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Claim Administrator Contracts for Employer Health Plans

Self-funded medical plans and their third-party administrators (TPAs) often maintain close yet competitive relationships. A frequent point of contention is the plan’s right to work with medical claim auditors and other facets of the TPA’s performance. With rising costs and greater monitoring sophistication, some TPAs have sought to alter these terms. In particular, they may restrict the plan’s ability to review all claims electronically or through targeted audits. The alternative is reverting to random-sample audits, which are less comprehensive and may require more staff time.

Random sample audits may uncover certain findings, but they are not the most effective approach for reviewing health care claims administration. Plans operate more efficiently when auditors are permitted to review every claim payment. The biggest cost-saving opportunities often come from identifying duplicate claims, improper billing, or payments for excluded items. Comprehensive audits and diligent monitoring can flag these issues and result in substantial savings. This also benefits plan members and ensures promised services are delivered. Often, member service and cost management go hand in hand.

Allowing independent auditors to review and report on a plan’s performance and claim processing is critical for sound management. It’s understandable that TPAs might prefer to restrict this oversight to strengthen their own position. However, best practices demand that plans preserve the ability to scrutinize claims administration from all perspectives. When these issues are discussed, it’s helpful to remind TPA management that audits are intended to maintain plan integrity and control costs, not to penalize TPAs. The independence of claim auditors is paramount to the process and its accuracy.

Independent benefits auditing firms are committed to serving their clients’ interests. To be effective, they require the use of the best available methods—namely, comprehensive audits rather than random samples. It is crucial to protect these options for your company’s self-funded plan. If you are responsible for reviewing TPA contract changes, examine them carefully. Approving modifications without thorough consideration may undermine your plan’s ability to be managed in accordance with current industry standards. Ongoing audits and monitoring remain essential.