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Self-funded health plans appeal to mid- and large-sized employers since they offer opportunities to reduce employee benefits spending. However, without careful management—including oversight of third-party administrators (TPAs) and PBM audits for pharmacy benefits—these plans carry significant financial risks. This is where claim audit firms become invaluable for assessing plan effectiveness. With cost containment a continuing priority for self-funded plans, ensuring claims are paid correctly is vital. Additionally, confirming that plan guidelines are followed is critical, and audits can help catch errors.

An accurate medical claim audit is a critical strategic move to ensure a self-funded plan operates effectively, and many companies today follow audits with continuous monitoring. The audits and monitoring also help management fulfill fiduciary responsibilities for the plan. Reviewing medical provider billing and related claim payments always uncovers mistakes. It also brings opportunities to recover overpayments and correct systemic problems to prevent similar errors in the future. Because issues can arise frequently, the value of continuous monitoring is becoming more accepted.

Careful management is crucial for self-funded medical plans, as sponsoring companies bear the financial risk. Oversight of TPAs through audits and monitoring is required to help reduce errors in the claims processing operations. It's common to find error rates between 2% and 6%, depending on the plan and TPA. Give medical costs today, and those percentages are high enough to amount to substantial numbers in most cases. TPAs also tend to focus primarily on regulatory and compliance issues, so it falls to the plan sponsor to keep close tabs on the error rate.

Agreements between self-funded medical plans and their TPAs include performance standards that guarantee a minimum level of performance, often with provisions addressing subpar performance. But unless a plan audits and monitors independently, it's challenging to know whether the standards are being met. It is not uncommon for a TPA to self-report performance at 100 percent, while an independent audit shows it at 96 percent or less. Because even a small percentage of mistakes can add up to hundreds of thousands of dollars, it's always wise to verify any self-reporting from TPAs.

Running a medical and Rx audit to review paid claims has evolved. Initially, the process relied on random samples, which limited the accuracy. However, advancements in technology have enabled the capability to audit every payment, resulting in higher accuracy rates in identifying discrepancies. Audit firms that tailor their services to the details of a plan's covered services can provide the most value. A more general approach may overlook unique aspects pertinent to specific plans, making it essential for auditors to adjust their software to align with both the plan's provisions and the administrator's system.

In plans of varying sizes, even minor errors can accumulate substantial financial losses. Identifying systemic errors is a way to enhance the value derived from an audit. Yet, the importance of systems that capture individual errors cannot be overstated. By targeting all recoverable sums, organizations can experience more significant financial benefits from their auditing efforts. An additional advantage is the reduction in staff time needed for claim audits. With electronic reviews handling the workload, auditors can devote their attention to final checks, which is more efficient than traditional random sampling.

Sophisticated software can further streamline the auditing process by detecting patterns of overuse or misuse of services, such as duplicate tests or services. Addressing these irregularities can prompt healthcare providers to be more strategic with their ordering practices. Often, problems stem from a lack of time or oversight, while others may genuinely be unintentional duplications. Coordinated medical services not only help in containing costs but also ensure that members receive the appropriate level of care without unnecessary testing. Good auditors can ensure it happens as needed.

Additionally, those with high-deductible plans who pay out of pocket benefit from accurate claim management. On the provider side, the use of tailored audits to scrutinize internal billing controls is becoming more common. Incorrect coding or overlooked items can lead to revenue losses. A review by auditors can yield enlightening results, with the potential for improvement varying by practice. For payers, the focus remains on managing billing errors. Organizations overseeing employer-funded plans should consider regular audits as a proactive measure, as they are a budget-friendly approach.