what is a assignment of benefits in healthcare

What Is the Assignment of Insurance Benefits?

An assignment of insurance benefits shares the ownership interest of an insurance policy with another party.

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•   1. What Is a Life Insurance Assignment?
•   2. Absolute Assignment of Life Insurance Policies
•   3. What Is the Collateral Assignment of a Life Insurance Policy?

Assigning insurance benefits is a legal procedure that gives another party permission to receive payments or benefits directly from your insurance company rather than you receiving the benefits yourself. Depending on the arrangement, you may be able to terminate the assignment at will, or be required to keep the arrangement in place until you meet certain conditions.

Health Insurance

When you require medical care, it's important to have health insurance in place to protect your financial well-being. If your health care provider does not have a direct contract with your insurance company, it may require you to fill out an assignment of benefits form allowing it to bill the insurance company directly for your medical treatments. You remain responsible for any deductibles and co-pays, however, and are ultimately responsible for any medical bills.

Income Loan

Whole life insurance policies with accumulating cash values can act as supplementary retirement income planning investments. When you wish to access the cash value in your policy, you can assign your policy to a bank in exchange for a loan. Typically the bank lends you up to a specified percentage of the policy's cash value, and it becomes the primary beneficiary of the death benefit up to and including the outstanding balance of the loan at your death. The advantage of such an arrangement is that the bank loan is not treated as taxable income, unlike a policy withdrawal, and you repay the bank loan with the tax-free death benefit.

Collateral Loan

If you are self-employed and wish to secure a loan for your business, you may be required by your lenders to purchase life insurance as an additional guarantee. Once the insurance is purchased you complete a assignment of benefits, sharing ownership control with the bank. You must pay the insurance premiums and cannot make any decisions affecting the policy without the written consent of the lender. If and when you pay off your business loan, the assignment is terminated and you regain full control of the policy.

Charitable Contribution

Life insurance can be purchased as a means to finance a charitable gift at death. There are several ways to set this up, one of which involves assigning the benefits to the charity immediately after purchase. The assignment is typically irrevocable, as this requires the charity's consent to make any changes to the policy. The advantage of such an assignment is that your premiums are tax-deductible as a charitable contribution. Upon your death, the charity receives the death benefit directly, without the money passing through your estate.

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Philippe Lanctot started writing for business trade publications in 1990. He has contributed copy for the "Canadian Insurance Journal" and has been the co-author of text for life insurance company marketing guides. He holds a Bachelor of Science in mathematics from the University of Montreal with a minor in English.

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Our blog series on best practices in administering benefit claims has thus far stressed the importance of knowing and reading the plan document and summary plan description.  This week, we take a look at a plan term that has been the subject of frequent dispute in health and welfare benefits claim litigation—interpretation of plan provisions prohibiting a participant’s right to assign benefits to healthcare providers.

Out-of-network medical providers commonly require patients to sign documents that purport to assign their rights to plan benefits to the provider.  If this assignment works (if it’s valid), it would allow the medical provider to “step into the shoes” of the patient and challenge the amount a plan pays to the provider.  This would give the provider direct rights against the plan, including through a plan administrative claim and, if necessary, litigation.

Under ERISA, group health plans are allowed to prohibit benefit assignments and, for a variety of reasons, many plans do so.  With a valid anti-assignment provision, plans have successfully defeated claims brought by out-of-network providers seeking additional plan reimbursements.

Anti-assignment provisions must be drafted carefully and clearly so they will accurately reflect the plan sponsor’s intentions.  Some of the issues to consider include:  Will the plan prohibit all benefit assignments? Will it prohibit only the assignment of payment of benefits?  Will it only prohibit the provider from commencing action in court?  Will it require that providers and participants get the plan administrator’s consent before the assignment is valid?  Plan sponsors generally have wide latitude to limit, or prohibit altogether, the assignment of benefits.

In considering anti-assignment provisions, there are two other points to remember:

First, ERISA allows participants to designate authorized representatives to act on their behalf through the claims process.  This could mean that a provider, an attorney, or any other individual could be appointed to act on behalf of the participant.  Unlike a properly designated assignee, however, an authorized representative does not step into the shoes of the participant and does not acquire rights independent of the participant.  A plan may provide for reasonable procedures that participants must follow in designating authorized representatives, which may facilitate benefit claim administration.

