The New Pharmacist's Quick Guide to Insurance
Key takeaways:
The two major categories of insurance are commercial and government. Government insurance is always billed after commercial insurance, and Medicaid is always the last payer to be billed.
Copay cards can be tricky to bill, but ensuring that you use the correct date of service and appropriate codes when necessary will help you have a successful claim.
Be on the lookout for billing issues that could lead to an audit or chargebacks, including an incorrect days’ supply or lack of supporting documentation.
Learning to navigate the complex processes of insurance companies is one of the biggest hurdles to gaining confidence as a new pharmacist, since even experienced pharmacists can have difficulty with insurance rejections and payments.
This post will serve as a sort of crash-course guide to prescription drug insurance. You can find even more information on this subject via CE-PRN.
Types of insurance
Insurance can be divided into two major categories: commercial and government. Commercial plans most often come from employers, while government plans include Medicare, Medicaid, Tricare, and state health plans. Medicare, Medicaid, and Tricare generally are more complex than commercial plans, and there are key aspects of each one that will help pharmacists correctly bill them and assist their patients.
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Medicare
Medicare insures those age 65 or older and also covers patients on dialysis or who have had a kidney transplant.
The major types of Medicare are categorized by letters A to D:
Medicare Part A primarily covers inpatient services. Most people have no premiums for Part A.
Medicare Part B primarily covers outpatient services. In the pharmacy, for example, Medicare B is billed for diabetes testing supplies, vaccines, and durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). If a prescription item is covered under Medicare Part B, it is not covered under Medicare Part D.
Medicare Part C is also known as Medicare Advantage and is a plan where a private insurance company is paid by Medicare to provide Part A and Part B benefits. They often also provide Part D benefits as part of their overall package. Because of this, a patient cannot have Part C and also have Parts A and B.
Medicare Part D covers prescription drugs and is administered through private companies.
Medicaid
Medicaid insures low-income individuals, families and children, pregnant women, the elderly, and those with disabilities. It is administered individually by states and is jointly funded by both the state and the federal government. However, patients have the option of choosing a private insurance company to provide their Medicaid benefits. This is called a managed Medicaid plan, or Medicaid managed care.
The most important thing to know about Medicaid is that it is always the payer of last resort. That means you must bill all other plans first — including obtaining a prior authorization if required — before being able to bill Medicaid.
Tricare
Tricare insures uniformed service members and their families. All Tricare beneficiaries must be registered in their DEERS system. On occasion, the DEERS system goes down and will return a rejection that the system is down and to try again later.
It’s important to know what the DEERS system is so you can correctly inform the patient that you will need to attempt to rebill the claim at a later time. This rejection does not, however, mean the drug is not covered — but rather that a coverage determination cannot be made until the DEERS system is back up.
What happens after sending a claim?
It is much easier to deal with insurance rejections after understanding what happens to the claim after hitting “submit.” For starters, the BIN and PCN numbers on insurance cards are identifiers borrowed from the credit-card industry to identify specific health plans and benefit packages. The group numbers, meanwhile, are used to identify a specific employer or individual benefit package.
After entering that information and sending the claim, it first reaches the pharmacy switch, which uses the BIN and PCN to route the claim to the correct payer. Once the insurance makes a coverage determination, they route the information back to the pharmacy. The pharmacy switch is kind of like the air traffic controller of the claim. Switches can also be used for eligibility checking, which is known as an E1 transaction.
Most switches also offer additional services, with the most important to understand being pre and post edits, or PPE. With this service, the switch checks the claim information before sending it on to the payer. If something is not correct, the switch will send the claim back to the pharmacy rather than to the payer.
The types of information typical of a pre- and post-edit service include:
Prescriber validation: Ensures that the prescriber’s national provider identifier (NPI), license, and DEA authorization are all valid and not on the OIG exclusion list.
