Insurance claims are processed at the pharmacy through a series of steps that check your coverage, verify your medication, and decide how much your insurance will pay. The pharmacy claims adjudication process is the method through which a pharmacy submits a prescription claim to a patient’s insurance provider or pharmacy benefit manager (PBM) for payment. This process happens almost instantly when you drop off your prescription, but several important steps work behind the scenes to make sure you get your medication at the right price.
This guide will walk you through exactly how pharmacy insurance claims work, what happens when claims get denied, and how you can avoid common problems that delay your prescription.
Understanding the Pharmacy Claims Process
What Happens When You Drop Off Your Prescription
When you hand your prescription to the pharmacy, the real work begins right away. The journey commences with a healthcare provider issuing a prescription for a patient, who subsequently takes it to a pharmacy for fulfillment. The pharmacy team starts by collecting your insurance information and entering it into their computer system.
The first step involves obtaining accurate patient information, including their insurance details. This includes:
- Your insurance ID number
- Your personal information like name and date of birth
- The medication details from your prescription
- The prescriber’s information
How Electronic Claims Submission Works
Most pharmacy claims today are sent electronically, which makes the process much faster. At the pharmacy, a claim is meticulously compiled and submitted to either the patient’s insurance provider or a relevant government program, such as Medicaid or Medicare.
The electronic claim includes important details about your prescription:
- The medication name and strength
- How much you’re getting (quantity)
- How many days the medication should last
- The total cost of the medication
- Your insurance information
Within seconds, the claims are processed, and the reimbursement amount is determined. This quick processing time is one of the biggest advantages of electronic claims submission.
The National Council for Prescription Drug Programs (NCPDP) creates national standards for electronic healthcare transactions used in prescribing, dispensing, monitoring, managing and paying for medications and pharmacy services. These standards help ensure that electronic claims are processed consistently across all pharmacies and insurance companies.
The Claims Adjudication Process
What Is Claims Adjudication?
Pharmacy claims, much like dental and medical claims, are adjudicated before the Payer processes them; adjudication assesses claim validity, relevancy, and accuracy. Think of adjudication as the insurance company’s way of double-checking that everything is correct before they agree to pay.
During adjudication, the insurance provider or payer scrutinizes the claim to ascertain the patient’s coverage, delineate cost-sharing responsibilities, and determine if the medication aligns with the formulary.
The Three Possible Outcomes
Every pharmacy claim ends up with one of three results:
1. Approved Claims Accepted claims move forward in the workflow, meaning the Payer will process and pay their responsibility for the claim. This is the ideal outcome for a claim, as it allows patients to receive their treatment.
2. Denied Claims Denied, or declined, claims are put on pause, and returned to the Provider. A Provider who receives a declined claim has three options: to prescribe an alternative treatment and restart the process, to appeal the determination, which often requires further documentation, or to do nothing.
3. Reversed Claims Reversed claims are effectively undone for the pharmacy and Payer. These claims often occur when a patient does not pick up their prescription in the allotted time frame.
Common Reasons for Claim Denials
The Top Four Denial Reasons
Pharmacy claims adjudication can result in a denial for numerous reasons, but there are four reasons that are the most common:
1. Not Covered or No Prior Authorization These claims are declined because the prescription is not covered under the patient’s plan, or because a specific treatment requires a prior authorization but one was not submitted.
2. Incorrect or Inaccurate Information When a claim is processed, all the data provided by the patient and the Provider must be accurate. This includes things like:
- Wrong insurance ID numbers
- Incorrect patient information
- Mistakes in the prescription details
3. Incorrect Daily Quantity or Supply If a prescription is written with inaccurate dosages over a time period, such as per day or per month, the claim will be denied.
4. Timing Issues Sometimes claims get denied because you’re trying to refill too early or because your insurance has specific timing rules for certain medications.
Understanding Prior Authorization
Prior authorization means that your insurance needs to approve your medication before covering it. This is one of the most common reasons prescriptions get held up at the pharmacy.
Step therapy. This is a required drug trial before another, likely more expensive, medication will be covered by health insurance. In the pharmacy, it usually appears as a denial with a prior authorization requirement or suggested alternatives.
