We're going self-funded; the insurance carrier will pay the claims and

[Guest jthomp02]

I work for a large educational institution responsible for paying insurance carrier bills. Starting next year we will be offering two insurance plans to employees that will be self-funded. The insurance carrier will pay the claims and we will reimburse the carrier for the claims paid on a monthly basis. How can I ensure that I am paying the proper amount each month? Do other companies hire an outside firm to audit the claims? If so, how many times a year is this usually done?

[Dave Baker]

I think there are companies that do that sort of thing for a fee -- see http://www.benefitslink.com/yellowpages/sbaudit.shtml for example

[GBurns]

Wasn't this part of your evaluation and decision making process? How did you make the decision if you did not look at these items? Your answers might already be in your RFP specs or the bid responses.

[Greg Judd]

Originally posted by jthomp02

...How can I ensure that I am paying the proper amount each month?  Do other companies hire an outside firm to audit the claims? If so, how many times a year is this usually done?  

a) you can't.

b) they do.

c) depends how much assurance you need that claims are processed accurately.

Ask your organization's finance staff for their thoughts here; there's no particular magic to audit standards, & by doing so you'll have internal corroboration of your approach.

Your claims processor's reputation, client list, years in business, complexity of your plan, # of participants/claim volume, etc may enter into your formula for appropriate audit frequency.

[KIP KRAUS]

Who was auditing the claims before you decided to go self-insured? Like G and Greg allude to, yes you can have somone audit the claims, but how much money do you want to spend to ensure that claims are being processed properly? Will it be cost effective?

Unless you are dealing with Kamikaze Life, or Six Gun Insurance Company you should have some level of comfortablity with their ability to fairly adjuticate claims. Also, past claims experience, and projected claims when compared to on-going claims should give you an indication of how good they will be doing.

I would wait until I had a few months of claims data to review before I'd be concerned about it. If claims start coming in way over projections then I'd start with questioning the insurer as to why.

The one thing I would be concerned about is the stop-loss coverage kicking in when it should. You can audit this yourself from claims data.

[Greg Judd]

Originally posted by KIP KRAUS

...Kamikaze Life, or Six Gun Insurance Company....

Love it, Kip!

[Guest Mike Engelhardt]

Please be very attentive to your FIDUCIARY RESPONSIBILITY.

As opposed to the previous opinions, my experience has been that insurance company and third-party administrators are prone to make mistakes. I know, because my profession is auditing the performance of such organizations.

I can assure you that if you rely on the "credibility" of the insurer or the size of the organization, then there is a substantial chance mistakes will happen, incorrect amounts will be paid, and when this is eventually discovered, it will be very difficult to be reimbursed for.

Again, I disagree with previous opinions regarding the cost of doing such an audit. Should a fiduciary question the accuracy of claims being paid, and especially if there are employee contributions being collected from members, then there is an added importance for you to investigate.

You see, under ERISA, is an employer collects contributions, then they have a fiduciary responsiblity to not only manage the plan under proper guidelines, but to make sure that employee contributions are being used in a financially prudent manner.

If you feel you have not done the proper investigation of this matter, the Department of Labor is lenient in cases where the employer is proactive in seeking to rectify an otherwise erroneous situation.

I hope this helps.

Good luck

[Greg Judd]

Originally posted by Mike Engelhardt

As opposed to the previous opinions, my experience has been that insurance company and third-party administrators are prone to make mistakes. I know, because my profession is auditing the performance of such organizations.

Gee, no other pros here, Mike. & if by "prone", you really mean "every claims processor does make some mistakes", you'll find no one disputing that here.

I can assure you that if you rely on the "credibility" of the insurer or the size of the organization, then there is a substantial chance mistakes will happen, incorrect amounts will be paid, and when this is eventually discovered, it will be very difficult to be reimbursed for.

Uh...you mean 'whether or not you rely on the credibility of the organization' mistakes will happen, right? Mistakes will happen regardless. Auditing does make sense. That's not in question. Frequency & urgency is.

MH: Again, I disagree with previous opinions regarding the cost of doing such an audit. Should a fiduciary question the accuracy of claims being paid, and especially if there are employee contributions being collected from members, then there is an added importance for you to investigate.

a) I can't find any "previous opinions regarding the cost of doing such an audit." I can find suggestions that the cost/benefit is worth keeping in mind. The potential cost (financial risk to sponsor) of mismanaging a group plan subsumes the risks entailed by not auditing with sufficient diligence or frequency. Squandering $ on inappropriate services arguably carries risk as well.

b) "Should a fiduciary, blah blah...." This is from your marketing material, right? It's good business practice to audit claims. How soon you need to from assumption of responsibility for claims, & how often, is the topic at hand.

In case you're not clear, jthomp02, Mike's basically agreeing with the rest of us. To recap:

a) periodic claims audits - good idea;

b) frequency & commencement depends on, among other things, run rate to budget (if you have decent projections of claims for your group), reputation of the firm you've hired,

c) determine the audit intensity you need (usually correlates with cost) by the complexity of your plans, volume of your claims, & your trust level with the claims processor. Your inclusion of other factors may vary.

[Guest Mike Engelhardt]

F.Y.I. I get my information regarding "Fiduciary Responsibilities and Liabilities" from the Department of Labor and ERISA. And if "blah, blah, blah" is your attention to details, I would imagine the Department of Labor would have a field day with one of your client.

My intention was to give some advice. My most recent comments have gone beyond that. I am signing off from this thread.

[GBurns]

Mike,

Dont be so defensive you "blah, blah, blahed" first and you were only being corrected or challenged on overly broad statements that you made. We all mis-speak at some time and as long as we do it in public some is going to point it out.The personal attack regarding his clients could make me wonder the same thing about your clients.

As you said we are here to give our best advice, and we should do this to the best of our ability and as accurately as we can. Reasonable people will at times disagree.

[Greg Judd]

Originally posted by GBurns

....Reasonable people will at times disagree.

Thanks G, even tho you could have (probably should have) suggested I cool my jets as well. Mike, no intent to slam, just jostle a bit. You're amongst colleagues here.

As G's suggested, you'll find even the reasonable folk here will disagree frequently - to say nothing of the unreasonable types, like me!

[Guest Mike Engelhardt]

I agree. I apologize if I have offended anyone.

[GBurns]

I have never been allowed to post a response similar to what Mike and Gregg just posted. The Administrator usually deletes my comments even my apologies.It is nice to see such cool responses.I also apologize for being a little harsh.I guess I can blame it on being in S.Florida, you all know what we are like.

[Greg Judd]

Originally posted by GBurns

...I guess I can blame it on being in S.Florida, you all know what we are like.  

LaffIN, G!! & doing it in a NICE way....