TPAs and Self-Funded Medical Plan Cost Containment

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Company Medical and Benefit Claims Auditing | TFG Partners

Auditing firms with medical and other benefit plan claims expertise are again in the spotlight after the coronavirus pandemic. With most self-funded plans relying on third-party administrators (TPAs), medical claims auditing is a necessary form of oversight. New testing and treatment and lengthy hospitalizations for many people added up to enormous medical costs borne by large employers via their employee benefits plans. Although TPAs commonly have performance and accuracy guarantees written into their contracts, only audit oversight confirms they are met. With big dollars on the line, plans seek audits.

When claim volume and cash outflows increase, they create larger pools to mask processing errors and overcharges. When the numbers are smaller or error patterns more consistent, mistakes can be more obvious. Self-funded plans increasingly turn to audit firms that can review 100-percent of claim payments with sophisticated software that has been improved through the years. The audits include an electronic review and human follow-up to confirm the findings. It's a detail-oriented endeavor, but with high dollar volumes is essential. Initially, audits were about compliance, and now they are valued management tools.

Most TPAs are large health plans with extensive provider relationships and detailed protocols for claims processing. But they aren't infallible, and when their management understands auditing and monitoring are underway, there is an incentive to self-police for errors more vigilantly. Each plan has a unique set of covered services, and the tendency can be to process a self-funded plan's claims the same way as a carrier's own. It causes variations that can affect costs and budgets and change the services covered for members. In-house plan managers can only run oversight with precise data tracking all claim payments.

Another cost-increasing trend is for TPAs to outsource some related services to vendors who charge a fee or keep a portion of funds they recover. Those costs can be passed on to self-funded plans where in-house managers are surprised to find they are paying the TPA and its contractors. It's common to see it occurring in subrogation and overcharge recovery. Vendor commissions range from 10 to 30-percent, and high costs can add up quickly for larger plans. It's another reason why claims audits and continuous monitoring services pay for themselves by multiples as high as four-fold over time.

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