Auditing Your Health Care Claims: A Cost Containment Strategy

All administrators make errors. By auditing claims, both employers or administrators or both can better understand the actual errors or proneness to errors. Thsi knowledge is the key towards minimizing wasted benefit dollars.

Auditing Your Health Care Claims: A Cost Containment Strategy

By: Randall L. Light
                    
    
The cost of health care benefits is among the largest expense items for most employers with the annual cost commonly exceeding $1,000,000.00 for less than 200 employees. It is a large expense and getting even larger as health care experts predict a fourth consecutive year of double-digit increases.

A recent Hewitt Associates survey suggests that health care costs could double by 2007 if current trends continue with costs increasing by an average of more than 15% in 2003. Employers are becoming increasingly frustrated with the seemingly impossible task of containing health care costs. Benefit levels have been reduced. Employee contributions have been increased. Despite these necessary but unpopular actions, employer costs continue to increase.

To assure that health benefits costs do not increase unnecessarily through administrative claims payment errors, self-funded plan sponsors are examining group health care benefits transactions. If auditors can effectively combine clinical logic, technical data base applications, claims settlement insight, investigative techniques, and health care claims audit expertise, cost-saving outcomes will likely result.

Claims processing error rates may range from 1% to 5% of paid claims and can often result from human misinterpretation of the plan design, flawed record-keeping systems, weak investigative efforts, and volume pressures.

Upon identifying administrative errors, some plan sponsors seek to recover all or a portion of the improperly paid benefits dollars. Others choose not to recover monies, which would retrospectively be collected from their employees. At the very least, the audit results are extremely effective in the creation of a working dialogue with the third-party claims administrator. Documented audit outcomes are invaluable when implementing corrective actions to eliminate payment of expenses not intended by the plan.

The author is the managing partner of BMI Audit Services, LLC, a professional audit firm specializing in audits of self-insured health care benefit plans. www.bmiaudit.com.