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Claims Audit FAQ’s

Rising costs. The cost of health care benefits is among the largest expense items for an employer and along with comprehensive healthcare reform, self-insured employers are facing additional pressures to ease the financial strain.

Based on data gathered from BMI customers in 2021, cost containment was the top motivator for conducting an audit.

Compliance. Increased scrutiny by the Department of Labor (DOL) relative to proper discharge and monitoring of fiduciary duties by employers and/or sponsors of group health plans is 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.

Fiduciary Responsibility. Many employers have never conducted an audit, yet draft authority on their bank account is granted to the third-party administrator for payment of the organization’s health care claims. Audits provide assurance that benefits are being provided as intended and claims are being paid accurately.

Expert recommendations. Industry experts in Human Resources along with Internal Audit executives commonly recommend that sponsors of health care benefit plans periodically conduct an independent audit of their third-party claims administrators.

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:

• Weak investigative efforts

• Volume pressures

• Poor claims payment systems or outdated software

• Internal policies prevail over plan language

• Human misinterpretation during plan set up

Any time! And BMI recommends auditing on an annual basis to align with the plan year and to ensure that corrections to claims paid in error can be made prior to any contractual limitations are met.

Claims audits are minimally invasive and only require 1-3 hours of your time. Members of the plan won’t even know an audit is taking place.

If a plan is preparing to switch administrators, implement plan design changes, or move to a self-funded plan for the first time… NOW is the time to conduct a pre-implementation audit.

Overall. About 5-7 months from kick-off to report delivery. This is influenced by multiple factors, including client responsiveness and third-party administrator scheduling availability. The good news is that the BMI team is doing all of the work for you during this time.

For an employer and/or the broker consultant. Just 1-3 hours of time for document submission, e-mail updates and calls, including a wrap-up discussion where BMI experts explain audit findings and offer guidance on next steps.

Language within the Administrative Services Only Agreement (ASO) between the plan sponsor and third-party administrator likely dictates the timeframe of claims which can be audited. If limitations are minimal, BMI recommends auditing the most recent 18 months of paid claims and then continuing with with annual audits covering a 12-month timeframe aligning with the benefit plan year.

BMI offers two statistical sampling methodologies. Audits can utilize just one methodology or a hybrid approach, which is a combination of both focused and random sampling.

Due to its effectiveness, BMI recommends conducting a focused audit. However, the decision is largely influenced by the plan sponsor’s desired outcome and the intended use of the results. Oftentimes, the Administrative Services Only Agreement (ASO) between the plan sponsor and third-party administrator dictates which approach may or may not be permitted.

Learn more about methodology effectiveness HERE.

Typically, identified errors range from .5% to 3% of annual claims spend. Savings could be received in the form of a reimbursement of monies paid in error and/or internal correction to eliminate future errors. Some TPAs will even help fund the cost of a follow-up audit.

See actual audit results here.

Cost is dependent on various factors like number of plans, count of enrolled members and preferred audit methodology. Request a quote so that we can provide you with an accurate estimate.

It is important that organizations do their homework before engaging with any audit firm. A few key considerations or questions to ask:

• How long have they been in business?

• How many audits have they successfully completed?

• What third-party administrators have they worked with?

• What type of audit technology or software is utilized?

• Do they offer an audit approach that meets the organization’s objectives?

• Will they continue to provide value-added support services after delivery of the audit results?

• Do they offer additional services or products that could be considered a conflict of interest?

Yes. BMI offers software licensing of AUDiT iQ™ to those who are interested in monitoring medical and/or prescription drug healthcare claims on their own. Let us know of your interest HERE to begin exploring options.

BMI’s extensive experience, technology and knowledge of employee benefits enables us to perform a variety of customized audit solutions. Contact us to discuss your specific needs; if we can’t assist you, we should be able to refer you to an organization that can.