Finding money in health benefits – Benefits
Eligibility errors and claims overpayment often go undetected and uncorrected, costing many companies millions of dollars each year. Outsourcing key areas such as payroll and investment options can help find that lost change.
It’s the old story of the cog in the wheel. In the chaos of annual benefit enrollment processes at the end of the year, eligibility data is often flawed or is not appropriately channeled through the system. As a result, your benefits staff is inundated with phone calls. Dissatisfied employees complain of missing identification cards or a health plan’s denial of coverage. In other cases, your staff has ongoing issues with health plans, but lacks the influence to do something.
As a result, premium overpayments occur and, along with eligibility errors, can lead to enormous amounts of financial loss impacting your bottom line, often in the millions of dollars, in addition to an influx of employee dissatisfaction. Can you afford it?
Health care costs, kept in check during the managed care escalation in the 1990s, are spiraling upward again across the continuum. In fact, Hewitt Associates projects average increases of 13 percent to 16 percent for 2002, depending on the type of health plan, and this comes after last year’s average rate hike of 10.2 percent. The increase represents a near tripling of the rate of medical inflation.
Meanwhile, industry statistics show that costs due to eligibility errors are, on average, two percent of a company’s total health care benefits budget–as high as $60 to $100 per employee per year. Claims overpayment alone can encompass more than half of the unnecessary costs.
But continuous maintenance of eligibility data is a daunting task, especially for employers that operate under a “best-in-market” health plan strategy, and one that most companies cannot effectively manage. Unfortunately, many are either unaware of eligibility errors or are unable to address the issues because they simply lack the time or resources needed. Through time, claim errors go undetected and uncorrected, costing many companies millions of dollars each year.
Factors leading to lost health care dollars:
1. Reporting inefficiencies: Health coverage changes occur all the time with new employees, turnover, employee marriages, and children. Is your health plan keeping current with all of your enrollee data changes? Many employers continue to pay for ineligible participants, often for individuals no longer with the company, because of inaccurate matching of eligibility data.
If companies are managing eligibility administration themselves, they are likely paying premiums based on invoices received from health plans–with lack of confidence that the premiums are based on accurate eligibility information. Premium overpayments to health plans result, which can represent a significant percentage of annual premiums–up to five percent.
2. Process complexities: Automating the complex administration and exchange of information in the benefits arena is only part of the story. Efficient data maintenance requires continuous updating and auditing to ensure eligible employees are receiving coverage and employers are only paying for the coverage promised to those employees.
Through both reporting inefficiencies and process complexities, a domino effect occurs, often with costly results. These results include:
* Millions of dollars lost through “cost leakage”;
* Insufficient information systems (IS) support;
* Limited influence and clout with health plans;
* Low employee satisfaction with benefits; and
* Low satisfaction from human resource employees supporting the process.
But there is a solution. In this era of financial constraints, employers cannot afford hesitation in getting eligibility data appropriately managed–and often, the most effective way to manage eligibility data processes is to outsource to a reliable partner.
Just as many employers understand the advantages of outsourcing key areas such as payroll and investment options, outsourcing of health benefit and enrollment data and/or eligibility data management promotes more effective benefit plan operation.
“It is a no-brainer to outsource this function,” according to Linda Fonteneaux, compensation benefits consultant with mobile communications provider, Nokia. “If we continued to do business the way we were doing it, the costs would be extraordinary over time.”
At Nokia, employee satisfaction remained very low before full integration and outsourcing of eligibility data management. According to current benchmark data at Nokia, employee satisfaction is strong, with all employees enrolling for benefits electronically across the board, said Fonteneaux.
“Our employees are more confident that their enrollment data will be updated and verified correctly,” says Fonteneaux. “We are in the business of communications, so we realized that our HR-related activities needed to be up-to-date to compete in the marketplace. We want to be a leader in e-business so everything we do must complement this strategy.”
In addition, Fonteneaux notes that the Internet tool used through the outsourcing partner added key efficiencies to the process in the areas of data exchange and issue resolution for Nokia. Developed primarily for health plan use, the tool serves as the central communication vehicle for health plans and companies to share information and support eligibility and premium billing operations. Employers may also use the site to gain information on health plan performance and support customer service.
Another big bonus for companies to work with an outsourced benefits expert: the pooling of resources and company data simply garners more attention from health plans. And major health plans rarely deny it.
“You need a significant amount of employees to have clout with carriers,” says Fonteneaux. “We have areas where we only have 100 employees enrolled, but we are able to pool with other organizations for a firm standing and effective communication with health plans. The fact that our partner works with more than 500 health plans nationwide and is well-versed in their multiple layers and patterns makes a big difference for us.”
Some health plans even require employers to sustain an estimated number of plan participants prior to agreement of electronic interchange of data. As a result, human resource staff use paper transmission for communication between the employer and the health plan–an obvious ineffective method of communication.
Often, employers are reluctant to offer expanded health plan choice, simply because of this key area of managing administration issues. Employers feel it is easier to get the best rates with adequate service from health plans, if they are able to keep administrative duties to a minimum.
Health plans also receive benefits in working with an outsourced benefit data manager.
“It allowed us the ability to streamline processes,” according to Tim Lampton at Humana Inc. “It is the ideal way for us to ensure membership load with current daily updates.”
But Humana realized further measurable gain in full-time equivalent (FTE) utilization.
“We were able to realign our FTEs to take on more critical tasks–instead of being bogged down by process and data verification,” says Lampton. “Because of this technology, our employees are able to accomplish tasks they were never able to do before.”
In addition, Humana no longer hires 25 temporary employees during its busy enrollment period–for entering data from employers into their system.
Lampton says it used to take three to four days to process a paper report, historically done by manual processing. Now, the same information is downloaded and processed in one business day.
“Errors remain at a minimum as all transactions are electronic, eliminating faxes and technology limitations,” according to Steve Hamlin, manager of national accounts at Blue Cross Blue Shield of Illinois. Some 1.5 million members of BCBS of illinois are impacted by the consolidation and electronic interface of eligibility data.
Ultimately, for major employers and the health plans they work with, there are many benefits to outsourcing eligibility data management to a reliable and experienced partner. These include:
* Enormous financial savings and more stringent control of process management;
* Increased employee satisfaction with enrollment processes;
* Human resource personnel are free to take on other strategic tasks;
* Move toward integrated, data-centric organization;
* More focus on the company’s core business; and
* Enhanced clout and influence with health plans.
For major employers like Nokia, identification of dollars lost in the system and continuous reliability of accurate data is a must to effectively track health benefit data, especially given the ever-changing dynamics of employment factors.
Companies that manage this key administration area themselves operate it as a back office service, often with lack of crucial technology support and resources to continuously validate information. As a result, errors proliferate as costs accelerate.
With high turnover in health plan eligibility and rampant consolidation throughout the industry, it is a moving target. It becomes a more difficult area for companies to manage, without dedication of extra resources and continual investment. Partnering and outsourcing to a reliable partner keeps the train moving with your bottom line in check.
Kathy Swinehart is head of Hewitt Associate’s Connections Practice in Lincolnshire, Ill.
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