The cost of health care benefits is among the largest expense items for most employers. Along with comprehensive healthcare reform, self-insured employers are facing additional pressures to ease the financial strain through conducting audits of their benefits plans. Industry experts in Human Resources along with Internal Audit executives commonly recommend that all sponsors of health care benefit plans periodically conduct an independent audit of their third-party claims administrators.
Many employers have never conducted an audit, yet they provide draft authority on their bank account for the third-party administrator to issue funds to pay the organization’s health care claims.
Increased scrutiny by the Department of Labor relative to proper discharge and monitoring of fiduciary duties by employers and/or sponsors of group health plans may be reason enough to conduct an audit.
Plan sponsors put a lot of effort into designing health care benefits for their employees and want to be assured that these benefits are being provided at the right cost.
Electronic claims payment systems minimize errors, but the complete claims payment process relies on human judgment. Multiple combinations of factors exist that attribute to claims payment issues such as:
There are several common approaches to conducting an audit when an outside vendor is engaged. All coverages can be examined including medical, prescription drug, dental and vision.
Regardless of the approach used, claims auditing involves sampling. The most commonly used statistical sampling methods used are:
Due to its effectiveness, this approach has become increasingly popular and more widely available. The approach may also be referred to as a focused audit, comprehensive audit, judgmental audit, targeted audit, or 100% review audit.
At a high level, this approach involves the electronic analysis of 100% of all claims paid within a specified period of time (the audit period). The objective is to use technology to electronically analyze claims payment data to aid the auditor in identifying or ruling out potential errors and judgmentally selecting samples for on-site review. A forensic analysis of claims data before sampling can identify patterns and trends. This method of sampling promotes the accuracy of audit results based on actual data rather than perceived statistical accuracy.
This audit approach may be performed as due diligence but also to get a closer look at administrative practices to identify root causes which lead to process improvement/corrective action. BMI was one of the first professional audit firms to utilize this approach and developed proprietary software, AUDiT iQ™, as a result.
This audit approach is more traditional, but may be perceived as somewhat outdated. Still effective in certain situations, this approach allows the auditor to select and test a random sample of claims within a specific audit period.
This approach focuses more on overall claims administrative procedural and financial accuracy which is then extrapolated to the entire claims population.
These audits are often performed in a due diligence process, or as a simple assessment of overall performance capabilities.
The decision on which audit approach to use is typically based on the desired outcome of the audit and intended use of the results. This should be discussed with any potential vendor. Often the Administrative Services Only Agreement (ASO) between the plan sponsor and third-party administrator may dictate which approach may or may not be permitted.
It is important that organizations do their homework before engaging with any vendor. A few key considerations or questions to ask:
Below is a listing of popular comprehensive benefits auditing solutions BMI offers to both self-insured and fully-insured organizations.
Our extensive experience and knowledge of employee benefits along with software developed, updated, and maintained in-house enables us to perform and develop a variety of customized audit solutions. Please contact today to discuss your specific needs. If we can’t assist you with your specific need then we can often refer you to an organization that may be able to help.
“ Your staff was always so helpful and I enjoyed working with them. ”
- Director of Internal Audit [Retail]
“ This was our company’s first audit and we wouldn’t hesitate to use BMI again in the future. ”
- Benefits Coordinator [School District]
“ Excellent level of professionalism and follow up. ”
- Benefits Specialist [City Government]
“ Good auditing services of health plan claims and related processing errors. Very detailed. ”
- Employee Benefits Manager [Energy Industry Supplier]
“ We've used BMI on two claims audits now and are very pleased. ”
- Account Manager [Employee Benefit Brokerage Firm]
“ I am extremely pleased with the post-audit follow up to finalize information with the administrator. It was very valuable. ”
- Director of Corporate Benefits [Industrial Supplier]
“ The audit was conducted with professionalism and was very thorough. ”
- Human Resources [Global Manufacturer]
“ BMI did an excellent job! The work performed was very comprehensive. Audit findings and recommendations were helpful. Overall, a very good value service. Highly recommended to other companies. ”
- National Account Manager [Employee Benefit and Consulting Firm]
“ BMI was very helpful in administering these audits and identifying concern areas that needed to be addressed. ”
- Benefits Administrator [Retail]