Periodic audits are a must for the benefit plans offered by large employers, both corporate and nonprofit. Depending on the employee population, claims paid in error can cost hundreds of thousands or millions of dollars. Medical claims auditing and similar doublechecks of pharmacy benefit plans are budget-friendly. They lead to recoveries far more than the audit cost, sometimes up to four times as much. Another meaningful asset is having people on the audit team with knowledge of claim payments from inside large health carriers that handle the processing.

Large audit firms view taxes as their most significant area of focus, and although they may have systems that can audit claims, it's not their specialty. Smaller firms have come on the scene recently and made game-changing improvements. One of the most significant was software advances that allowed 100 percent of claims to be reviewed. Gone are the days when a random sample is the only option, and you check every claim; the chances of finding all errors improve. Anyone who has been in the field long enough to recall random sampling also remembers the staff time it took up checking the pulled claims.

The best audits focus on everything and flag all errors. But it depends on whether a payer or provider sponsors the review. On the payer side, you want to know about mistakes, overbilling, duplicate charges, and patterns of repeating errors. On the provider side, ensuring correct codes were entered and all services billed is generally the priority. Accurate payments better serve members, providers, and plan sponsors' needs, and audits keep things on track. Some companies go as far as to monitor their claim payments continuously so that errors are always reported.

Self-funded benefit plans have stepped up their use of auditing since processing and payments have moved out of house to third-party administrators. The agreements for processing services generally include performance guarantees, but only periodic oversight can confirm it's happening. Given the claim costs, sponsors need to keep tabs on payment activity and ensure it remains as accurate as possible. Each claim can be reviewed for hundreds of checkpoints and error patterns corrected before becoming million-dollar problems. It's one of the best plan cost management tools.