There is one unfortunate reality in medical billing. Almost all preventable denial situations stem from a failure to complete eligibility and benefits verification or completing the task inaccurately (or too early) in which case, it becomes unreliable.
Eligibility verification is simply checking a box during your patient’s intake. Eligibility verification is the financial backbone behind every single claim you will file. Therefore, when it does fail, so do all subsequent claims filed as a result of your failed eligibility verification. As a result of failed eligibility verification, you allow many accounts to go uncollected. Patients get sent to collections without reason. Relationships with patients and/or their family members become strained based upon their expectation of confidentiality regarding their health.
Fortunately, ensuring successful eligibility verification is a relatively simple process. To accomplish successful eligibility verification, the provider needs a well-established procedure, adequately trained staff, and a clear understanding of what they are verifying.
Why is eligibility verification important?
Change healthcare’s 2023 Denial Management report identified that the number of eligibility related denials were responsible for approximately 23% of all the initial claim denials experienced by healthcare providers throughout the u.s. This represents almost one in four denials caused by insurance eligibility issues.
According to The American Academy of Family Physicians’ study on reworking denied claims stated that the average expense to rework a denied claim is estimated to be anywhere from $25 to $118. When considering the financial implications associated with having hundreds or thousands of denied claims annually, the potential financial impact is substantial.
In addition to the financial implications of failed eligibility verification, CMS statistics show that registration errors including those involving eligibility issues, represent two of the top three reasons for claim rejection by Medicare Administrative Contractors. On the commercial side, there is an increased prevalence of failed eligibility verification; as a result of commercial payers having numerous plan-specific rules and benefit variances.
Furthermore, beyond the financial implications, there are also patient experience implications. If a patient experiences a surprise bill resulting from your staff not successfully verifying his/her/their benefits appropriately, it results in diminished trust towards the provider. Surprise bills create additional phone calls to your front office. Surprise bills create conflicts and create negative reviews for your business on social media. As we continue to evolve into an increasingly competitive healthcare environment; these factors matter significantly.
What does eligibility verification involve?
Many front-office staff believe that conducting eligibility verification is merely logging onto a payer’s portal, viewing an “active” checkmark indicating that coverage exists, and then proceeding with other tasks. While this provides some level of insight into coverage; it is merely the tip of the iceberg relative to true eligibility and benefits verification.
To truly perform eligibility and benefits verification for each patient; before scheduling an appointment, and in relation to the services that will be provided, you should confirm the following:
• active coverage – confirm that the patient has active coverage on the date of service. Coverage can lapse for numerous reasons such as failure to remit payment of premiums, employer terminated employment, loss of employment, etc., or simply due to administrative errors made by the payer. There is little value in reviewing an insurance card that is 90 days old to determine if the policy remains active today.
• correct plan identification – identify the appropriate insurance plan(s). Many patients hold multiple insurance cards. Some have primary and secondary plans. Others have both medicare and a Medigap supplemental policy. Others have employer-sponsored coverage and are also eligible for Medicaid. It is necessary to identify the applicable coordination of benefits regulations in order to correctly sequence billing.
• appropriate benefit confirmation – confirm the exact benefits associated with the services being delivered. A patient may have active coverage but lack mental health benefits; or perhaps limited physical therapy visits; or may have different benefit structures for specialty vs. Primary care services. General coverage confirmation does not provide any detail regarding benefits.
• deductible status – verify the remaining deductible amount. How much of the patient’s deductible has been satisfied? What amount of the deductible still exists? This will dictate how much the patient will be responsible for paying out-of-pocket. By gathering this information prior to services being delivered; you are able to have a legitimate financial discussion with your patient.
• copay/coincidence amounts – verify copay and coinsurance amounts specifically for the type of visit/service. Specialist copays differ from those for primary care services. Coinsurance percentages vary depending upon service categories.
• prior authorization requirements – verify prior authorization requirements for certain services. Failure to obtain prior authorization is considered one of the most costly mistakes a practice can commit..
Secondary Insurance and Coordination of Benefits
When a patient has more than one insurance plan, you need to determine which plan is primary and which is secondary before you submit any claims.
The coordination of benefits rules define who pays first. For patients with employer coverage from their own job and their spouse’s job, the patient’s own plan is typically primary. For dependents, there is a birthday rule. The parent whose birthday falls earlier in the calendar year has the primary plan for the child.
Medicare as secondary payer (MSP) situations are particularly complex. Medicare has very specific rules about when it pays as secondary and what triggers its secondary status. Active employer group health plan coverage for patients over 65 who are still employed is one common MSP situation. Workers’ compensation and liability claims also trigger MSP rules.
Always submit to the primary payer first. When the primary payer processes the claim, take the explanation of benefits (EOB) and submit it along with the secondary claim. Do not guess at what the secondary payer will owe. Let the EOB drive that calculation.
Real-Time vs. Manual Eligibility Verification
Real-time eligibility verification through the 270/271 transaction is far superior to manual phone verification for routine situations. It is faster, creates a record automatically, and processes information more accurately.
However, real-time electronic verification has limits. Not all payer systems return complete benefits information electronically. Some plans, especially smaller commercial plans and Medicaid managed care organizations, may return a generic “eligible” response without detailed benefits breakdowns.
In those cases, follow up with a phone call to the payer’s provider services line. Document the call with the representative’s name, the reference number, and the specific information confirmed. This manual step takes more time but it produces a complete picture.
