Protecting Employer Sponsored Health Plans by Controlling Costs

By Doug Williams
Nov. 8, 2018

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Annual benefits enrollment has become something employees dread. Employers faced with increasing health plan costs are passing on a larger share to employees. Workers now expect to pay more – in larger payroll deductions for premiums and higher out-of-pocket expenses. It’s effectively a pay cut – and they’re not happy.

But passing on costs to reduce plan expenses is only one of several levers employers can use to control rising healthcare costs. One of the sources of rising healthcare costs is improper payments due to errors in billing and claims payments; ineligible enrollees; and charges related to fraud, waste and abuse. These improper payments can be addressed head on by employers and payers with a focused effort to detect and correct erroneous claims. Here are some of the key areas they should examine.

More effective dependent eligibility verification. Typically, between four and eight percent of the dependents on an employer-sponsored plan are not eligible for coverage. Depending on the size of the workforce and number of enrollees, ineligible dependents can be a major generator of plan expenses.

It is important that plans and their employer clients implement a process to verify dependent eligibility during an employee’s new-hire benefit enrollment or when they change their enrollment level for a life event. That’s when employees are in “enrollment mode,” and expect to provide details about themselves and their family members. Dependent eligibility verification at later stages, such as at the claims processing stage, is much more likely to create unhappy employees.

Detect the errors made by a third-party administrator (TPA). This one is for employers but plans with administrative services only agreements should take note as well. Even though the best time to catch improper claims is before they are submitted for payment, the next best alternative is to conduct quality edits post-payment. A good place to start is with the claims processed by TPAs, where on average 10 percent of the claims they process contain errors.

A thorough audit will examine many elements:

  • Correct coding for procedures
  • Coordination of benefits with other payers, such as Medicaid
  • Appropriate pricing for services
  • Proper applications of copayments, deductibles and out-of-pocket maximums

Identify improper claims before they are paid. For payers and providers alike, “pay and chase” is the antithesis of effective claims and cost management. It is what happens when claims that have already been paid are audited and errors are discovered. The plan then incurs a major administrative burden to pursue reimbursement from providers, who may have provided and billed for the care years ago.

Instead, the best way to avoid the cost associated with improper claims is to detect them before they are paid. To be effective, provider claims should be reviewed for clinical accuracy as well as to detect potential fraud or abuse. Some areas for attention should include:

  • Diagnosis Related Group coding accuracy
  • Is the care provider for covered or non-covered services?
  • What is the readmission rate for this provider?
  • Is the level of care provided appropriate to the medical condition?
  • Was the patient treated on an inpatient or outpatient basis, and was it the appropriate setting?

Employers and health plans alike can find many ways to control cost and do so without massive administrative burden. However, it will take looking beyond recovering costs from the users of the system, such as enrolled employees, and moving upstream to where many costs are created – at the service, billing and claims payment stages.

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