What is grg/drg?

Comprehensive Coverage (DRG), Collision Coverage (GRG), Vehicle. Updated Collision Rating Group (GRG), Comprehensive Rating Group. Comprehensive coverage (DRG) and Insurance Rating Group for Collision coverage (GRG) shall be two less than those otherwise applicable. State Farm Mutual Automobile Insurance PP Auto Updated Collision Rating Group (GRG), Comprehensive Rating Group (DRG), Vehicle Safety Discount (VSD), and Liability Rating Group (LRG) (Pending) 1/1/2011 RI 10/07/10 21st Century Centennial. In other words, coverage in case you cause an accident where there is either physical or property damage to other people. These GRG, DRG, VSD, and LRG designations have been determined based on the procedure previously filed with your department and.

If you feel like you need to take a foreign language course to "speak insurance" don't worry, you're not alone! But, you need to at least understand the basic auto insurance terms because they spell out what you are and aren't covered for in your policy. Here is a translation of some basic insurance lingo:

$25/50/15

You will see three numbers when you are buying liability coverage. They represent (in the $ thousands) your liability limits for per-person bodily injury, bodily injury for all persons injured in any one accident, and property damage liability. Most states require a mandatory minimum amount and insurance companies offer the option to purchase more.

Automobile Liability Insurance

Protection in case others hold you legally responsible for bodily injury and/or damage to property losses incurred as the result of a motor vehicle accident. In other words, coverage in case you cause an accident where there is either physical or property damage to other people. This is a general term that covers bodily injury (BI) liability and property damage (PD) liability. See explanation of limits, above.

Bodily Injury Liability Insurance (BI)

BI pays for injuries to other people when the insured vehicle's driver is legally at fault. This coverage is required in Colorado, New Mexico, Utah and Wyoming.

Collision Coverage

Optional coverage for when your car is damaged as a result of colliding with another object—a brick wall, for example, or a rollover. It also can come into play if you hit a pothole that severely damages your car. This insurance applies only to your car. It doesn't cover whatever the car collided with (that's what your property damage liability is for). According to 2004 data from the National Association of Insurance Commissioners, 72 percent of insured drivers carry this coverage.

Comprehensive Coverage

Optional coverage for when your car is stolen or damaged in ways that don't involve a collision. Examples include: hail damage, glass breakage, fire, vandalism, damage from an animal, flood, earthquakes, falling objects and theft. The price of comprehensive insurance is affected by the risk of loss, meaning the likelihood that an insured car will be stolen or damaged, and the car's value at the time of the loss. According to 2004 data from the National Association of Insurance Commissioners, 77 percent of insured drivers carry this coverage.

Declarations Page ("Dec Page")

The first page of the insurance policy that generally includes your name, address, the insured property, its location and description, the policy period (how long the coverage will be in force), the amount of the insurance coverage, the premiums and additional specific information provided by the insured.

Deductible

This is your out-of-pocket expense that you agree to pay for losses up to set amount, such as $250 or $1,000. If you can afford to carry a higher deductible on collision and comprehensive coverage, you can substantially lower your costs.

Economic Benefits

Tangible, out-of-pocket expenses, such as medical expenses, rehabilitation expenses, lost wages and essential services.

Financial Responsibility Law

Typically, this refers to the law that requires motorists to have auto insurance, however most states also permit a bond or cash deposit as evidence of the ability to pay for negligence in causing losses to others from the operation of a motor vehicle. In 47 states and the District of Columbia, it is illegal to operate a vehicle without obtaining proof of insurance.

McCarran-Ferguson

Enacted by Congress in 1945, this law grants authority to the states to tax and regulate the business of insurance (see regulation).

Medical Payments Coverage (MP or Med Pay)

This coverage (usually optional) pays the doctor, hospital bills, and funeral expenses for injuries to you and the passengers in your car, regardless of who causes the accident, up to the policy limits. Med Pay is sold in states with traditional tort insurance laws. In states where Med Pay is optional, drivers may choose to rely on their own and their passengers' own health insurance to cover resulting injuries. Most insurance companies offer a wide range of coverage amounts.

Monetary Threshold

In some "no-fault" states, a dollar amount for medical and rehab expenses that must be reached in order to file a lawsuit for damages for non-economic damages (i.e. pain and suffering) against the driver who caused the accident. For example, under Colorado's old no-fault law, you could sue for pain and suffering if you racked up a threshold of $2,500 in medical expenses (nullifying the no-fault law). See verbal threshold.

