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1. The processing of claims and payment functions may

be accomplished at carrier field offices. In such cases, the records may either be retained at the field offices or sent to the central (home) office for retention.

2. Claims processing and payment functions may be accomplished by employers, unions, and other organizations who administer their own group health insurance programs, but make payments either on the drafts of the carrier, or on their own checks, with a subsequent reimbursement (in full or in part) by the carrier. In some instances, such functions may be accomplished by an independent general insurance agency employed by the carrier. The procedures relating to these third party cases, and the providing of detailed information to the carrier will vary, depending on the specific contractual arrangements which have been negotiated.

To illustrate the variety and complexity of these arrangements, one carrier visited by the task force has group insurance contracts with the claims processed and drafts issued under these policies by its home office. 14 group offices, 50 general agency offices, and 120 third party administrator offices. Third party arrangements include: (1) group policyholders who pay their own claims, receiving premium credit for performing this function, and (2) third parties who are under contract with the insurance company to perform the claim payment function. Generally, the third

party administering arrangements fall into the following categories:

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1. Claims are paid by the third party, using the carrier's rafts and worksheets, with notice of the payment to the home ffice consisting of a copy of the draft and worksheet.

2. Claims are paid by the third party, using the carrier's rafts and worksheets, with notice of payment to the home office onsisting of the entire claim file.

3. Claims are paid by the third party using the carrier's drafts (nonstandard) with third party procedures with notice of payment to the home office consisting of a copy of the draft. Claims are paid by the third party using the carrier's

4.

drafts (nonstandard) with third party automated procedures with notice of payment to the home office consisting of a punched card. 5. Claims for certain coverages only are paid by the third party using its procedures and the drafts of the carrier, with the remaining coverages paid by the carrier.

6. Claims are paid by the third party using the drafts of the carrier with notice of the payment consisting solely of the draft when accepted by the carrier.

VII. DISCUSSION OF PROBLEMS RELATING TO THE REPORTING OF ASSIGNED PAYMEN

A.

Determination of Reporting Responsibility

The general rule on information reporting is that the payer of the amount to be reported is responsible for submission of the report although he may delegate this responsibility to an agent. The nat of health care payments and the related processing systems, however, introduce complexities of both an interpretative and systemic nature. Reporting responsibilities can be fixed in one of three places: (1) on the organization which is identified as the payer on the check or draft (Payer of Record); (2) on the organization which is the ultimate provider of the funds being paid (Source Organization": or (3) on the organization which is processing the claim and preparing the check or draft (Processing Organization). Sometimes these three organizations are one and the same; however, quite frequently two cr three different organizations are involved, making it necessary to establish a general rule. Some of the major considerations are:

1. Group insurance contracts often provide that the group policyholder may administer the policy and process the claims. In most instances, the group policyholder uses the checks or drafts of the insurance company on the funds of the insurance These self-administered plan arrangements, however,

company.

do have a number of variations which pose complications for a definitive placement of the reporting responsibility.

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The Payer of Record may actually be receiving complete or rtial reimbursement from another party. In this instance, a licyholder under a group insurance contract may be adminisring its own plan (which is underwritten by an insurance ompany) and paying benefits to beneficiaries or providers on ts own checks or drafts. The insurance company would reimburse he group policyholder in a lump sum payment for claims paid

ach month.

There are variations in this reimbursement method.

For

Alternately, an insurance

nstance, the group policyholder may pay the claims using its wn checks or drafts and the insurance company may reimburse it 'or payments above a specific amount. Company may process and pay the claims using the drafts of the group policyholder on the funds of the group policyholder. The insurance company would reimburse the group policyholder for all claims over the above specified amount.

2. The Payer of Record may actually be disbursing funds advanced by another organization. As an illustration, 'carriers and intermediaries' administering the Medicare program make claim payments out of the funds advanced to them by the Federal Government on the basis of letters of credit.

3. The Payer of Record may be reimbursed by another organization after the payment is made. For example, a claimant may file for benefits with two or more carriers.

Frequently

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the contractual terms require a coordination of the benefits payable. One carrier is usually determined to have primary responsibility and therefore must pay the full amount of benefits under its policy. The remaining, i.e., secondary responsibility carriers, in turn pay additional amounts due on the claim, if any. On occasion, primary and secondary liability determinations are established after a payment has been made to the claimant, resulting in a subsequent monetary adjustment between the carriers.

4. Usually the Source Organization maintains no record of individual payments when it is not also the Processing Organization.

5. As far as the individual provider is concerned, the payments he receives emanate from the Payer of Record on behalf of a specific patient. In many cases, the provider is unaware of the existence or identity of the actual Source Organization. 6. The decision as to where the reporting responsibility

is vested has an obvious bearing on the subject of aggregation and the $600 floor for reporting purposes. If the reporting responsibility is delegated to the Processing Organization, effective reporting coverage would be diluted because of the additional number of reporting units.