Second, many health plans will have “direct payment” provisions whereby the plan will pay out-of-network benefits directly to a provider as a convenience to the participant.  A properly drafted anti-assignment clause will distinguish between a permissible direct payment arrangement from a prohibited assignment of benefits.  This is an important and difficult provision to draft, and counsel should be consulted on this point.

Next week, we’ll discuss the importance of knowing and understanding the applicable law and regulations on benefit claim and appeal procedures.

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What is Assignment of Benefits in Medical Billing?

• March 5, 2024
• Rhold James Steven Navarette

Understanding Assignment of Benefits

Assignment of Benefits in medical billing is a legal arrangement wherein a patient signs over or ‘assigns’ their insurance benefits to a healthcare provider. Essentially, this allows the provider to bill the insurance company directly for services rendered and receive payment straight from the insurer. While it simplifies the billing process for patients, relieving them of upfront payment responsibilities, AOB also places the onus of claim processing and follow-up directly on the healthcare provider.

This arrangement carries significant legal and financial implications, making it imperative for patients to understand the terms and for providers to manage these agreements with utmost diligence.

The Process of Assignment of Benefits

The AOB process is characterized by a series of deliberate and informed steps:

• Patient Authorization : During the visit, the patient signs an AOB form, officially granting the provider the right to receive insurance payments directly.
• Documentation and Consent : The provider ensures that all necessary documentation is in order, including service records, and that the patient fully understands the scope of the consent.
• Claim Submission : The provider submits the claim to the insurance company, detailing the services provided and the agreed charges.
• Direct Reimbursement : Upon claim approval, the insurance company disburses the payment directly to the healthcare provider.

Through these steps, AOB streamlines the reimbursement process, ostensibly making it more efficient for all parties involved.

Benefits and Drawbacks of AOB

While AOB offers distinct advantages, it’s a double-edged sword, presenting potential benefits and drawbacks.

• Convenience for Patients : Patients are relieved from the burden of upfront payment and the complexities of billing.
• Streamlined Operations for Providers : Direct billing and payment can simplify the provider’s revenue cycle management.
• Risk of Misuse : There’s potential for misuse or exploitation, with providers possibly overcharging or billing for services not rendered.
• Misunderstanding of Terms : Patients might sign AOB forms without fully understanding the implications, leading to unexpected expenses or disputes.

Navigating Assignment of Benefits

For healthcare providers, effectively managing AOB agreements means ensuring transparency and maintaining clear communication with patients. It’s crucial to explain the terms thoroughly and ensure patients are fully aware of their rights and obligations.

Patients, on their part, should approach AOB with a keen eye, understanding their insurance coverage in-depth and being mindful of the responsibilities they might be signing off to their providers.

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Accepting Assignment: HCFA 1500 claim form Boxes 27 and 13

As a provider, you have the option to accept or decline assignment of benefits in chirofusion..

When adding a new Payer in ChiroFusion, you have the ability to specify whether or not you are accepting assignment. By accepting assignment of benefits, the Payer will remit payment directly to you and not the patient. Conversely, if you choose to not accept assignment, the Payer will remit payment directly to the patient. 

You can specify assignment for a particular Payer in ChiroFusion in Settings > Add/Edit Insurance Company > Clearinghouse Details. By default, this selection will apply to all patients associated with this Payer and place the "Signature on File" in Box 13 if necessary.

Insurance Company Settings:

Patient Specific Settings:  

When 'Assignment' is checked in the global insurance settings, it will apply to all patients who are covered by that insurance policy. You have the ability to deselect this box for a specific patient if need be.

In Billing For Refiling Claims: 

You can edit this directly in the HCFA Claim tab and it will update all claims pertaining to specific patients.

Understanding How Insurance Policy Conditions Apply When There is an Assignment of Benefits

Timothy engelbrecht.