Prior authorization is usually required for:
- Brand-name drugs when generics are available
- Expensive medications
- Medications that might be misused
- Drugs that need special monitoring
According to the American Medical Association, about 40% of physicians employ staff whose only job is to work on prior authorizations, and they spend approximately 13 hours per week completing them. This process can take days or even weeks to complete.
The Role of Pharmacy Benefit Managers (PBMs)
What Are PBMs?
Pharmacy benefit managers, or PBMs, are companies that work with health insurers, large employers, and other payers to manage their prescription drug benefits. They act as the middleman between your pharmacy and your insurance company.
PBMs negotiate rebates and discounts for an insurance plan from drug manufacturers and determine the prices insurers pay and the payments pharmacies receive.
How PBMs Process Claims
PBMs can also take on the administrative role of directly reimbursing retail pharmacies on behalf of an insurer. When your pharmacy submits a claim, it often goes to a PBM first, who then processes it according to your insurance plan’s rules.
PBMs also create formularies, which are lists of preferred medications that your insurance covers. PBMs create and update formularies of preferred drugs, with different prices and cost-sharing amounts that influence what beneficiaries pay out of pocket and which medications they can access through their insurance.
The three largest PBMs are CVS Caremark, Express Scripts, and OptumRx, which according to the Federal Trade Commission, control roughly 80% of the prescription drug market. This high level of consolidation has led to increased scrutiny from regulators and lawmakers.
What Happens After Claims Processing
Payment and Reimbursement
Once your claim is approved, the payment process begins. Subsequently, the patient is responsible for out-of-pocket costs. Patients typically fulfill their financial obligations at the pharmacy counter. Upon payment by the patient, the pharmacy is reimbursed by the insurance provider for the covered portion of the medication cost.
Your out-of-pocket costs might include:
- Copayments (fixed amounts you pay)
- Coinsurance (a percentage of the drug cost)
- Deductible amounts (if you haven’t met your yearly deductible)
Communication of Results
The outcome of the claim adjudication is communicated to both the pharmacy and the patient. You’ll usually find out right away if there are any problems with your claim.
Once the result of the claim is finalized, the payer will send an Explanation of Benefits (EOB) to the patient and an explanation of payment (EOP) to providers.
Tips to Avoid Claims Processing Delays
Keep Your Information Updated
Make sure your pharmacy has your current insurance information. For full reimbursement, pharmacies must gather complete and accurate patient data, including name, address, and date of birth. Even small mistakes can cause delays.
Know Your Insurance Benefits
Understanding your insurance plan helps you avoid surprises. Check if your medications are on your plan’s formulary and whether you need prior authorization.
Work with Your Pharmacy Team
Techs communicate with insurance companies, process claims, and explain what is happening as the patients waits patiently, or sometimes impatiently, in front of them. The pharmacy staff are experts at handling insurance issues and can help resolve problems quickly.
Plan Ahead for Refills
Don’t wait until the last minute to refill your prescriptions. Refilled too soon If there is an incorrect days’ supply on a previous fill, it can lead to a prescription being refilled sooner than allowed, which is an immediate red flag.
Technology and Automation in Claims Processing
Electronic Claims Benefits
Electronic claims may be submitted directly via your billing software and are the preferred and fastest way to submit a claim. Electronic claims are processed in real-time for pharmacies.
Electronic processing offers several advantages:
- Faster processing times
- Fewer errors
- Immediate response from insurance companies
- Better tracking of claim status
Auto-Adjudication Systems
Auto-adjudication can help speed the adjudication process by flagging keywords and routing claims for next steps without requiring manual inputs. This automated system helps process routine claims faster, leaving more time for complex cases that need human review.
Special Considerations for Different Insurance Types
Medicare and Medicaid Claims
Government insurance programs like Medicare and Medicaid have their own special rules for claims processing. According to the Centers for Medicare & Medicaid Services, government programs (Medicaid or Medicare Part D) and third-party payors cover slightly more than 90 percent of those scripts, with an average prescription charge of about $56.
