When is a health plan not a payer? WEDI tries to explain

Many people in the healthcare industry use the terms “payer” and “health plan” interchangeably, but when it comes to a new wrinkle in the requirements for electronic healthcare transactions covered by the Health Insurance Portability and Accountability Act of 1996, there's a big difference.

That difference gains legal—and cash flow—significance come Nov. 7, 2016, when the proposed new health plan identifier must be used in HIPAA-covered transactions. Use of the long-delayed health plan identifier was specified in the 1996 Health Insurance Portability and Accountability Act statute and was finally mandated in a CMS rule issued in August 2012.

“The HIPAA regulation defines 'health plan' differently than the way the industry commonly used the term,” says a six-page issue brief explaining the difference from the Workgroup for Electronic Data Interchange.

To make matters even more complex, while the role of payer is distinct from that of a health plan, the WEDI brief notes, “an entity can be in both roles,” although “not all payers are health plans and not all health plans are payers.”

WEDI used the HIPAA definition of “health plan” as “an individual or group plan that provides, or pays the cost of, medical care” as specified under the U.S. Code of Federal Regulations.

Payers, meanwhile, in the WEDI brief, are “the intended entity” that is responsible for many claims-processing functions, such as final processing of eligibility queries, enrollment, premium payment and remittance advices, but excludes “any business associate (such as a claims clearinghouse) used to create or receive a transaction on behalf of a payer.”

Got it?

If not, better read the WEDI brief.

Follow Joseph Conn on Twitter: @MHJConn