Common Insurance Terms

Pharmacy Benefit Manager (PBM): Third party companies such as OptumRX, ExpressScripts, and CVS Scripts that contract with insurance carriers and coordinate with pharmacies to process pharmacy benefit claims.  The Big Three process over 70% of pharmacy insurance claims in the United States and they they are not obligated to ensuring patient care or maintaining the standard of care. They promise to reduce costs to insurance carriers and profit from minimizing care to patients.

Third Party Administrators (TPA): Third party companies that are contracted with insurance carriers to administer claims, including adjust and adjudicate, guarantee payment, utilization reviews of medical and pharmacy authorizations, contract with providers, and accept or deny liability. 

Claims: Payment requests from medical providers or pharmacies submitted to the responsible party. 

Responsible Party: The responsible party for a claim is the person or entity legally obligated to provide payment for services rendered. For example, if you are injured on the job, the worker's compensation carrier is the responsible party; however, they may deny they are responsible for the claim. Or they may accept responsibility for the claim but deny responsibility for certain services they deem not necessary.

Explanation of Benefits (EOB): Explanation of Benefits are letter or documents from insurance company encoded with payment or denial reasons. For example, they may deny medication as unnecessary for treatment, or state your doctor is out of network and thus not eligible. Some denials are mistakes. Some denials can be appealed. 

Appeals: Requests submitted to insurance carriers or third party administrators with additional evidence to support the original request. An insurance carrier may deny a medication as unnecessary until they receive support evidence, such as a Letter of Medical Necessity. 

Letter of Medical Necessity (LMN): A document or statement from your provider (such as a doctor or a nurse) with supporting evidence for the recommended treatment plan or medication. The doctor may explain that other types of medication were ineffectual, or the typical recommended treatment would cause you more harm than good. Many insurance claim denials can be appealed with a letter of medical necessity from your doctor. 

Prior Authorizations (PAs): Insurance carriers require prior authorizations for many treatment plans, procedures, and medications beyond the most common practices. Once a prior authorization is received, however, it is not a guarantee for payment for services rendered. It is merely an indication that the insurance carrier accepts, in general, the provider is in network and the procedure is medically relevant. They may reserve the right to deny payment at a later date, leaving the patient stuck with a very big bill. 

Coordination of Benefits: When two or more insurance carriers are responsible payers for a patient's treatment. For example, if you are injured as the result of a car accident, your own insurance and the other party's insurance may both pay for your treatment. 

Subrogation: The process in which two or more insurance carriers decide how to split responsibility for a patient's care. 

Utilization Review: The process in which an insurance carrier, third party administrator, or pharmacy benefit manager reviews a doctor's prescribed treatment to verify the treatment is reasonable. Often times, the carrier or TPA's own doctor will make that decision.