No-Fault Auto Insurance

There are different versions of no-fault auto insurance laws in 12 states and Puerto Rico. In theory, the system is supposed to discourage lawsuits by allowing policyholders to recover financial losses from their own insurance company without having to prove that anyone is at fault in an accident. Motorists may only sue for injuries and for pain and suffering if their case meets certain minimum conditions. Seven states, including Utah, require that you meet a minimum dollar threshold to be able to bring a lawsuit over damages over and above your economic losses. Florida, Michigan, New Jersey, New York and Pennsylvania use a verbal description as a threshold (i.e. severe disfigurement, disability or death). In New Jersey, Pennsylvania and Kentucky, motorists may choose to reject the lawsuit threshold on their insurance policy and keep their right to sue for any auto-related injuries. Click here to learn about Colorado's transition from no-fault to tort.

Non-Economic Benefits

Intangible benefits, such as pain and suffering, inconvenience, emotional stress, impairment of quality of life, loss of consortium, etc.

Personal Injury Protection (PIP)

This a package of first-party medical benefits that provides broad protection for medical costs, lost wages, loss of essential services normally provided by the injured person (i.e. childcare, housekeeping), and funeral costs. It is usually associated with a no-fault auto insurance system.

Property Damage Liability (PD)

This coverage is for when you damage someone else's property with your vehicle. Usually it's someone's car, but it can apply to other property such as buildings, utility poles, fences and garage doors.

Rate

This is the cost of a unit of insurance (usually $1,000 worth). Insurance is based on the history of loss experience for similar risks. What a driver pays for auto insurance is based in part on past experience by that company with drivers categorized by similar factors such as age, gender, marital status, driving record and make and model of car.

Regulation

The insurance industry is state regulated. State insurance laws are administered by insurance departments whose job includes approval of rates and policy forms, investigation of company practices, review of annual financial statements, periodic examination of books and liquidation of insolvent insurers (see McCarran-Ferguson).

Third Party

In an insurance contract, a third party is anyone other than the policyholder and the family members covered under the insurance policy. The policyholder is the first party. The insurance company is the second party in the contract. Anyone else is a third party.

Threshold

A cutoff point, which, if met, allows the injured person to file a lawsuit to attempt to recover damages for bodily injury, such as "pain and suffering," from the driver who caused the accident.

Tort

A wrongful act resulting in damage or injury, on which a civil action can be based. This does not include breach of contract.

When you've been admitted as an inpatient to a hospital, that hospital assigns a DRG when you're discharged, basing it on the care you needed during your hospital stay. The hospital gets paid a fixed amount for that DRG, regardless of how much money it actually spends treating you.

If a hospital can effectively treat you for less money than Medicare pays for your DRG, then the hospital makes money on that hospitalization. If the hospital spends more money caring for you than Medicare gives it for your DRG, then the hospital loses money on that hospitalization.

DRG stands for diagnosis-related group. Medicare's DRG system is called the Medicare severity diagnosis-related group, or MS-DRG, which is used to determine hospital payments under the inpatient prospective payment system (IPPS). It's the system used to classify various diagnoses for inpatient hospital stays into groups and subgroups so that Medicare can accurately pay the hospital bill.

The idea behind DRGs is to ensure that Medicare reimbursements adequately reflect "the fundamental role which a hospital’s case mix (the type of patients the hospitals treats, and the severity of their medical issues) plays in determining its costs" and the number of resources that the hospital needs to treat its patients.

The diagnoses that are used to determine the DRG are based on ICD-11 codes or ICD-10 codes (the ICD-11 codes went into effect in 2022, but some areas are still using ICD-10 codes). Additional codes were added to that system in 2021, to account for the COVID-19 pandemic.

DRGs have historically been used for inpatient care, but the 21st Century Cures Act, enacted in late 2016, required the Centers for Medicare and Medicaid Services to develop some DRGs that apply to outpatient surgeries. These are required to be as similar as possible to the DRGs that would apply to the same surgery performed on an inpatient basis.

