In the era of health care reform, one of the most significant issues everyone is facing is increasing heath care costs.
Indeed, more tribes and tribal enterprises are turning to self-funding options for their health care plans—not only to reduce their premium expenses but also to manage their cash flow and gain control over their benefit dollars.
Employer Bears Cost and Risk
It’s important to note that self-funded plans aren’t insurance. Health care costs are paid from the tribe’s own pocket as the medical costs are incurred, and the tribe assumes the financial risk of providing health care benefits to employees and tribal members. Contrast that with fully insured coverage, in which medical costs are paid as a fixed premium to an insurance carrier and the carrier bears the financial responsibility for the costs of enrollees’ medical claims.
Self-funded plans typically set up a special trust fund to earmark money (contributions from the tribe, employees, and members) to pay claims as they’re incurred, and the tribe usually purchases stop-loss insurance to protect the plan from catastrophic losses. Self-funding means assuming a bigger role in employee and member health management and taking over the paperwork and other services an insurance company normally provides.
For most tribes, focusing on managing tribal operations often supersedes managing medical claims expenses. As such, the majority of self-funded plans rely on third-party administrators (TPAs) or insurers to administer their benefits.
Make Sure Your Plan Is Working for You
The largest expense in any employee or member health care benefit plan is the claims cost. For tribes using a TPA, health care claims are essentially unaudited expenses because they’re handled by the TPA. So how do you know whether your TPA is helping you keep costs down and drive greater efficiency?
An audit of the TPA, sometimes called an administrative claims review, gauges an administrator’s ability to pay claims accurately and efficiently. Studies have shown that TPAs fail to meet industry-standard accuracy measures 60 percent of the time.
Performing such a review of your administrator will fulfill the tribe’s fiduciary responsibility as a plan sponsor as well as help you evaluate whether your claims are being paid correctly and in accordance with the plan’s intended benefit provisions. It offers the best opportunity to create accountability, measure performance, and establish processes for continuous quality improvement.
In addition to validating current performance metrics, results from an administrative performance review can serve as a benchmark for establishing or renegotiating performance guarantees between the tribe and plan administrators.
These reviews can also help you:
- Recognize claims payment errors and recover identified overpayments
- Validate your medical claims spend
- Discover process or systemic issues impacting administrative performance
- Identify exceptions to standard claims processing procedures
- Confirm performance metrics that are often self-reported by the TPA
- Measure the TPA against industry standards and best practices
The Best Defense Is a Good Offense
With claims costs representing the largest expense component of an employee or member health care benefit plan, it simply doesn’t make sense to assume that your claims administration process is operating exactly the way it should. Getting out in front of the issue by obtaining regular administrative performance reviews can help you verify that you’re getting the most from your health care expenditures.
Here are some questions to consider:
- What’s your tribe currently doing to review and monitor claims costs processed by your TPA?
- Is anyone performing procedures to review claims information in detail on a sample basis to ensure claims meet plan requirements and provisions?
- Who’s monitoring and gauging the TPA’s performance and ensuring it meets performance requirements?
If these questions aren’t currently being answered by an internal audit or another internal function, consider engaging an outside expert to either perform an administrative review or assist your tribe in designing a review process that can be performed by tribal personnel.
We're Here to Help
If you’d like to know how an administrative claims review or administrative performance audit can benefit your organization, contact your Moss Adams professional.