Auditing Health Plan Fiduciaries

[Guest eafredel]

I am reviewing a proposed contract with a claims fiduciary for a self-insured health plan. The contract limits the number of claims that can be audited, requires a random sample of claims for an audit, and prohibits the calculation of overpayments based upon an extrapolation from the audit sample. The proposed contract also is very restrictive in terms of remedies against the claims fiduciary. My questions are:

1. Have any of you had success in negotiating revisions to similar contract terms?

2. Is an audit of 250 claims sufficient for a plan with over 4,000 covered employees?

3. Is this similar to your experience?

While I have my own notions about these questions, I am interested in hearing from those of you who have dealt with this issue.

[Kirk Maldonado]

I think that the DOL would not be pleased with a fiduciary that entered into such a contract.

I would advise the fiduciary not to enter into such an agreement.

[Guest b2kates]

I too am concerned that the test population is too small.

Why limit it to specific number of claims when there are 4000 participants.

the number of claims to be tested on the basis of total claims; or

testing of all claims on the basis of a sample of the number of participants.

[Jbentz]

I used to be a compliance auditor, and usually it is based on a percentage of 3 to 5%, with an error rate of 98% or better. Under 98% and it is another 5%. Under 95% and they are on a Performance Improveemnt Plan. I would be extremely cautious of only a 250 claim limit. If a consistent error is found, you need to be able to view all claims that fit criteria to resolve the issue, whether it be 10 claims or 1000.

This is especially true when dealing with Medicaid and Medicare as a secondary payor. If they believe that an error has occured that cost them money, you will need to have additional audits for their benefit.

[Guest eafredel]

Thanks for your responses.

The contract in question was received from one of the five largest health carriers/TPAs in the U. S. I found surprisingly little guidance from the Department of Labor on the topic of auditing health plans. Most of the published advisory opinions concern multiemployer health plans that are auditing employer contributions to ensure that contributions are being received. These typically recognize that targeted audits may be preferable to the use of random sample audits. The case law on auditing health plans also is skimpy.

While I think these provisions are objectionable, I want to know whether they present a trend in the thinking of the major claims processors for self-insured health plans.