COMMON INSURANCE TERMS
Here’s a running list of commonly used terms you will come across when calling insurance, reviewing claims or an explanation of benefits (EOB), and when speaking with us.
Allowed Amount or Usual and Customary (UCR) – How much your insurance company is willing to pay for each service. What they approve and how much they pay depends on your plan’s benefits. This is the figure that your insurance company uses to calculate how much they will reimburse for a given procedure code. This is NOT the same as your midwife’s fee. This may be based on what insurance companies call the “usual and customary rate” or it may be based on a percentage of the Medicare rate for the service code. Be mindful that when your plan tells you they will pay 100% after your deductible is met, or words to this effect, what they mean is they will pay 100% of THE PLAN’S ALLOWED AMOUNT.
Co-insurance – You’re sharing the cost with your insurance company, and the amount is usually in the form of a percentage (ie 70/30) and is called co-insurance. The first number is always the portion the insurance plan pays and the second is your responsibility. Your responsibility will be deducted from the payment the insurance provider makes on a claim. The phrase ‘co-insurance’ applies strictly to the portion of the plan’s ‘allowed amount’. This figure is what is shared between you and your insurance company.
Co-pay (co-payment) - If your plan charges co-pays for each service or visit (for example $25) this fee you would pay directly to your midwife at the time of service. Most visits with physicians, specialists, or the ER include either a first visit or per visit co-pay.
CPT (Current Procedural Terminology) – This is a procedure code, the numerical translation of a procedure or service. It’s the “what”, that is, what service was rendered or received. For example a first visit with a provider might be billed using CPT 99204.
Deductible – this is a yearly limit on how much you have to pay before your insurance company steps in and shares the financial responsibility for further costs. Say your plan’s deductible is $1,000. Once you’ve spent $1,000 your insurance company begins reimbursing you for the cost of procedures. There is usually an individual (member) deductible, as well as a limit on the annual deductible per family. For a birth, only the mother’s deductible need be met before the insurance company starts to pay. However, your insurance company may try to tell you that the baby’s deductible must also be met. This is incorrect.
Diagnosis – This is a diagnosis code, supplemental to the CPT. It’s the “why”. For the first visit using a CPT 99204, there would need to be a diagnosis code included such as V22.0 (1st pregnancy) or V22.1 (other normal pregnancy).
EOB – Explanation of Benefits – Your insurance may or may not pay, but they will send out an EOB to explain how they came to their decision. If it is sent directly to you, keep in mind your midwife probably did not get a copy so be sure to coordinate with her or Clearbill to share a scan of the EOB. Why don’t you specify instructions here as to what you want/need)
Fair Health Pricing – this site came into existence in 2009 but has only recently begun to be referenced by several insurance companies as their go to for pricing service amounts. The site is worth looking at because it has a lot of useful information for consumers that attempt to explain many insurance specific topics. That said, the problem for homebirth midwives is that the site gives you the estimated price your plan will pay, but it does not distinguish between homebirth and hospital. And since there are no codes specific to homebirth it leaves you with only a portion of the picture. But it is nonetheless a good point of reference. Locate the procedure code lookup section and enter in the 59400 procedure code and your zip code.
Federally-Funded – Similar to self funded, but generally specific to government or military employees
Fully Funded – A fully funded plan is subject to all state mandates. In New York state that means you will be legally covered for your homebirth.
In-Network – refers to your provider/midwife’s status with an insurance company. To see an In-Network provider, one does not need to obtain prior authorization to submit bills. Payment is more consistent, but often at a lower rate than Out-of-Network providers. In-Network providers agree to be paid rates set by the insurance company.
In-Network Exception – Used interchangeably with ‘in-network authorization’ and ‘gap exception’. This is granted by your insurance company in cases where they agree to treat a provider as if they were in-network for a particular client for a particular set of CPT codes. They are agreeing to “bridge the gap”.
Medicaid Pay Rate – State regulated pricing; New York State global payment is $1720; it’s only ever higher in cases where it is specifically negotiated. Most companies that offer Medicaid plans do not wish to negotiate for more. (da!)
Medicare Pay Rate – You’ll hear this when insurance says something like, ‘we pay 180% of the Medicare rate’. It’s a federal standard, but it changes locally based on cost of living factors. Because the Medicare rate for global maternity care with delivery is akin to the Medicaid rate of $1720, hearing the plan pays 180% of Medicare is equal to hearing the plan will pay roughly $3400. It’s a red flag that a low payment is coming.
Out-of-Network – refers to provider’s/midwife’s status with an insurance company. Out-of-Network providers face more challenges when billing insurance companies but, done correctly, they generally receive higher payments and can set their own rates.
Out of Pocket Maximum – the most that you will pay ‘out of pocket’ for all services in a given year. This figure is a lump sum. It includes your deductible and coinsurance and applies to the plans allowed amounts for claims processed. It doesn’t come into play when estimating costs of having a homebirth, since the midwife’s fee is not likely large enough nor will the plan allow enough of it for your out-of-pocket-maximum to be met. (Why can’t I follow this last sentence? Is it because I’m tired? When your deductible is met, then coinsurance (or percentage of cost sharing for services) kicks in. Then, if you were to have enough claims processed in a given year to meet your out-of-pocket maximum, no further co-insurance is required and the plan pays 100% of the allowed amount for all services for the rest of the year.
Payment Policy – This is an agreement, a contract, between you and your midwife, based on whatever service agreement you’ve signed. While it is informed by what your insurance benefits are, it is unrelated to your insurance coverage and it remains the final point of reference for settling on what your total balance is.
Prior Authorization (Pre-authorization) – Insurance companies will often require this before they will consider paying a claim. If one is needed for your plan, it will be obtained as early as possible. It stays on file and is attached to your claim during the billing process. Also called ‘in-network authorization’.
Procedure Code or CPT – See CPT; in a column on the EOB (Explanation of Benefits), the list of codes refers you to specific, line-by-line descriptions of how and why your plan paid - or did not pay.
Rate Agreement – If an Out-of-Network Provider gains billing authorization, it can be accompanied by a negotiated rate of pay. Once signed by both parties (provider and insurance company), a Rate Agreement has been forged. Also known as an SCA or single case agreement or an LOA, letter of agreement.
Self-Funded also known as ASO (administrative services only) – Self-funded plans are federally regulated and thus are not subject to state wide mandates, which means they can deny coverage for homebirths. So why do these exist? They’re types of contracts that an insurance company can offer an employer to help lower the employer’s cost to the business. On the plus side, 95% of self-funded plans that we see have Out-of-Network benefits. Those benefits can be used towards homebirth.
When an employer decides to buy coverage from a given insurance company, they have the option to limit the costs of the plan by limiting the options offered on the plan. This type of plan is called a self-funded plan. Here the term ‘Self’ refers to the employer, so we should think of it as an employer-funded plan. By purchasing coverage for their employees as self-funded they are not required to follow state specific laws such as those NYS has in place to ensure that any service a licensed midwife provides that is within her scope of practice is covered. Through this designation – functionally, a loophole - they are exempt from complying with NYS laws that ensure coverage for homebirth.