How do payment policies work?

We're often asked why all payers don’t work from the same set of payment policies. The answer may surprise you: payers’ payment policies are in fact all nearly identical. Why the confusion?

How coverage relates to payment policies

People often erroneously conflate coverage with payment policies. However, payment policies do not speak to coverage. Payment policies articulate the manner in which covered services are reimbursed. Coverage and payment are two different things.

Note the word “covered” is emphasized above: services must pass the coverage gate before they even get to the payment policy logic in a claims system. Most health plans, in response to consumer and broker demand, offer a wide variety of benefits packages. This ability to create benefits packages specific to a given employer allows employers to offer tailored and attractive benefits; however, it can also create confusion about what is a covered service (meaning, a service included in a given benefits package), and how much or whether a provider will get paid for that service.

For example: most payers publish a payment policy describing how that payer will pay for (covered) acupuncture services. However, acupuncture itself may or may not be a service covered under all health plans offered by that payer. Therefore, the payment policy articulates how a payer will reimburse any covered acupuncture services. If acupuncture is not covered under a given member’s policy, then any and all claims for acupuncture billed in the context of that benefit package will deny, regardless of what the payment policy might say.

Provider contracts vs. payment policies

The source of most friction between provider and payer is that the provider contract, not a payment policy, is the real source of truth.

Health care claims systems are, in essence, software code designed with a default set of logic built upon standard contract terms. As contracts age and renew and as systems get larger, provider contracts become highly customized over time. Contract customizations necessitate special billing guidelines, specific to that provider, in order to override default standard edits within a claims system.  This provider contract customization then meets the customization foisted upon the system by benefits package customization, which can make the end result of any particular claim process inscrutable. Billing and revenue cycle personnel going to payment policy sites for clarity are usually better off consulting their contract to understand the terms of that particular relationship. The contract would supersede any published payment policy.

For more information about how we do health insurance, check out our infographic about how AllWays processes claims.