individual terminates or the insurance contract terminates with the insurer. The claim form includes information on the type of expense, the provider of the product or service, and the date the product or service was provided. The provider’s bill is also generally acceptable if it includes the following:

(a) Full name of the plan member

(b) Date the service/product was provided

(c) Description of the related medical condition, if required

(d) Description of the service/product, including itemized costs

(e) Name, address and phone number of the provider

(f) Attending physician’s referral or description of the service if provided by a practitioner other than the physician.

Question 12

Outline the documentation necessary to process drug claims.

Answer 12

For drug claims, the insurer or TPA must receive a description of the drug purchased and proof that a physician or licensed professional such as a dentist prescribed it. The pharmacy receipt may be sufficient if it includes the following:

(a) Full name of the covered individual

(b) Drug identification number (DIN) and name of the drug

(c) Name of the practitioner who prescribed the drug

(d) Price the pharmacy charged for the drug

(e) Date of purchase.

Question 13

Explain how pay-direct drug (PDD) plans are processed.

Answer 13

A pay-direct drug plan follows the same adjudication procedures as a traditional reimbursement plan, going through all the standard edits/checks. However, the process is performed in real time if the pharmacist is electronically linked to a pay-direct network provider. The system effectively validates at the point of sale that the claim is in compliance with plan eligibility requirements. The plan member provides the pharmacist with a drug card or certificate number when the prescription is filled. The pharmacist enters that number and all other required prescription drug claim information directly into the claims adjudication system and instantly verifies member and benefits eligibility, benefit maximums, coinsurance amounts and deductibles. The pharmacist can also access the plan member’s drug claims history with the pharmacy. However, the pharmacist cannot access prescriptions another pharmacy filled or information that may violate the claimant’s right to confidentiality. The pharmacist then charges the plan member only the amount they are responsible for under the plan.

If the plan does not cover the drug, the individual can pay the full cost, or the pharmacist may suggest an alternative and, if necessary, contact the individual’s physician to change the prescription.

Question 14

Describe the relevance of reasonable and customary charges for extended health care and claims adjudication.

Answer 14

Insurers/TPAs pay claims on the basis that the service is provided at a reasonable and customary charge. This charge typically has a maximum level, often determined by the amount most providers in the area typically charge. The reasonable and customary charge is the level at which insurers/TPAs cap eligible expenses when calculating the benefit they will pay.

Question 15

Describe the application of deductibles, coinsurance and maximums in extended health care claim adjudication.

Answer 15

Insurers/TPAs deduct annual or per-prescription deductibles from the eligible amount of expenses payable. Then they multiply the result by the coinsurance level, if any, that applies to the specific expense. They may reduce the benefit payment further based on specific benefit maximums, internal maximums or overall maximums, with the plan member paying any remaining balance.

For plans with coinsurance less than 100%, not all insurers/TPAs determine a maximum amount in the same way. The intent of a maximum amount must be clear—that is, whether it is the maximum eligible expense or the maximum payment. For example, while a maximum benefit of $500 for a hearing aid under a plan with 80% coinsurance usually results in a maximum claim payment of $500, some plans pay a maximum of $400 (80% of $500).

Question 16

Describe the documentation necessary to process dental claims.

Answer 16

The insurer/third-party administrator (TPA) must receive written proof of a loss/expense typically within 12 to 18 months after the date the expense is incurred and not more than three months after the date that group coverage for a plan member terminates or the insurance contract terminates. Providers or plan members must submit a completed standard dental claim form (approved by the relevant Canadian or provincial/territorial dental associations) that includes the following:

(a) Treatment provided and procedure code

(b) Dentist or qualified practitioner who provided treatment

(c) Date the treatment was provided.

For accidental dental benefits, the completed standard dental claim form must also include a description of the damage and any future treatment required.

For procedures that require multiple appointments, such as bridgework or installation of a crown, dentists should use the date of the final visit as the date of treatment for purposes of completing the form. This makes it easier to determine eligibility in situations when a plan switches insurers or an individual’s coverage terminates.

Question 17

Describe the role of the CDAnet electronic data interchange (EDI) system.

Answer 17

The CDAnet system, developed by the Canadian Dental Association, allows claims information to transmit from the dentist to the insurer/TPA in a standard format through electronic networks. Claims adjudication can occur in real time. The insurer or TPA immediately sends an explanation of benefits (EOB) electronically, either stating that the treatment is covered and the amount it will pay or declining payment of the claim. If the plan allows the assignment of benefits, the dentist then knows what amount, if any, to bill the patient directly. If the plan does not allow the assignment of benefits, the dentist bills the patient for the full cost of the treatment.

