The Healthcare & Life Sciences Industry

About Healthcare Payers and Plans

In healthcare & life sciences industry, the user and purchaser of healthcare services aren’t usually the same.
Healthcare payers serve:
- Patients: Individuals who receive medical care
  - Primary beneficiary: Those eligible for health insurance plans (e.g. employees in employer-sponsored health plans)
  - Secondary beneficiary: Those who receive same benefits as primary one because of their relationship with a primary beneficiary (spouse or child below a certain age)
- Sponsors: Sometimes companies contract with third-party companies to offer healthcare services to their employees, which is called sponsoring
Healthcare payers include:
1. Providers
2. Patients
3. Third-party payers

Could be:
1. Group health insurance plans (e.g. employee health insurance)
2. Individual/private/personal health insurance
3. Specialty healthcare insurance plans (like dental or vision plans)
US healthcare plans types:
- Health Maintenance Organization (HMO):
  - A type of health insurance plan that usually limits coverage to care from doctors who work for or contract with the HMO
  - It generally won’t cover out-of-network care except in an emergency
  - An HMO may require you to live or work in its service area to be eligible for coverage
- Point Of Service (POS):
  - Health insurance policy that allows the employee to choose between in-network and out-of-network healthcare products and services each time
- Preferred Provider Organization (PPO):
  - Medicare arrangement where availing medical services like consultations, hospitals and medicines are all provided for a cost lesser than it usually is under this plan
  - Have higher premiums and higher level of cost-sharing than HMO or POS plans

Also called Claims Adjudication
It’s the insurance company’s procedure to check the claim requests for adequate information, validation, justification and authenticity
Many payers outsource claims processing to other payers
Claims processing begins when a provider delivers medical care to a patient
The medical care provided is translated into numeric codes. This is called Medical Coding
Most common codes set used is International Classification Of Diseases (ICD)
Once medical coding is complete, providers generate a claim, a process called as Medical Billing
Claim includes:
- Patient information
- Medical codes
- Provider information
The claim is then submitted to the payer
The provider may also submit the claims to the Clearinghouse which sends the claims to appropriate payers
Once claims reach payers, claims examiners/claims adjusters examine:
- Patient eligibility
- Provider credentials and Rate agreements
- Medical necessity
Some claims are approved by auto-adjudication, without manual intervention
Once the payer pays the bill to the provider, an Explanation of Benefits is sent to the patient, providing information about the claim status (if claim was directly submitted by patient, payment is also forwarded to the patient)
Information on claim status is sent back to provider
A claim could be:
- **Rejected:** because of incomplete/inaccurate information
- Denied: because the claim has been determined as not-payable

EVP, Marketing and Products: Responsible for designing healthcare plans that address member needs
Chief Actuarial Officer: Analyses risks associated with specific private payer health care plans, consumer groups and population segments
Chief Underwriting Officer: Responsible for pricing applications for group health coverage
EVP, Service Operations: Responsible for Internal Operations
EVP, Pharmacy Benefits: Develops and maintains formulary lists
Chief Medical Officer (CMO): Responsible for preventing illness and improving member health, while managing payer’s overall healthcare costs. Responsible for monitoring the level of care provided by network providers.

Commissioner/Director/Administrator: Leads a public payer
Director of Actuary: Analyses healthcare financing issues
Medical Director: Responsible for monitoring patient safety standards for public payers

Lowering costs
- Rationing healthcare
- Leveraging IT
- Cost-shifting (by increasing cost-sharing/raising premiums for sponsors/lowering reimbursement rates to providers)
Improving member health
- Focusing on prevention
- Enhancing medical management
Encouraging cost effective treatments
- Alternative payment models (such as value-based care reimbursement)
- Leveraging Utilization management
- Promoting telemedicine
Growing additional sources of revenue
- Offering additional plan options
- Supporting public payers (helping state and local governments)
- Administering self-insured healthcare plans
- Providing additional services to other industries
Complying with regulations
- In US, it’s Affordable Care Act
- Broad Consumer Privacy Regulations
- Industry Specific Patient data regulations
- GDPR, HIPAA
Improving member engagement