Some practices use a tiered approach. For high-frequency payers they verify electronically and only escalate to phone verification when the electronic response is incomplete or when the service involves significant patient cost-sharing or authorization requirements.
The Eligibility Verification Process Step by Step
Step 1: Collect Insurance Information at Scheduling
The verification process starts the moment a patient calls to schedule an appointment. Do not wait until check-in to ask for insurance information. Train your scheduling staff to collect the patient’s insurance name, member ID, group number, and date of birth at the time of scheduling.
Have the patient spell out the information slowly. Data entry errors at this stage cause downstream failures in every single verification attempt. If the member ID or group number is wrong, the payer system will not return an accurate result.
For new patients, ask them to bring their physical insurance card to the appointment as a backup. Better yet, offer to send a secure form they can complete before the visit.
Step 2: Run the Eligibility Check at Least 3 to 5 Days Before the Appointment
Do not verify eligibility the morning of the visit. Verify it three to five days in advance. This gives you time to resolve discrepancies, request authorization if needed, and contact the patient if their coverage has an issue.
Most practice management systems and billing platforms have real-time eligibility verification built in. These systems connect directly to payer databases through the HIPAA 270/271 transaction set. The 270 is the eligibility inquiry. The 271 is the response. This transaction happens electronically in seconds.
Use your clearinghouse or billing system to run batch eligibility checks for your upcoming schedule every night or every morning. Large practices with hundreds of appointments per week cannot afford to do this manually one patient at a time.
Step 3: Interpret the 271 Response Correctly
This is where a lot of teams fall short. Getting the 271 back is not the end of the process. Reading it accurately is.
The 271 response will tell you whether the patient is eligible. But it also contains detailed benefits information broken into service type codes. Service type 30 covers health benefit plans. Service type 86 covers emergency services. Service type 96 covers outpatient professional physician services. Service type AJ covers specialty pharmacy. Each type of health care service has its own specific out of pocket costs, including the amount covered by the plan, the deductible, the out of pocket max and the total cost sharing.
While a patient might appear to be eligible for general coverage (service type 30), there could be specific exclusions or limitations for the service type related to your specialty. Therefore, reading the response at the overall or aggregate level ignores these nuances. Train your verification personnel to locate plan exclusions; network status indicators; and service-specific restrictions.
Step 4: Verify Network Status
This is an important and often-overlooked aspect. Verify that your provider is participating within the patient’s specific plan. Not simply verifying that your provider participates with the insurance company. UnitedHealthcare, for example, offers multiple plan products. Your doctor being “in-network” for UnitedHealth Choice Plus may mean he/she is NOT “in-network” for UnitedHealth Navigate or UnitedHealth Select. The name of the insurance company on the card does not ensure network participation.
There are many negative implications of charging a patient for services provided outside their plan network. Most importantly, however, it places you in a position where you don’t need to be. Verifying the plan-level network status for every patient is necessary.
Step 5: Get Deductible and Out-of-Pocket Max Balance Information
Get the current year balance of the deductible information from the 271 response or through the payer portal. Record how much of their deductible the patient has paid so far and how much is left to pay. If a patient has a $3000 deductible as an individual and they’ve already satisfied $200 of it then they will probably owe a considerable portion of what they’ll receive today in out of pocket expenses. By communicating this to them ahead of time, it dramatically affects their financial experience receiving care. It removes any potential for surprise medical bills. It allows the patient to ask questions or arrange a payment plan if needed prior to receiving services.
Step 6: Determine if Prior Authorization Is Required Before Services Are Rendered
Prior to scheduling any procedure, test or visit with a specialist, determine whether the payer requires prior authorization for the procedure/test/visit.
Authorization requirements vary wildly by payer and by plan. What requires authorization under one Blue Cross plan may not require it under another. What was authorized last year may require a fresh authorization this year. Payers update their authorization requirements frequently.
Use the payer’s provider portal or call the payer’s provider services line to confirm authorization requirements for specific CPT codes when you are not certain. Many clearinghouses also offer real-time authorization lookup tools.
The cost of failing to get a required authorization is enormous. Some payers deny the entire claim. Others pay a reduced amount and hold the patient harmless, leaving the provider with nothing
Step 7: Document Everything
Documentation of each verification interaction is necessary in a patient’s account. Documentation should include:
- Date and time verification was performed
- Method(s) of verification were employed (phone call, electronic, patient portal)
- Reference numbers assigned by payers (if available)\specific services or benefits that were verified
Documenting all interactions helps protect you in the event of an audit and/or appeal. If a payer denies a claim based on eligibility and you can produce documentation of a prior verification attempt using a reference number, it will serve as evidence in supporting your appeal.
Final thoughts
A clean claim begins long before you click “submit.” a clean claim starts when the scheduling staff verifies the insurance eligibility; continues through a systematic verification process; and concludes when the patient has been informed of how much he/she owes before arriving at the office. This is what a thorough eligibility & benefits verification process does for your practice. Practices that view verification as a part of their overall revenue cycle strategy instead of just a front desk function continue to beat the competition in terms of denied claims rates, collections rates, and patient satisfaction ratings. Investing time and money into developing processes, training personnel and implementing technology typically yields multiple returns on investment in reduced write offs and increased recoveries of lost revenue. Verify early – verify completely – Document everything – do not assume active coverage today means active benefits for services being delivered today.