This system eliminates redundant data entry for the dentist since basic data (e.g., plan member name, plan identification number and provider name) is entered only once and then automatically populates each time the dentist sends an additional claim. It also saves time for the insurer/TPA, as they do not have to reenter the claims data. CDAnet verifies that all required claim information has been entered, reducing time spent tracking down additional information.

Dental associations compile information from the data exchanged through CDAnet and use it to produce statistical analyses to eliminate rarely used procedure codes, expand service codes as new processes are developed and update fee guides.

Question 18

Describe the purpose of CLHIA Guideline G4, Coordination of Benefits—Group Health and Dental.

Answer 18

The CLHIA developed Guideline G4 for the health and dental benefits industry to help promote consistency in determining the priority in which payments are made and to outline the minimum amount payable by each group plan in situations where a covered individual can submit a claim to more than one group plan. Guideline G4 describes the order in which benefits are determined and how to coordinate health and dental payments from group plans available to the covered individual.

The combined payment from all group plans for a particular item cannot exceed 100% of the eligible medical expense or eligible dental expense. In some cases, the combined payment from all group plans on a particular item may be less than the submitted amount.

Question 19

An individual works two part-time jobs, both with group health care plans with a COB provision. Indicate which plan will pay first in respect of a claim for an individual who has the same eligibility status under both plans.

Answer 19

An insured individual who has benefits coverage and the same status (part-time employee in this example) under more than one plan first receives payment for a claim from the plan that has covered them the longest. For example, if the individual joined Plan A in 20X1 and Plan B in 20X3, they first submit the claim to Plan A. Plan B is the second payer because it is the more recent plan in terms of the membership effective date.

Question 20

Indicate the order of payment when an individual is covered as an employee under one plan and as a dependent under a second plan, when both plans have COB provisions.

Answer 20

In the case where an insured individual is covered as an employee under one plan and as a dependent under a second plan, and both plans have COB provisions, priority for payment is established as follows:

First—The group plan of the covered individual

Second—The group plan where the covered individual is a dependent

Question 21

A postsecondary student has coverage under an educational institution’s plan and coverage as a dependent under their parent’s plan, and both plans have a COB provision. Indicate the order of payment for a health care claim for that student.

Answer 21

A postsecondary student who has coverage under an educational institution’s plan and coverage as a dependent under their parent’s plan will receive payment first from the school plan, then from the plan where they are covered as a dependent.

Question 22

Indicate the order of payment for a health care claim for a child whose parents have joint custody. The plans of both parents have a COB provision.

Answer 22

When parents have joint custody of a child, priority for payment is established as follows:

(1) The group plan of the parent with the earlier birthdate (month/day) in the calendar year,

(2) The group plan of the parent with the later birthdate (month/day) in the calendar year,

(3) If the parents have the same birthdate, the alphabetical order of the parents’ first names.

Question 23

Explain the purpose of CLHIA Guideline G17, Coordination of Benefits for Out-of- Country/Out-of-Province/Territory Medical Expenses.

Answer 23

Many Canadians have more than one plan providing coverage for out-of-country/ out-of-province/territory medical expenses. For example, an individual may have coverage through a group plan, an individual travel health plan and a credit card. While benefit plans may include provisions indicating that they will be the last payer after claim payment has been made under all other plans, often it is not readily apparent which plan should pay first.

There are two components to an out-of-country claim:

(1) Emergency assistance. The insurer or plan administrator who is contacted first will generally initiate the case management in the event of a medical emergency.

(2) Claim payment. Coverage varies from plan to plan. Regardless of which insurer is first contacted at the time of loss, Guideline G17 assists in identifying what, if any, liability exists under a plan to pay all or a portion of the expenses claimed.

Guideline G17 addresses both components. It describes the role of the “first carrier” in case management, outlines how to coordinate the payments from all plans under which an individual is covered and helps ensure that the total payments from all plans do not exceed the total expenses incurred. The intent is to provide for effective claims management; minimize claims assessment and payment delays; provide assistance to the covered individual in resolving the claim; fairly coordinate benefits among all plans involved; and identify and discourage duplicate or fraudulent claim submissions.

Question 24

Describe the relevance of coordination of benefits provisions in group health and dental care plans.