Partner | First-Party Coverage , Extra-Contractual 813-281-1900 [email protected]

Overview | Blog Posts | Timothy Engelbrecht | Related | Print | Share

October 20, 2016

Florida first-party property insurers have seen a dramatic rise in assigned insurance claims. In the typical scenario, an insured assigns her rights to receive insurance proceeds from a loss to a contractor in return for the contractor’s agreement to prevent additional loss or to make repairs. Florida law has allowed assignments of benefits (“AOBs”) for nearly 100 years, so long as the AOB itself satisfies the requirements of a valid contract. See   W. Fla. Grocery Co. v. Teutonia Fire Ins. Co. , 77 So. 209, 210-11 (Fla. 1917) and  First Ins. Co. v. State, Office of Ins. Regulation , 177 So. 3d 627, 628 (Fla. 1st DCA 2015). 

One question that often arises when an insurer is handling an assigned claim is “can the insurer request that the assignee/contractor satisfy the post-loss conditions of the insurance policy?” Such post-loss conditions typically take the form of submitting a sworn statement in proof of loss, submitting to an examination under oath, providing documents, and exhibiting the damage. Insurers often ask “if the assignee/contractor is stepping into the shoes of the insured by way of the AOB, shouldn’t the assignee/contractor be required to satisfy the post-loss conditions of the insurance policy too?”

This issue was addressed by Florida’s Fifth District Court of Appeal in the case of  Shaw v. State Farm Fire & Cas. Co. , 37 So. 3d 329, 333 (Fla. 5th DCA 2010) disapproved of on other grounds by  Nunez v. Geico Gen. Ins. Co. , 117 So. 3d 388 (Fla. 2013). In  Shaw , an injured motorist assigned his insurance benefits to a chiropractor in exchange for treatment. When the chiropractor made a claim to the insurer, the insurer requested the chiropractor submit to an examination under oath. The chiropractor refused, and the insurer then refused to pay his claim. The chiropractor sued for a declaration that he was not required to fulfill the conditions of the insurance policy despite receiving the AOB from the insured.

The trial court ruled in favor of the insurer, but the Fifth District Court of Appeal (“5DCA”) reversed. The 5DCA held that the assignment of a contract right does not also transfer the duties of the insurance policy to the assignee unless the assignee specifically assumes those duties. Id . at 332. As such, the insurer could not require the assignee/chiropractor to fulfill the insurance policy obligation of submitting to an examination under oath.

However, the 5DCA noted that, just because there has been an AOB, that does not relieve the insured from having to comply with the post-loss conditions of the insurance policy. The 5DCA held “[a]ssignment of a right to payment under a contract does not eliminate the duty of compliance with contract conditions, but a third-party assignee is not liable for performance of any duty under a contract.” Id . In that regard, an insurer can still request compliance with the post-loss conditions of the insurance policy, but it is the insured (not the assignee) who must comply.

If the insured fails to comply with the requested post-loss condition, that may amount to a material breach of the insurance policy that relieves the insurer from any obligation to pay the claim. See   Goldman v. State Farm Fire Gen Ins. Co. , 660 So. 2d 300, 303 (Fla. 4th DCA 1995) (failure to submit to an examination under oath) and  Edwards v. State Farm Fla. Ins. Co. , 64 So. 3d 730, 732-33 (Fla. 3d DCA 2011) (failure to submit to an examination under oath and provide requested documents). 

If the insured materially breaches the insurance policy by failing to comply with a requested post-loss condition, that breach will be imputed to the assignee and can bar the assignee’s claim as well. On that point, the 5DCA held in  Shaw  that “[i]f the assignor is entitled to be paid, the assignee is entitled to be paid, but if the assignor is not entitled to be paid because of some failure of performance on the part of the assignor, then the assignee is not entitled to be paid either.” 37 So. 3d at 333.

Florida’s Third and Fourth District Courts of Appeal have held similarly. See Citizens Prop. Ins. Corp. v. lfergane , 114 So. 3d 190, 197 (Fla. 3d DCA 2012) (holding that an insured’s failure to submit to an examination under oath barred the assignee’s recovery) and  Kroener v. Florida Ins. Guar. Ass’n , 63 So. 3d 914, 916 (Fla. 4th DCA 2011) (explaining the insured’s failure to timely report a loss barred the assignees’ claim).