Specialty Medications
Some medications need special handling because they’re expensive or require special storage. These specialty drugs often have different processing requirements and may need to be filled at specific pharmacies.
Compounding Prescriptions
If you need a compounded medication, the claims process might be different because these are custom-made medications. Your pharmacy team can help explain any special requirements for compounded prescriptions.
When Claims Get Denied: Your Next Steps
Understanding the Denial
Claims denials are by far the most common cause of delays in the pharmacy claims processing workflow. When your claim gets denied, don’t panic. Most denials can be resolved with the right information.
Steps to Take
- Ask for Details: Find out exactly why your claim was denied
- Check Your Information: Make sure all your insurance and personal information is correct
- Contact Your Doctor: If prior authorization is needed, your doctor will need to submit the request
- Appeal if Necessary: You have the right to appeal insurance decisions
Working with Your Healthcare Team
If any issues arise, such as prior authorization requirements or denied claims, the pharmacy collaborates with the healthcare provider and the insurance provider to address and resolve them.
Your pharmacy team works closely with your doctor’s office to resolve claim issues. They can:
- Contact your insurance company for clarification
- Help your doctor submit prior authorization requests
- Suggest alternative medications that might be covered
- Explain your appeal options
The Future of Pharmacy Claims Processing
Improved Technology
Additionally, technology plays a pivotal role in enabling electronic claims submission and adjudication for a more streamlined and accurate process. New technologies are making the claims process even faster and more accurate.
Better Integration
Future systems will likely integrate medical and pharmacy claims better, giving insurance companies a more complete picture of your healthcare needs.
Working with Your Local Pharmacy
The Advantage of Local Pharmacies
Local pharmacies like VillageRx often provide more personalized service when dealing with insurance issues. These claim experiences not only help ensure payment for the pharmacy but also open many doors to additional opportunities for techs.
Services That Help
Many pharmacies offer services that can help with insurance issues:
- Medication therapy management to optimize your prescriptions
- Medication reviews to catch potential problems
- Help with transferring prescriptions from other pharmacies
Training and Expertise Behind the Scenes
Pharmacy Technician Training
Each time a prescription is filled, a claim is made and payment is confirmed. Techs experience many utilization management and coverage determinations put in place by payers.
The Pharmacy Technician Certification Board (PTCB) offers specialized certification programs for pharmacy technicians, including training in billing and reimbursement, claims processing, and prior authorization management. This training helps them resolve issues quickly and accurately.
Continuing Education
Continuous staff training is crucial in the dynamic landscape of healthcare policies and regulations. Pharmacists and pharmacy staff must remain well-informed about the latest billing and reimbursement guidelines to navigate the evolving landscape effectively.
Best Practices for Patients
Be Prepared
When you visit the pharmacy, bring:
- Your current insurance card
- A list of all your medications
- Contact information for your doctor’s office
- Any prior authorization paperwork
Stay Informed
Understanding your insurance benefits helps you make better decisions about your healthcare. Know your copayments, deductibles, and which medications are covered.
Communicate Early
If you’re starting a new medication, ask your doctor if it requires prior authorization. That’s why beginning the prior authorization process early is important. Ask your health care provider if a prescription or medical treatment is going to require prior authorization so they can start the process immediately.
Final Thoughts
Insurance claims processing at the pharmacy is a complex system that works mostly behind the scenes to help you get your medications at the right price. While the process usually happens quickly and smoothly, understanding how it works can help you avoid delays and resolve problems when they come up.
The key to success is working closely with your pharmacy team, keeping your information updated, and being patient when issues arise. Identifying your most common denial reason codes, to notice workflow patterns that can be corrected going forward can help both you and your pharmacy improve the process over time.
Remember that pharmacy staff are there to help you navigate insurance issues. Not only do techs help patients gain access to much-needed medications, they also get valuable experience working with payers in the complex health care system. Don’t hesitate to ask questions and work with them to find solutions.
If you’re looking for a pharmacy that provides personalized service and expertise with insurance claims, contact VillageRx to learn more about how we can help you get the medications you need without the hassle.