Topic:
MEDICARE; MEDICAID; MEDICAL CARE; DENTISTS; HEALTH INSURANCE; PATIENTS' RIGHTS; STANDARDS;
Location:
INSURANCE;

OLR Research Report


January 12, 2006

 

2006-R-0055

DIAGNOSTIC AND TREATMENT CODES USED BY INSURANCE COMPANIES

By: Janet L. Kaminski, Associate Legislative Attorney

You asked if there is any regulation of insurance companies' use of diagnostic and treatment codes, such that each insurance company must use the same coding.

SUMMARY

The federal Health Insurance Portability and Accountability Act (HIPAA) required the Secretary of Health and Human Services (HHS) to adopt standards for the electronic exchange of administrative and financial health care transactions to improve the efficiency and effectiveness of the health care system in the United States. Federal regulations adopted national standards for electronic health care transactions, code sets, and national identifiers for providers, health plans, and employers. Compliance was required by October 16, 2003. The federal standards supercede any state law that is contrary to them.

A “code set” is any set of codes used for encoding data, such as medical diagnosis or procedure codes. HHS has adopted the following code sets as the standard medical data code sets: (1) International Classification of Diseases, 9th Edition, Clinical Modifications, Volumes 1, 2, and 3 (ICD-9-CM); (2) National Drug Codes (NDC); (3) Code on Dental Procedures and Nomenclature, Second Edition (CDT-2); (4) Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration) Common Procedure Coding System (HCPCS); and (5) Current Procedural Terminology, Fourth Edition (CPT-4).

Under the law, health plans are required to accept a standard claim submitted electronically. They may not require health care providers to make changes or additions to the standard claim (e.g., to use local or proprietary codes).

For more information about administrative simplification and code sets, see the HHS website at www.aspe.hhs.gov/admnsimp/.

HIPAA TRANSACTIONS AND CODE SET STANDARDS

To improve the efficiency and effectiveness of the health care system, Congress enacted the Health Insurance Portability and Accountability Act (HIPAA) of 1996, which included a series of “administrative simplification” provisions that required the Department of Health and Human Services (HHS) to adopt national standards for electronic health care transactions. All covered entities were required to comply with the electronic transactions and code sets standards by October 16, 2003.

While HIPAA establishes the standards for electronic data transmission when transactions are conducted electronically, it does not require health care providers to transmit claims electronically. However, the Administrative Simplification Compliance Act does require Medicare providers to submit initial claims electronically to Medicare.

Therefore, initial Medicare claims must be submitted using the HIPAA-prescribed transaction codes. An “initial Medicare claim” excludes any adjustment or appeal of a previously submitted claim. A small provider or supplier is exempt from the electronic-filing requirement. A “small provider or supplier” is (1) a provider with fewer than 25 full-time equivalent employees or (2) a physician, practitioner, facility, or supplier with fewer than 10 full-time equivalent employees.

Standard Code Sets

A “code set” is any set of codes used for encoding data, such as medical concepts, terms, diagnosis codes, or procedure codes. Medical data code sets used in the health care industry include coding systems for diseases, impairments, other health-related problems; manifestations and causes of such problems; treatment actions; and any equipment, supplies, substances, or other items used in such treatment.

HHS has adopted the following code sets as the standard medical data code sets that health care entities must use in electronic transactions:

International Classification of Diseases, 9th Edition, Clinical Modification, (ICD-9-CM), Volumes 1 and 2 (including The Official ICD-9-CM Guidelines for Coding and Reporting), as updated and distributed by HHS, for the following conditions:

1. diseases;

2. injuries;

3. impairments;

4. other health related problems and their manifestations; and

5. causes of injury, disease, impairment, or other health-related problems.

International Classification of Diseases, 9th Edition, Clinical Modification, (ICD-9-CM), Volume 3 (including The Official ICD-9-CM Guidelines for Coding and Reporting), as updated and distributed by HHS, for the following procedures or other actions taken for diseases, injuries, and impairments on hospital inpatients reported by hospitals:

1. prevention,

2. diagnosis,

3. treatment, and

4. management.

National Drug Codes (NDC), as updated and distributed by HHS, in collaboration with drug manufacturers, for (1) drugs and (2) biologics.

Code on Dental Procedures and Nomenclature, Second Edition (CDT-2), as updated and distributed by the American Dental Association, for dental services.

Centers for Medicare & Medicaid Services (formerly known as Health Care Financing Administration) Common Procedure Coding System (HCPCS), as updated and distributed by HHS, and Current Procedural Terminology, Fourth Edition (CPT-4), as updated and distributed by the American Medical Association, for physician services and other health related services. These services include, but are not limited to, the following:

1. physician services;

2. physical and occupational therapy services;

3. radiological procedures;

4. clinical laboratory tests;

5. other medical diagnostic procedures;

6. hearing and vision services; and

7. transportation services, including ambulance.

The Centers for Medicare & Medicaid Services (formerly known as Health Care Financing Administration) Common Procedure Coding System (HCPCS), as updated and distributed by CMS, HHS, for all other substances, equipment, supplies, or other items used in health care services. These items include, but are not limited to, the following:

1. medical supplies,

2. orthotic and prosthetic devices, and

3. durable medical equipment.

Codes established on a local basis may not be used. Users that need new codes must apply to the appropriate organizations (e.g., CMS for HCPCS codes, the AMA for CPT-4 codes) for national codes.

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