Electronic Claims 101: The Future Is Now

by Technology Policy and Projects and Communications Staff

Getting paid promptly and accurately is a chief concern for many practitioners. Electronic claim submission is one tool practitioners are increasingly using to facilitate the claim reimbursement process. Practitioners are finding that transmitting insurance claims electronically to carriers managed care companies, and other health care payers can increase their practice's cash flow and help to streamline their billing operations.

The trend toward greater use of electronic claims has also been prompted by the expectation that a growing number of insurers will require electronic claim submission in an effort to cut costs. Medicare payment policies have also encouraged the trend by requiring hospitals and clinics to submit all Medicare claims electronically.

The shift toward electronic claims has also been prompted by the Health Insurance Portability and Accountability Act (HIPAA). In an effort to facilitate electronic exchange of health care payment information, the HIPAA Transaction Rule mandated the use of standardized formats for electronic claim transmission. Additional information about the impact of the HIPAA Transaction, Privacy and Security Rules is available in the "HIPAA compliance" section of APApractice.org.

This article outlines the basics of electronic claim submission in order to help practicing psychologists learn more about — and make the transition to — this increasingly popular reimbursement option.

Filing claims electronically can offer a number of benefits, including: 

• Minimize disruptions to your cash flow. Claims submitted electronically are processed more quickly, resulting in faster payment. 

• Track claim status. Verify the status of your submitted claims via a secure Internet connection any time day or night. 

• Increase accuracy and cut down on claim rejections. While paper claims are often rejected due to inaccuracies, omissions, or other problems, submitting claims electronically can result in fewer lost or incomplete claims. You can opt to have an electronic clearinghouse check your claims for accuracy before submitting them to carriers, and promptly return claims to you for missing or invalid information before forwarding them to the payer. 

• Cut down on paperwork. Electronic claim submission eliminates the need to fill out and store paper claims, helping to streamline your billing procedures and simplify your record keeping. 

• Decrease overhead costs and staff time. Submitting claims electronically reduces the clerical time and cost of processing, mailing, resubmitting and tracking the status of paper claims, freeing up your administrative staff to perform other important functions.

Many different options and providers exist for submitting claims electronically. Following are some of the basic features of full-service and self-service electronic claims:

"Full-service" Electronic Claims

Full-service electronic claims are filed on behalf of a psychologist by a third party-often a billing service. The psychologist is required only to send basic patient and service information to the billing service, which then develops and submits the claim directly to the appropriate insurer or to a health care claims clearinghouse.

How much does it cost? The billing service often retains a percentage of the total claim amount as payment for its services. The percentage retained often depends on the types of services provided, and can range anywhere from 4 to 15 percent of the total claim amount.

"Self-service" Electronic Claims

Self-service electronic claims are developed and submitted by a psychologist (or a member of the psychologist's staff) directly to a third-party payer or health care claims clearinghouse.

Practitioners who submit claims to only one or two payers may opt to submit their claims directly to the individual third-party payer using proprietary software provided by the payer.

However, practitioners who submit claims to many different third-party payers often find it most convenient to submit claims to a single clearinghouse, where the claims are sorted, formatted, checked for accuracy and transmitted to the appropriate payer. Options for submitting claims to a clearinghouse include: 

• Direct file submission. Some practitioners use their practice management software to submit claims to a clearinghouse. The practice management software creates an electronic file containing claims to be processed, and the file is sent to the clearinghouse through a secure connection via the telephone or Internet. 

• Direct data entry. Practitioners who are not comfortable using — or are not able to use — their practice management software to submit claims can still enjoy the benefits of submitting claims electronically. Using direct data entry, the practitioner or his or her staff member logs into a clearinghouse using a secure Internet connection, enters the provider, patient and claims information into a formatted webpage — often an electronic version of the HCFA 1500 — and submits the claim for processing. The clearinghouse can retain the patient, provider and claim information in a secure system so that the practitioner does not need to reenter all of the information if he or she files similar claims in the future.

Additional self-service claim submission options may be available for an additional cost, enabling practitioners to perform such functions as: 

• Check insurance information, such as patient eligibility, plan information and co-pay amounts 

• Convert patient statements into electronic format for download into practice management software 

• Check referrals, pre-certifications and authorizations online 

• Receive Electronic Remittance Advice (ERA) and electronic Explanation of Benefit (EOB) statements from participating payers to determine immediately when a claim is paid and for what amount.

The self-service option is often more economical than using a full-service billing service for solo practitioners and small practices, and provides the psychologist with an additional level of control over the sensitive personal information contained in a claim.

How much does it cost to submit self-service electronic claims? Pricing may be determined on a "per claim" basis, a flat fee or a combination of a regular flat fee plus per-claim fees. Pricing may also be different depending on whether claims are entered via direct data entry or a file is uploaded from practice management software.

Many electronic claim providers exist in the marketplace, and practitioners should choose a provider carefully based on their administrative needs and budget. It is a good idea to talk to colleagues about services they use and recommend and find out if your practice management software includes an electronic claim submission component.