Health Benefit Plans and Third-Party Administrators

By Zachary Porter May 21, 2020

If you are an employer, chances are that you provide your employees with some kind of health benefit plan and you have outsourced its administration to a third-party benefits administrator. If so, have you found yourself wondering: How do I know that our health benefit plan is being administered accurately and according to the design of the plan?

Depending on the degree of complexity of the health benefit plan, there are a number of areas within the plan that heighten the risk of claims being processed incorrectly. Here are just a few examples:

Claim processing risks

Provider discount rates

Healthcare providers often have agreed-upon contracted rates with the third-party benefits administrator to apply discounts to the total amount charged on each claim. These discount rates may vary among different providers and may change over time as new contracts are agreed to. These can also become complicated if the same provider provides the service from different facilities.

Multi-tiered plans

Most health benefit plans have two tiers, in-network and out-of-network. It is possible, however, for a benefit plan to have more than two tiers. Each benefit plan tier has many providers that fall into either in-network or out-of-network. There is added complexity when a provider is in multiple tiers based on the services provided, the facility, and the urgency.

Type of services provided

Health benefit plans generally have different cost-sharing amounts between the plan and the member based on type of services provided. The services provided are categorized within a section of the summary of benefits with varying copay, coinsurance, and deductible amounts. These costs can vary based on the number of tiers within the plan.

Deductible and out-of-pocket (OOP) accumulators

Each time one of your members incurs a claim, any deductible and OOP amounts should be accumulated for the applicable plan year based on the plan design. Within most health benefit plans, each member has a deductible and OOP limit for the plan year at the individual and family levels. Most plans also have limits assigned based on the claim tier, which adds yet another level of complexity. Further, some plans are designed to accumulate claims across tiers.

Potential impacts

If any of the above items are set up incorrectly within the claims system utilized by the third-party benefits administrator, there is an increased risk to the accuracy of the adjudication of claims. It could result in over-payments by the member, or in the case of self-insured health plans, over-payments by the employer – sometimes, both. In any case, there is a chance of major financial implications that may affect an employer’s bottom line, or cause a member unnecessary financial burden. Additionally, left unaddressed, such configuration issues could compound over time and impact the related plan’s performance.

Addressing the risks and impacts

So, if after considering the above you are wondering if there is a possibility that your health benefit plan is not being administered correctly, what can you do?

Depending on your plan agreement, you could exercise your “right to audit” the plan. You could either request plan information to do it on your own or you might consider hiring an independent third-party auditor to test and evaluate the plan. The auditor can coordinate testing procedures with the third-party benefits administrator and any other interested parties. In some cases, you may be able to pass along the cost of the project to the third-party benefits administrator, as they will have the incentive to maintain a positive relationship with their customers, and further, make improvements to their internal controls to reduce the risk of claims being processed incorrectly.

BNN has been able to successfully help several clients with benefit plan reviews. Please feel free to reach out to the Information Systems and Risk Assurance Group for any further details.

For more information or a discussion on how this may impact you, please contact Zachary Porter or your BNN advisor at 800.244.7444.