In conclusion, an insurer cannot require an assignee to satisfy the post-loss conditions of the insurance policy unless the assignee has specifically agreed to assume and perform those duties. However, an insurer can require its insured to satisfy the post-loss conditions of the insurance policy even if the insured has executed an AOB. If the insured fails to satisfy the post-loss conditions of the insurance policy, that may bar the assignee’s claim.

For any further questions, please contact Timothy Engelbrecht.

Medicare Options

To help ensure that physicians are making informed decisions about their contractual relationships with the Medicare program, the AMA has developed a “Medicare Participation Kit”(www.ama-assn.org) that explains the various participation options that are available to physicians. A summary of those options is presented below. The AAFP is not advising or recommending any of the options. The purpose of sharing this information is merely to ensure that physician decisions about Medicare participation are made with complete information about the available options. Please note that the summary below does not account for any payment adjustments that a participating or non-participating physician may incur through one of the Medicare initiatives, such as the Physician Quality Reporting System. Physicians wishing to change their Medicare participation or non-participation status for a given year are usually required to do so by December 31 of the prior year (e.g., December 31, 2015 for 2016). Participation decisions are effective January 1 of the year in question and are binding for the entire year.

The Three Options

There are basically three Medicare contractual options for physicians. Physicians may sign a participating (PAR) agreement and accept Medicare's allowed charge as payment in full for all of their Medicare patients. They may elect to be a non-PAR physician, which permits them to make assignment decisions on a case-by-case basis and to bill patients for more than the Medicare allowance for unassigned claims. Or they may become a private contracting physician, agreeing to bill patients directly and forego any payments from Medicare to their patients or themselves. Physicians who wish to change their status from PAR to non-PAR or vice versa may do so annually. Once made, the decision is generally binding until the next annual contracting cycle except where the physician's practice situation has changed significantly, such as relocation to a different geographic area or a different group practice. To become a private contractor, physicians must give 30 days notice before the first day of the quarter the contract takes effect. Those considering a change in status should first determine that they are not bound by any contractual arrangements with hospitals, health plans or other entities that require them to be PAR physicians. In addition, some states have enacted laws that prohibit physicians from balance billing their patients.

Participation

PAR physicians agree to take assignment on all Medicare claims, which means that they must accept Medicare's approved amount (which is the 80% that Medicare pays plus the 20% patient copayment) as payment in full for all covered services for the duration of the calendar year. The patient or the patient's secondary insurer is still responsible for the 20% copayment but the physician cannot bill the patient for amounts in excess of the Medicare allowance. While PAR physicians must accept assignment on all Medicare claims, however, Medicare participation agreements do not require physician practices to accept every Medicare patient who seeks treatment from them.

Medicare provides a number of incentives for physicians to participate:

• The Medicare payment amount for PAR physicians is 5% higher than the rate for non-PAR physicians.
• Directories of PAR physicians are provided to senior citizen groups and individuals who request them.
• Medicare administrative contractors (MAC) provide toll-free claims processing lines to PAR physicians and process their claims more quickly.

Non-Participation

Medicare approved amounts for services provided by non-PAR physicians (including the 80% from Medicare plus the 20% copayment) are set at 95% of Medicare approved amounts for PAR physicians, although non-PAR physicians can charge more than the Medicare approved amount.

Limiting charges for non-PAR physicians are set at 115% of the Medicare approved amount for non-PAR physicians. However, because Medicare approved amounts for non-PAR physicians are 95% of the rates for PAR physicians, the 15% limiting charge is effectively only 9.25% above the PAR approved amounts for the services. Therefore, when considering whether to be non-PAR, physicians must determine whether their total revenues from Medicare, patient copayments and balance billing would exceed their total revenues as PAR physicians, particularly in light of collection costs, bad debts and claims for which they do accept assignment. The 95% payment rate is not based on whether physicians accept assignment on the claim, but whether they are PAR physicians; when non-PAR physicians accept assignment for their low-income or other patients, their Medicare approved amounts are still only 95% of the approved amounts paid to PAR physicians for the same service. Non-PAR physicians would need to collect the full limiting charge amount roughly 35% of the time they provided a given service in order for the revenues from the service to equal those of PAR physicians for the same service. If they collect the full limiting charge for more than 35% of the services that they provide, their Medicare revenues will exceed those of PAR physicians.