Answer 24

Group contracts for health and dental coverage normally include a COB provision to address situations in which an insured has coverage under more than one group plan (e.g., as a dependent under a spouse’s group plan). Insurers use CLHIA Guideline G4, “Coordination of Benefits—Group Health and Dental,” to determine which plan is the primary payer (first payer) of a claim and which is responsible for adjudication and payment of the balance, if any. In this way, a plan pays only the claims it is liable for, the claimant does not receive more than actual losses/expenses and the industry is consistent in how it applies COB.

Question 25

Explain how benefit payments are determined when an insured individual has coverage under more than one group benefit plan with a COB provision.

Answer 25

When benefit payments are coordinated, each insurer determines the total amount of incurred expenses eligible for coverage before applying deductibles and/or coinsurance. The primary insurer (the first payer) pays eligible expenses first (that is, the insurer to whom the claim is first submitted for payment and the industry is consistent in how it applies COB) and calculates the benefits amount payable as though the covered individual has no other coverage. The secondary payer/insurer calculates the amount of the eligible expenses it must pay, which is the lesser of:

(a) The amount that would have been payable had it been the first payer

(b) 100% of the eligible expenses reduced by the benefit amount paid by the first payer for the same eligible expenses.

When the insured individual has coverage under more than one plan with the same insurer, that insurer is both the first payer and the secondary payer. COB allocates financial liability among insurers by allocating responsibility according to the order of benefits determination outlined in CLHIA Guideline G4. Guideline G4 does not address out-of-country/out-of-province/territory coordination of health and dental benefits. G17 covers those scenarios.

Question 26

Sadiq is a member of his employer’s benefits plan. His spouse, Abella, has similar coverage with her employer and covers Sadiq as a dependent. Under the COB provision contained in both plans, Sadiq’s plan is the first payer of claims he incurs. Abella’s plan is the second payer. Assume the following claims are incurred by Sadiq:
Claims Submitted
$320.00
$250.00
$190.00

Eligible Expenses
$320.00
$225.00
$190.00

Coinsurance Level
80%
80%
80%
Calculate the amount Sadiq will receive from his plan.

Answer 26

The total paid by Sadiq’s plan
= (320 x 80%) + (225 x 80%) + (190 x 80%)
= 256 + 180 + 152
= $588.00

Question 27

Identify the “first carrier” when an insured individual with an out-of-country health care claim is covered by more than one group insurance plan where COB guidelines apply.

Answer 27

Where the COB guidelines apply, the first carrier is the first plan/insurer that is contacted in the case of a claim. This carrier must handle the case management, including involving an assistance group or service provider. The first carrier notifies the other plans/insurers to ensure COB coverage. It pays the claim with an amount that is equal to the coverage determined by the terms and conditions of its contract; in paying this amount, the first carrier reserves the right to reimbursement from the other affected plans/insurers and from the provincial/territorial health plan and forwards claims documents to other plans/insurers. It also receives assessments from other plans/insurers and, based on these assessments, allocates liability among itself and other plans/insurers.

If the first carrier is not liable for the claim (e.g., there is a preexisting exclusion provision to which the claimant’s disability relates), it must advise the individual and provide them with instructions to contact the other plans/insurers. In this case, the first carrier must still notify the other insurers when the claim is reported, and it must inform the claimant that the plans/insurers will coordinate payment of the claim.

Question 28

Explain why early intervention is important in disability claims management.

Answer 28

Early intervention is important in disability claims management because it helps determine the potential for rehabilitation and whether vocational assessment or retraining is necessary. Early intervention is also key to reducing benefit costs. It can start before the insurer begins processing the claim (as early as the first few days of absence) or at any time during the waiting period for long-term disability (LTD). It can prevent a weekly indemnity/short-term disability (WI/STD) claim from developing into an LTD claim.

Question 29

Outline the documentation necessary to process a disability claim.

Answer 29

The insurer/third-party administrator (TPA) must receive written notification of a disability claim (paper submission or online) by the deadline the group contract sets out. For proof of loss, the plan member and plan sponsor complete a claim form stating the plan member’s inability to work due to a disability, including the date of the disability and whether it is work-related. The attending physician also completes a standard statement that includes medical and functional information the insurer/TPA can use to assess the claimant’s ability to return to their usual occupation. Timing for submission of proof of loss information varies depending on the claims practices of the insurer/TPA and plan sponsor.

Question 30

Outline the documentation necessary to process a CI insurance claim.

Answer 30

To assess whether or not the group contract covers a condition, the insurer must receive a written claims application and proof of a covered critical condition that it considers satisfactory, typically within one to three months after the date of diagnosis, along with the physician’s statement and diagnosis information.