RISK ASSESSMENT CONSIDERATIONS

What’s Included in Your Organization’s Health Benefit Costs?

Health benefit costs not only include payments to providers for goods and services and the cost of administration; but also payment errors, overcharges, fraud, and abuse. The portion of health plan spending attributable to fraud and abuse cannot be quantified precisely; although healthcare experts estimate that a substantial part of the nation’s healthcare spending is lost to such practices. However, amounts related to payment errors and overcharges can be more readily identified, quantified, and recovered through active stewardship, oversight and audit processes.

Consideration: The first comprehensive audit of the Medicare program performed by the Office of Inspector General (OIG) showed that fraud, abuse, and errors accounted for $23 billion, or 14 percent of the program’s cost.

How Does Your Self-Insured Benefit Plan Compare To Medicare?

Due to the financial exposures in the industry, and dependency on outside contractors, the U. S. Government Accountability Office (GAO) has consistently included the Medicare program in the Federal Government’s high-risk series of federal programs vulnerable to waste, fraud, abuse, and mismanagement. Self-insured health benefit plan administrators utilize the same review processes as Medicare administrators; and therefore the plans are subject to the same financial exposures as the Medicare program. Close scrutiny of your benefit plan may disclose some of the same overcharge indicators as those reported on the Medicare program. They include:

• Payments for inflated charges or unnecessary services.
• Excessive payments on billed charges from non-network providers.
• Payments for persons ineligible for benefits under the plan.
• Payments on claims that another group health plan should have been the primary payor.
• Coordinated payments for which there was no legal liability to pay.
• Duplicate payments, clerical and system adjudication errors.
• Administrative and funding overcharges.

Consideration: While some health benefit plans will not have all the problems identified above; most plans – regardless of size – will experience some of these problems.

Problems in Health Benefits Administration Can Go Undetected!

Often problems in health benefits administration can go undetected. Because of limited oversight and audit capability, many organizations lack the means to detect major problem areas.

Consideration: GAO’s assessment of the Medicare program for its high-risk series includes the review of the oversight of the Medicare program. It has consistently found that:

• Medicare is vulnerable to serious financial losses.
• There is a need to exercise more active oversight over the program.
• Medicare’s program safeguards have not kept pace with the growth in claims volume.
• There must be a more active stance to hold contractors accountable.

The Medicare Program Needs More Active Oversight! Your Program Probably Does Too!

Regardless of size, health benefit plans are subject to a number of financial risks and exposures common to the industry. Ascertainment of the adequacy of control over these exposures is crucial to successful stewardship of the benefit plan. Many organizations rely strictly on the administrator’s reporting of plan activities to evaluate performance.

Consideration: Common reasons for just relying on the administrator’s reporting and not auditing are:

a. False Sense of Security - Managers feel secure that because there are performance guarantees that payment errors and overpayment exposure control is guaranteed.

b. Too Busy - Managers have other projects, obligations or concerns which take up their time; so they strictly rely on the administrator to watch out for the Plan’s interest.

c. Limited Training - Managers are unfamiliar with the financial risks and exposures in health benefits administration or the means available to evaluate the adequacy of controls over the exposures.

Error Rates & Performance Guarantees

Typically, health benefit plan audits include testing a statistical sample of claims to provide assurance that all claims have been paid within an acceptable error rate, usually in accordance with the performance guarantee of one percent. Error rates address only known claim errors – not all plan overcharges.

Consideration: QBA utilizes proprietary software to analyze each bill-line of every claim paid and assigns a rating factor to indicate potential overpayment. Based on our experience in auditing various size health benefit plans, we find that for well-controlled plan administration, the claim payment error rate ranges from 0.2% to 1.0%. In less controlled administration, overpayments identified can average from 2.0 to 5.0%, and higher in some cases. There is no correlation between the size of the plan and percentage of overpayments.

PERFORMANCE GUARANTEES DO NOT GUARANTEE GOOD PERFORMANCE!

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