Medicare and private insurers have also piloted new payment systems that are similar to the current DRG system, but with some key differences, including an approach that combines inpatient and outpatient services into one payment bundle. In general, the idea is that bundled payments are more efficient and result in better patient outcomes than fee-for-service payments (with the provider being paid based on each service that's performed)

In order to figure out how much a hospital gets paid for any particular hospitalization, you must first know what DRG was assigned for that hospitalization. In addition, you must know the hospital’s base payment rate, which is also described as the "payment rate per case." You can call the hospital’s billing, accounting, or case management department and ask what its Medicare base payment rate is.

Each DRG is assigned a relative weight based on the average amount of resources it takes to care for a patient assigned to that DRG. You can look up the relative weight for your particular DRG by downloading a chart provided by the Centers for Medicare and Medicaid Services following these instructions:

The average relative weight is 1.0. DRGs with a relative weight of less than 1.0 are less resource-intensive to treat and are generally less costly to treat. DRG’s with a relative weight of more than 1.0 generally require more resources to treat and are more expensive to treat. The higher the relative weight, the more resources are required to treat a patient with that DRG. This is why very serious medical situations, such as organ transplants, have the highest DRG weight.

The base payment rate is broken down into a labor portion and a non-labor portion. The labor portion is adjusted in each area based on the wage index. The non-labor portion varies for Alaska and Hawaii, according to a cost-of-living adjustment.

Since healthcare resource costs and labor vary across the country and even from hospital to hospital, Medicare assigns a different base payment rate to each and every hospital that accepts Medicare. For example, a hospital in Manhattan, New York City probably has higher labor costs, higher costs to maintain its facility, and higher resource costs than a hospital in Knoxville, Tennessee. The Manhattan hospital probably has a higher base payment rate than the Knoxville hospital.

Other things that Medicare factors into your hospital’s blended rate determination include whether or not it’s a teaching hospital with residents and interns, whether or not it’s in a rural area, and whether or not it cares for a disproportionate share of the poor and uninsured population. Each of these things tends to increase a hospital’s base payment rate.

Each October, Medicare assigns every hospital a new base payment rate. In this way, Medicare can tweak how much it pays any given hospital, based not just on nationwide trends like inflation, but also on regional trends. For example, as a geographic area becomes more developed, a hospital within that area may lose its rural designation.

In 2020, the Centers for Medicare and Medicaid Services approved 24 new technologies that are eligible for add-on payments, in addition to the amount determined based on the DRG.

After the MS-DRG system was implemented in 2008, Medicare determined that hospitals' based payment rates had increased by 5.4% as a result of improved coding (i.e., not as a result of anything having to do with the severity of patients' medical issues).

So Medicare reduced the base payments rates to account for this. But hospital groups contend that the increase due to improved coding was actually only 3.5% and that their base rates had been reduced by too much, resulting in $41.3 billion in lost revenue from 2013 to 2028.

Hospitals in rural areas are increasingly struggling, with hospital closures in rural areas becoming more common in recent years. There are also indications that even well-established, heavily trafficked hospitals are losing money in some areas, but that's due in part to an overabundance of high-priced technology, replicated in multiple hospitals in the same geographic location, and hospital spending on facility and infrastructure expansions.

The largest nonprofit hospitals, however, earned $21 billion in investment income in 2017, and some big hospital systems have continued to profit throughout the COVID pandemic. But other hospitals have seen reductions in their profit margins.

The challenge is how to ensure that some hospitals aren't operating in the red under the same payment systems that put other hospitals well into the profitable realm. That's a complex task, though, involving more than just DRG-based payment systems, and it promises to continue to be a challenge for the foreseeable future.

When a patient with Medicare (or many types of private insurance) is hospitalized, a diagnostic related category (DRG) code is assigned based on the patient's condition. There are numerous factors that go into determining the DRG for each patient, and each DRG has a different relative weight, depending on the resources that are generally needed to provide care for someone with that DRG.

Each hospital also has a blended base rate, which is based on a variety of factors, including location, patient demographics, whether it's a teaching hospital, etc. The relative weight of the DRG is multiplied by the hospital's base rate to determine how much the hospital will be paid for that patient.

Although there's a complex formula that determines how much a hospital gets paid for each patient, you don't have to know the details of exactly how it works. From a patient perspective, the most important details are ensuring that the hospital is in-network with your health plan, and understanding how your health plan's cost-sharing works.