What is the Difference between Insurance Verification and Insurance Authorization?

by | Published on May 23, 2022 | Insurance Verification and Authorizations

Insurance Verification vs Authorization
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Revenue cycle management (RCM) is the administration of financial transactions that result from the medical encounters between a patient and a provider, facility, and/or supplier, according to the Healthcare Business Management Association (HBMA). RCM involves several processes from the time a patient schedules an appointment to claim submission and payment collection. Insurance verification and authorization are key processes performed in the initial phase of RCM or medical billing insurance claims process. Though both aim at preventing claim rejection and delays, insurance verification and prior authorization are distinct and different.

What is Insurance Verification?

The life cycle of a patient begins with appointment scheduling and registration where demographic and insurance information are collected. This sets the stage for insurance verification – the process of checking the patient’s health payer coverage and benefits prior to the encounter. The goal is to confirm:

  • If the patient has active insurance coverage
  • What procedures/services are and are not covered
  • How much of each procedure the insurer will cover and the patient’s financial obligation

The following information is collected when a patient calls to schedule an appointment:

  • Patient’s name and date of birth;
  • Name of the insurance provider
  • Name of the primary insurance plan holder and their relationship to the patient;
  • Patient’s policy number and group ID number (if applicable); and
  • Insurance company’s phone number and address

A reliable insurance verification service provider will make sure that all the required details about insurance eligibility and benefits are collected before the patient visit, which includes:

  • Type of plan and coverage details
  • Calendar year/ policy year
  • Effective date
  • Plan annual maximum
  • Plan deductible
  • Primary and secondary insurance
  • Per code coverage, if available
  • Copays and deductibles
  • DME coverage
  • Plan exclusions
  • Referral and pre-authorization requirements
  • Out of network benefits

Insurance verification specialists will get a full breakdown of patients’ insurance coverage and benefits by visiting payer web portals or calling the insurance carrier with the information collected from the patient during the initial phone call.

Proactive patient eligibility verification is crucial for a successful claim submission in medical billing:

  • Improves the patient experience: Verifying the patient’s insurance before the office encounter and communicating to them as to what their plan covers and doesn’t cover will ensure transparency. Patients will know about the costs of their care and can better prepare to pay their bills. With transparency throughout the medical billing process, patients will not face any costly surprises.
  • Reduces claim denials: If the patient’s information is outdated and the provider uses that to submit a claim, it would result in an instant payment denial. Verifying patient eligibility upfront will ensure that claims are submitted with current and accurate data and prompt payment. Insurance verification services minimize claim denials and saves time and money that would go into reworking claims.
  • Maximizes cash flow: Proper insurance verification will ensure that claims are submitted with up-to-date information. Clean claims will be approved faster and speed up the medical billing cycle. Reduced denials and a larger number of clean claims will increase practice cash flow.

What is Insurance Authorization?

Insurance authorization or prior authorization is a “health plan cost-control process by which physicians and other health care providers must obtain advance approval from a health plan before a specific service is delivered to the patient to qualify for payment coverage” (American Medical Association). Prior authorization is also referred to as precertification, pre-authorization, prior approval, and predetermination. Insurance companies use the prior authorization process to determine if a prescribed medical treatments, drugs, or medical equipment will be covered in full or in part.

The insurance authorization process begins when a service prescribed by a patient’s physician is not covered by their health insurance plan. The physician’s office has to communicate with the insurance company and complete a prior authorization form along with documentation supporting the medical necessity of the specific procedure, test, medication, or device. Prior authorization is a time-consuming process that can delay patient access to care.

Insurance Verification vs. Insurance Authorization

The differences between insurance verification and insurance authorization are as follows:

  • Unlike insurance verification which is performed before the patient encounter, the prior authorization process begins when a procedure, test, medication or device that the physician prescribes for a patient requires preapproval from the insurer.
  • Insurance verification is related to the process of creating and filing medical claims and obtaining payment for patient services, while prior authorization is about obtaining prior authorization for services.
  • For a smooth preauthorization process, medical billing personnel need to be knowledgeable about the CPT code for the services for which approval is requested. Insurance verification focuses on coverage status, active/inactive status and eligibility status.

Both insurance verification and authorization are time consuming processes that can lead to denials. That’s why they are best handled by experts. Outsourcing these tasks to an experienced insurance verification company can go a long way toward saving time, preventing denials and delays, optimizing reimbursement, and improving patient care and satisfaction.

Loralee Kapp

Since joining our RCM Division in October 2021, Loralee, who is HIT Certified (Health Information Technology/Health Information Management), brings her extensive expertise in medical coding and Health Information Management practices to OSI.

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