Incorrect package size: Checks that the quantity matches the package size. A common mistake is entering “1” when the quantity should be entered in the number of grams or in milliliters.
Days’ supply: Ensures that the days’ supply is reasonable given the quantity entered.
DAW codes: Checks that the Dispense as Written (DAW) code used reflects the product selected. For example, if a DAW 1 is entered, then the branded medication should be selected.
NDC codes: Checks for discontinued National Drug Code (NDC) numbers.
Safety and clinical alerts: Checks for excessively high or low dose, based on the quantity and days’ supply entered, or look-alike/sound-alike drugs.
It’s important to understand these issues, as that understanding will help you determine whether the rejection you see is coming from the payer or the switch. If it is coming from the switch, it is possible to override the switch and send the claim to the payer.
While that is a judgement call — since the pre and post edits are there to protect pharmacists from audits and for safety — there are times when that is necessary. The most common example is a rejection for look-like/sound-alike; the drug is entered correctly, but the switch is asking you to double-check. After confirming it is correct, you can override the switch using a “1” in the prior authorization type code field and “9999,” “9998,” or “6666” in the prior authorization number submitted field.
Copay cards and free trials
Copay cards and free trials are offered by drug manufacturers for many branded medications. Each provides the opportunity for patients to save money.
Specifically, copay cards are used to help cover the copayment, while free trial cards give the patient a chance to try the medicine at no charge. Because of this, copay cards are billed as secondary insurance, while free trial cards are billed as primary insurance.
For most copay cards, you must get a paid claim from the insurance company first. While it is possible to use most copay cards without insurance, maximum benefits are often in the range of $100 to $150. That means the branded medications they are used on will still be financially out of reach for most patients.
Here are the most important things to know about copay cards and free trials:
Activation: If a copay card needs to be activated, you must bill for a date of service after it was activated. This leads to a common mistake: If you filled the drug on a previous day already, you must reverse the claim, add the copay card, and then rebill to update the date of service. If not, you will get a rejection that says, “Plan not active on date of service.”
Billing exceptions: Some copay cards will still allow for a low copay even if it is rejected by the patient’s insurance. In these cases, you must send the claim to the copay card after using an Other Coverage Code, letting the copay card know it was not covered.
One time only: Free trials can only be used once. If any pharmacy attempts to submit a free trial a second time for the same patient, they will get a rejection that says “exceeds maximum benefit.”
Payment and auditing
Even after receiving a paid claim, the insurance company still has a right to audit prescriptions and may do so regularly. If there is a mistake in the billing, the pharmacy might be at risk of a chargeback, where all of the money paid to the pharmacy is taken away.
Because of the large financial risks posed by chargebacks, it’s important for all pharmacy staff to be able to bill and document correctly. In particular, be on the lookout for these common misses:
Best price: Be sure the patient’s insurance is giving them the best price. Sometimes, pharmacy benefit managers (PBMs) use a copay clawback to collect more from the patient than cash price and then take back the difference they pay from the pharmacy. GoodRx can help patients find the best cash price so they don’t overpay.
Days’ supply: Chargebacks are common with days’ supply miscalculations. Be especially careful with high-cost medications, which are more prone to audits, and also to dosage forms that are trickier to calculate, like eye drops, inhalers, insulin, and topicals.
DAW codes: DAW 1 (prescriber requests brand) and DAW 2 (patient requests brand) are the most commonly used. All of them must be clearly documented on the face of the prescription.
DUR codes: DUR codes are used to override rejections that might be a safety concern, like drug interactions, excessive dosing, and excessive usage. Because of this, only the pharmacist should override these.
The bottom line
Prescription drug insurance is complex. So complex that even among practicing community pharmacists, it is not uncommon for insurance messages to be interpreted incorrectly. This can result in delays in therapy or the patient overpaying for their prescriptions. By better understanding how prescription drug insurance works, you can not only help the patient with access and adherence but also protect your pharmacy from chargebacks and audits.
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