Coordination of benefits (COB): Coordination of benefits (COB) applies when a patient has more than one insurance plan. COB determines which plan pays first (primary payer) and how much the other plan pays (secondary payer). Typically, the primary payer pays first and the secondary payer may cover some or all of the remaining balance. COB helps prevent overpayment for prescription benefits.

Adjudication: Pharmacy claim adjudication is the process of evaluating a pharmacy claim, commonly performed by pharmacy benefit managers (PBMs). During adjudication, the system checks whether:

• The prescription is covered
• Cost-saving options are available
• Drug safety issues exist
• Prior authorization is required

After these checks, the claim is approved, held for more information, or rejected.

NCPDP or National Council for Prescription Drug Programs: NCPDP is a nonprofit organization that develops and promotes standards for the electronic exchange of healthcare information related to pharmacy services. Its standards support many pharmacy operations, including:

• SCRIPT, which facilitates e-prescribing
• Standards for drug labeling, dosing instructions, and patient counseling to improve patient safety
• An NCPDP ID for each pharmacy
• A pharmacy directory

NCPDP also issues reject codes, which are standardized codes used by insurers and processors to explain why a claim was rejected.

Table showing common NCPDP reject codes (M/I means missing information)

Types of health and prescription insurance: Health insurance may be provided through an employer, purchased privately (including self-employed coverage), or purchased as an individual or family plan. Government-provided health insurance includes Medicare and Medicaid.

Plans also differ by structure, such as:

• Health maintenance organizations (HMOs): Typically the least flexible. The provider network is limited, referrals are needed to see specialists, and premiums and out-of-pocket costs are usually lower.
• Preferred provider organizations (PPOs): Typically the most flexible. Referrals aren’t required, but premiums are usually higher.
• Exclusive provider organizations (EPOs) and point of service (POS) plans: Hybrid models that generally cost more than an HMO.

TRICARE is health insurance for current and retired uniformed service members and their families. It covers prescription drugs as well as doctor and hospital visits. Care is available through military hospitals and clinics and through TRICARE-authorized civilian providers.

Medicare: Medicare is federal health insurance for people age 65 and older. It also covers some people under 65 with certain disabilities or health conditions, such as end-stage renal disease. Original Medicare includes Part A and Part B.

Part A (hospital insurance) covers inpatient care in hospitals, skilled nursing facilities, hospice, and some home health care.

Part B (medical insurance) covers outpatient care and services provided by physicians and other health care providers (such as nurse practitioners and physician assistants). It also covers home health care, durable medical equipment (such as blood sugar meters and test strips, wheelchairs, nebulizers, and walkers), and preventive services (such as screenings, vaccines, and wellness checkups).

For prescription drug coverage, you need either:

• A Medicare Advantage plan that includes drug coverage, or
• An additional Medicare drug plan

Part D covers prescription drugs, including recommended vaccines. Medicare Advantage is also known as Part C. It’s a Medicare-approved private plan that can be used instead of Original Medicare. Medicare Advantage plans can differ from Original Medicare in provider networks, out-of-pocket costs, premiums, and benefits.

Medicaid: Medicaid is a joint federal and state program that covers medical costs for eligible people with limited income and resources. Medicaid may help pay health expenses such as Medicare Part B monthly premiums, Part A premiums, deductibles, coinsurance, and copays. Some people qualify for both Medicaid and Medicare (dual eligibility). In that situation, Medicare pays first and Medicaid pays last.

Workers’ compensation: Workers’ compensation provides disability compensation and health insurance to workers who are injured at work or develop occupational diseases. Each state has a Workers’ Compensation Board that processes claims. Federal employees receive workers’ compensation through the Department of Labor.

Common terms associated with health insurance

Co-payment: A fixed, predetermined amount paid for a covered health care service. For example, if a specialist visit copay is $50, the insured pays $50 for each approved specialist visit, in addition to other costs such as deductibles and out-of-pocket expenses.

Co-insurance: The insured’s share of the cost, expressed as a fixed percentage. For example, 20% coinsurance means that for every $100 in covered costs, the insured pays $20.

Deductible: The amount the insured pays out of pocket before the insurance plan starts paying for covered services. For example, if the deductible is $5000, the plan doesn’t pay until $5000 in costs has been met.

Premium: The amount paid regularly (such as monthly or quarterly) to keep health insurance coverage active.

Network: The providers, facilities, and pharmacies included in a health insurance plan.

Preauthorization or prior authorization: Also called precertification, this is the process of getting approval from the insurance company before using certain services (such as surgery, specialist visits, brand-name drugs, or certain procedures). The insurance company determines whether the requested service is medically necessary and may suggest alternatives that typically cost less (for example, a generic version instead of a brand-name drug).