Provider billing reviews can help self-funded health plans save money

While self-funded benefit plans can allow an employer to save significantly on employee healthcare benefit costs, there are many risks involved with managing these plans that can cause financial strain. Cost containment continues to be a priority for self-funded health plans, and organizations are constantly looking for ways to protect plan assets so funds aren’t lost due to improperly paid claims.

Performing medical claim audits is a key strategy to determine if your self-funded plan is operating effectively and to help prevent financial exposure. These audits also help executives fulfill their fiduciary responsibility relating to management of the employers benefit plan. Conducting provider billing reviews can be an especially beneficial method to uncover payment errors and can potentially save employers money. Issues can arise within medical benefit plans frequently, yet it’s common for organizations to only perform a claim audit or billing review once every three years.

Self-funded benefit plan overview

Self-funding is an insurance arrangement in which an employer assumes the financial risk for providing healthcare benefits to its employees. Over the last 10 years, self-funding has been increasing in popularity as employers look for means to bend the cost curve.

In a self-insured arrangement, employers pay claims out-of-pocket as they’re incurred instead of paying a premium to an insurance carrier. Employers typically engage the services of a third-party administrator (TPA) to manage the benefit claims process.

Risks

Employers who are self-insured bear complete financial risk. While outsourcing claims to a TPA is prudent, employers should provide some level of TPA oversight to help reduce the presence of errors in the claims process, which often yields error rates of 2% — 6%. TPAs are often more focused on regulatory and compliance issues rather than maintaining financial accountability and correcting any potential errors that arise in claims processing.

Suspect performance reporting

In contracting with a TPA, employers typically draft agreed performance standards to guarantee a certain level of quality and provide some protection for subpar performance. However, reviews conducted to determine if criteria are met are typically self-reported by the TPA so objectivity and the reliability of results may be suspect.

For example, a TPA may self-report a key performance metric coming in at 100%, when in reality the actual performance measurement may be closer to 96% when calculated by an independent party. Even that small percentage margin can result in the loss of hundreds of thousands of dollars for an employer.