Achieving the Prudent Health Plan Audit

Yesterday’s Leadership Daily Advisor explored how organizations are focusing on specific audits and design reviews to better pursue health plan accuracy and cost-effectiveness. Today we take a look at how compliance audits and performance guarantees may soon take center stage as well.

While still in flux, any potential national health law rewrite is likely to shine a brighter light on the value of compliance audits of employer health plans, experts say. States’ revisions of legislation also could increase employers’ administrative and financial burdens.

Avoiding challenges is, of course, a major goal of compliance audits, which generally examine how well health plan sponsors comply with federal and state laws and regulations as well as their own plan documents.

For example, audits of Health Insurance Portability and Accountability Act (HIPAA) compliance confirm that employers meet the law’s privacy, security, access, and other provisions. Such audits, which may be done internally or externally, are geared toward government compliance and avoidance of legal claims.

Employee Retirement Income Security Act (ERISA), meanwhile, also sets standards of conduct for employers who manage an employee benefit plan—including regular monitoring of third-party administrators (TPAs) or other service providers.

These standards call for establishing and following a formal review process at reasonable intervals to decide whether to continue using the current provider—or look for a replacement. At the minimum, employers must regularly:

  • Review TPA performance.
  • Read any reports they provide.
  • Check actual fees charged.
  • Ask about policies and practices (such as a TPA’s claims processing system).
  • Ensure that plan records are properly maintained.
  • Follow up on participant complaints.

The benchmark? Typically, major employers audit their health plans once every 3 years—if multiple health plans are offered, they rotate the plans each year.

Holding Them Accountable

Another fast-growing trend involves putting guarantees in place to help ensure that the TPA is meeting the employer’s clinical and financial goals, HR and benefits consultants say. In fact, many of them advise plan sponsors to consider implementing vendor performance guarantees that cap average network provider increases to overall CPI plus a margin.

The idea is to link performance guarantees to both unacceptable service and cost reduction. For instance, an employer can establish a guarantee to be reimbursed for the cost of time and expenses to correct inaccurate claim payments or complete an on-site audit of a claim office with numerous errors.

Another approach for performance guarantees is to position them to reward for positive results as well as to penalize them for poor results. A common method is to hold a portion of the vendor’s premium or administrative fee until the year-end assessment of the vendor’s performance is completed—then determine whether they’ve earned the entire amount or a portion.

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