Assignment acceptance, for either PAR or non-PAR physicians, also means that the MAC pays the physician the 80% Medicare payment. For unassigned claims, even though the physician is required to submit the claim to Medicare, the program pays the patient, and the physician must then collect the entire amount for the service from the patient.

Example: A service for which Medicare fee schedule amount is $100

Private contracting.

Provisions in the Balanced Budget Act of 1997 give physicians and their Medicare patients the freedom to privately contract to provide health care services outside the Medicare system. Private contracting decisions may not be made on a case-by-case or patient-by-patient basis, however. Once physicians have opted out of Medicare, they cannot submit claims to Medicare for any of their patients for a two-year period.

A physician who has not been excluded under sections 1128, 1156 or 1892 of the Social Security Act may, however, order, certify the need for, or refer a beneficiary for Medicare-covered items and services, provided the physician is not paid, directly or indirectly, for such services (except for emergency and urgent care services). For example, if a physician who has opted out of Medicare refers a beneficiary for medically necessary services, such as laboratory, DMEPOS or inpatient hospitalization, those services would be covered by Medicare.

To privately contract with a Medicare beneficiary, a physician must enter into a private contract that meets specific requirements, as set forth in the sample private contract below. In addition to the private contract, the physician must also file an affidavit that meets certain requirements, as contained in the sample affidavit below. To opt out, a physician must file an affidavit that meets the necessary criteria and is received by the MAC at least 30 days before the first day of the next calendar quarter. There is a 90-day period after the effective date of the first opt-out affidavit during which physicians may revoke the opt-out and return to Medicare as if they had never opted out.

Emergency and Urgent Care Services Furnished During the "Opt-Out" Period

Physicians who have opted-out of Medicare under the Medicare private contract provisions may furnish emergency care services or urgent care services to a Medicare beneficiary with whom the physician has previously entered into a private contract so long as the physician and beneficiary entered into the private contract before the onset of the emergency medical condition or urgent medical condition. These services would be furnished under the terms of the private contract.

Physicians who have opted-out of Medicare under the Medicare private contract provisions may continue to furnish emergency or urgent care services to a Medicare beneficiary with whom the physician has not previously entered into a private contract, provided the physician:

• Submits a claim to Medicare in accordance with both 42 CFR part 424 (relating to conditions for Medicare payment) and Medicare instructions (including but not limited to complying with proper coding of emergency or urgent care services furnished by physicians and qualified health care professionals who have opted-out of Medicare).
• Collects no more than the Medicare limiting charge, in the case of a physician (or the deductible and coinsurance, in the case of a qualified health care professional).

Note that a physician who has been excluded from Medicare must comply with Medicare regulations relating to scope and effect of the exclusion (42 C.F.R. § 1001.1901) when the physician furnishes emergency services to beneficiaries, and the physician may not bill and be paid for urgent care services.

Sample Medicare Private Contract and Affidavit

The sample private contract and affidavit below contain the provisions that Medicare requires (unless otherwise noted) to be included in these documents.

Private contracts must meet specific requirements:

• The physician must sign and file an affidavit agreeing to forgo receiving any payment from Medicare for items or services provided to any Medicare beneficiary for the following 2-year period (either directly, on a capitated basis or from an organization that received Medicare reimbursement directly or on a capitated basis).
• Medicare does not pay for the services provided or contracted for. The contract must be in writing and must be signed by the beneficiary before any item or service is provided.
• The contract cannot be entered into at a time when the beneficiary is facing an emergency or an urgent health situation.

In addition, the contract must state unambiguously that by signing the private contract, the beneficiary:

• gives up all Medicare payment for services furnished by the "opt out" physician;
• agrees not to bill Medicare or ask the physician to bill Medicare;
• is liable for all of the physician's charges, without any Medicare balance billing limits;
• acknowledges that Medigap or any other supplemental insurance will not pay toward the services; and acknowledges that he or she has the right to receive services from physicians for whom Medicare coverage and payment would be available.

If you determine that you want to "opt out" of Medicare under a private contract, we recommend that you consult with your attorney to develop a valid contract containing other standard non-Medicare required provisions that generally are included in any standard contract.

Download sample contracts:

• Sample Medicare Private Contract
• Sample Medicare Private Contracts "Opt-Out" Affidavit

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