When processing medical claims, health insurance companies assign codes for different services, with each code corresponding to a certain cost. As a result of the Paperwork Reduction Act of 1995, the healthcare system has moved to computerized networks for processing patient files and insurance claims. And while a standard medical coding system does exist, insurance companies also use non-coding methods as a means for repricing standard claim costs.

Healthcare Coding System

With the passing of the Health Insurance Portability and Accountability Act of 1996, standard coding systems became a mandatory requirement for insurance billing processes. Based on the American Medical Association’s procedure protocol — also known as Current Procedural Terminology (CPT) — the Healthcare Common Procedure Coding System exists as the coding standard for health providers and insurance companies. These codes enable insurers to process large numbers of medical claims in a consistent manner by assigning corresponding costs to each medical code. The effects of managed care plan cost structures have made it necessary for insurers to reprice many standard codes to correspond with each health plan's rates and costs. As a result, insurance companies make use of non-standard coding systems to reprice existing cost and service rates.

Repricing Programs

Repricing programs provide a way for insurance companies to discount standard fee-for-service medical claims submitted by doctors and healthcare providers. The type of health plan network a doctor or group of doctors participates in determines the type of repricing program used. Because of the different pricing strategies used within different managed care plans — such as HMOs, PPOs and POSs — discounts can vary depending on the product or service rendered, the market or region involved and the type of provider offering services. Repricing programs use non-standard procedures or codes to process medical billing claims.

Repricing Factors

According to the CBS Interactive Business Network, insurance companies may consider as many as 50 different factors when repricing standard code costs. Ultimately, the type of contract an insurer has in place with a provider determines which repricing factors apply. Factors considered include the type of provider, such as a doctor versus a specialist. Where a person receives treatment can also trigger a repricing effect in cases where someone receives treatment within his assigned network of providers versus outside the network. Additionally, repricing factors can play a role when pricing prescriptions costs, depending on the type of prescription plan a person has.

Repricing Effects

Many doctors’ offices and most hospitals have computerized claims processing methods that use billing management software programs to process and submit insurance claims. And while providers use the standard coding system for billing charges, billing errors can still result from using treatment codes that don’t correspond with an insurer’s repricing program. When this happens, insurers can underpay or overpay on claims submitted. In cases where insurers have contracts with Medicare, overpayments can cause providers considerable problems. When multiple underpayments occur, providers can lose money; especially in cases where multiple errors result from services provided on a frequent basis, such as blood tests or physical exams.