Automated COB check said to be on the horizon

Not knowing hurts hospitals’ bottom line

A new service that claims to be the first automated method of performing the proper coordination of benefits (COB) on health insurance and drug card plans — which insurance company should pay when an individual has multiple coverage — should be of interest to hospital billing and receivables departments. Coordinating benefits is particularly helpful in cases where the primary coverage may change.

"There may be coverage that’s primary for an appendectomy but doesn’t include vision care," says Todd Swanson, vice president of COB Clearinghouse Corp. in Independence, OH. "If the patient gets a sliver in his eye in the hospital, [for example] the hospital will have to determine which coverage is primary in that case. So [hospitals] will inquire not only at the point of admission, but also at the time of billing to ensure the procedure done is billed to the proper carrier."

Asking the right questions

Hospitals historically have had difficulty determining the proper COB. Health care organizations lose time and money by failing to ask patients such questions as, "Are you employed?" and "Do you have group health insurance?" when the patients offer a spouse’s insurance card. Insurers then delay paying claims, saying they’re not sure if theirs is the primary coverage.

The problem is expected to worsen as hospitals begin assuming more risk under capitated systems. (See related story, p. 100.) With tougher screening by insurance companies and the move toward capitation, the issue could fast become a matter of financial life and death for a health care organization.

The key to bringing the system to fruition is convincing large health plan sponsors, both governmental and corporate, that it is to their advantage to sign on to a universal database, explains Patrick Lawlor, COB president.

When that happens, the service will become available. "Until we’ve gotten most of the third-party administrators (TPAs) and carriers involved, it’s not ready for release."

With that in mind, the company currently offers a retrospective audit service that shows health plan sponsors how much money they’re losing because a plan member’s primary insurance is not identified, he says.

One audit uncovered an employee who had four fully paid-up health insurance policies in force at the same time, Swanson notes.

"Rather than relying solely on enrollment forms, our system searches patient Social Security numbers through the top 300 third-party administrators/insurance carriers’ eligibility gateways and immediately determines if other coverage exists," says Susan Muha, a spokeswoman for COB Clearinghouse.

"Once other coverage is found, an algorithm is run consisting of six COB rules established by the National Association of Insurance Commissioners. Primacy is instantaneously determined."

The idea, Lawlor says, is to persuade the company that its TPA cannot do the coordination of benefits by hand. "We get clean identification information on everybody, not just spouses but children, and put it in a centralized database. We show, for example, a major carrier’s biggest customers that they’ve missed a lot of COB events — that 10% of the claims they’ve paid, someone else should have paid."

Working with the Department of Defense on a sample of its CHAMPUS coverage, for example, COB Clearinghouse already found that 6% of military dependents thought to have no other coverage are, in fact, covered by other insurance plans, Lawlor notes. This sample looked at only 10 of the 2,000 TPAs involved.

The company also is performing COB on drug claims, Muha adds. "There are 350 million drug cards floating around in the United States and only 260 million Americans. Only about 200 million of those have insurance."

People tend to use the drug card or the insurance card with the lowest co-pay, and until now, those cards have not been coordinated, Muha points out. In the case of at least one carrier, insured persons are not covered if they fail to provide current COB information, she says. "The next time they go to the emergency department, the provider won’t get paid."

The service could be on-line as early as Jan. 1, 2000, Lawlor says. A fee scale has not yet been established, but the company likely will charge a minimal sum for participation plus a per-transaction charge, Swanson notes. COB may pilot its service as early as July in a regional area, he adds.

A familiar electronic gateway

The COB service will use the same electronic gateway as the 270 standardized transaction set, one of the data sets that under the Health Insurance Portability and Accountability Act of 1996, will be required for electronic data interchange beginning in February 2000, Lawlor notes.

For example, electronic billing inquiries to Blue Cross or Aetna will go from the health care provider to the TPA or insurance company as the system now stands. The TPA or insurance company may or may not have correct COB information, Swanson points out. Instead, COB Clearing- house will answer that inquiry directly, also determining the primacy of coverage, Lawlor explains. "It will be a more complete answer."

[Editor’s note: For more information, contact Patrick Lawlor, COB Clearinghouse Corp., 6100 Oaktree Blvd., Suite 300, Independence, OH 44131. Telephone: (216) 643-4637. Fax: (216) 447-9254.]