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October 2006 | Volume V, Issue 9 |
HIPAA EDI and Consumer Driven Health CareMany authorities have identified consumer empowerment as one of the drivers of the healthcare industry. To encourage consumers to be more responsible for their individual healthcare we need to provide them with informed choices about their health. Many studies have shown that when consumers get involved in their own healthcare they save money. So where does the Health Insurance Portability and Accountability Act (HIPAA) come into this movement toward empowering healthcare consumers? Congress enacted HIPAA in 1996 to improve the access to health insurance for millions of consumers who found themselves unable to obtain health insurance once they had a pre-existing condition. Employees found that if they tried to change jobs, the new insurer demanded excessive waiting times before covering them or refused to cover the pre-existing condition for a period of time. If the condition was chronic and required continued treatment, it meant the employee had to stay with that employer. It was called “job lock” and the Department of Health and Human Services (HHS) estimated to Congress that more than seven million people found themselves in this situation. As part of the compromise to get the insurance industry to reduce the pre-existing condition requirements, Congress included in the legislation a mandate for the administrative simplification of the healthcare industry. The administrative simplification requirements directed DHHS to work with existing industry groups to develop uniform national standards for the administration of electronic transmission of all healthcare information. The goal of this portion of the act was to encourage the healthcare industry to adopt electronic records and other automated systems to reduce the heavy burden of administrative costs related to the primarily manual and paper systems used by the healthcare industry. To protect patients, the act also mandated tough new standards to ensure the privacy and security of any personal health information (PHI) that is maintained or transmitted electronically. HIPAA mandated requirements will directly benefit consumers by expanding access to the information they need to better manage their healthcare. What is Electronic Data Interchange (EDI)?HIPAA EDI standards (also called rules) are for electronic transmission of many administrative and financial transactions. HIPAA EDI standards were created for protecting the privacy and security of personal health information (PHI) during electronic transactions. As of October 16, 2003 the HIPAA EDI requirements are effective for all group health plans including health FSAs and HRAs. While EDI regulations place the legal obligation on the group health plan, many plan sponsors will rely on their third part administrators or health insurance carrier to ensure EDI compliance.
HIPAA EDI provides tremendous potential for improved efficiency and cost savings to the consumer, and to the entire healthcare system. Pharmacies have already recognized these EDI savings in their on-line systems. In most pharmacies as soon as a patient receives a prescription, it is billed on-line to the insurer and in many cases the bill is settled before the patient gets home with the medicine. Another benefit of HIPAA EDI is the Explanation of Benefits (EOB) rollover claims. The Insurer sends a HIPAA 835 file to TPA for all eligible expenses under the FSA, HRA or HSA that has not been paid for under the Group Health Plan. The TPA imports these claims for reimbursement and the participants/consumers do not need to submit a claim form or receipt in order to be reimbursed. Employers introducing CDHC are working to achieve a number of important goals:
An empowered consumer needs real options, good information and decision support to organize, simplify, and interpret those options and that information. CDHC requires an effective flow of information to and from individuals about healthcare choices and needs in order to help educate patients and their families. The overall goal of consumer driven health care (CDHC) is to enhance the efficiency and decrease the costs of the healthcare program as a whole. Because the data gathered by the standard transactions is much more detailed and granular than most current formulas, among other things, HIPAA standardizes transactions and code sets, will in fact, permit CDHC to offer options with comparable information and to quickly and inexpensively add and/or remove options based on demand. HIPAA’s standard transactions and code sets enable comparable information to be generated by payers (insurance carriers), providers, and other health-industry participants. While many employers, understandably, believe HIPAA privacy rules are unnecessary given their current uses of health information, the value of those rules is more apparent in relation to emerging trends in the use of such information, including health-risk assessments and electronic health records. Many continue to misunderstand the interrelationship between HIPAA and CDHC; on the other hand, many others are blind to the opportunities that HIPAA offers CHDC by defining clearer boundaries for privacy and security concerns and by providing the opportunity for a more standardized, detailed, and seamless healthcare information platform for enrollment and eligibility feeds and the payment functions. |
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LEGAL DISCLAIMER: Material contained in
this newsletter is not legal advice, and should not be construed as
legal advice. If you need legal advice upon which you can rely, you
must seek a legal opinion from your attorney. © DataPath, Inc. 2006 |
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