Regardless of the specific line of coverage, claim audits are a best practice for employers and plan sponsors to ensure accuracy, identify errors, and document process gaps. A comprehensive claims audit can uncover issues related to compliance, adherence to contractual provisions, and consistency with best practices.

While most employers and plan sponsors understand the value of a claim audit, it is common to struggle with knowing where to start, and more specifically, when to start. For clients looking to audit their disability claims, we recommend considering the following factors in determining an optimal timeframe:

1. Vendor Implementation

If you are implementing your fully-insured disability plan with a new carrier or your self-funded disability plan or program with a new claim administrator, conducting a claim audit after the go live date can ensure that:

  • Workflows established during implementation are being properly followed
  • The vendor is correctly managing claims through the entire claim cycle
  • Any areas where additional training or communication would be beneficial are flagged

Conducting a claim audit post-vendor implementation can help solidify the foundation for the relationship and serve to identify opportunities for improvement before they grow into more significant roadblocks as the volume of claims increases.

2. Renewal & Stewardship

Whether you have a vendor administering your self-funded disability plan or program or a carrier insuring your fully-insured plan, it may make sense to conduct a claim audit in anticipation of your renewal, allowing you greater insight into:

  • Any process or performance issues that need to be addressed
  • The financial implications of any findings of non-conformance
  • Whether any performance guarantee should be added as part of the renewal negotiation to address a specific area of concern identified by the audit

As your team comes to the table to advocate for a fair renewal, audit findings can be a powerful negotiation tool. They can be used not only to position your organization for a more favorable renewal, but also as leverage to correct those findings that have had a negative impact on the plan or program’s financials and/or your employees’ experience.

3. Compliance

When determining the right time for a disability claim audit, if your plan is subject to The Employee Retirement Income Security Act (ERISA), your fiduciary duties may drive your decision to conduct an audit. As the plan sponsor, your organization is a fiduciary and must act prudently. An audit is one way to fulfill your fiduciary duty to act prudently as it not only monitors your vendor’s performance, but also ensures that the plan is in compliance with ERISA, the Internal Revenue Code, and other applicable laws.

4. Trend

Most employers receive some type of regular reporting and claims analysis from their vendor partners. When considering a claim audit, pay close attention to the data you are receiving, and consider setting things in motion if your plan or program’s experience is yielding an unexpected or new trend. In doing so, the claim audit can:

  • Validate whether the trend is real and/or significant
  • Identify the root cause of the shift in trend to inform potential strategies for mitigation or reversal  

5. Self-Funded, Self-Administered

If you have a self-funded disability plan or program which you manage inhouse, you may want to consider establishing a routine cadence for conducting an audit of your team’s claim handling to:

  • Validate that insourcing is still the right path for your organization
  • Determine if there are any areas of opportunity for improvement and efficiency
  • Confirm that your workflows and controls are being properly followed and applied
  • Identify if there are any compliance issues

Conclusion

Disability claim audits should be one tool in an employer’s toolbox for ensuring compliance, vendor and internal performance, and an overall positive claim experience for your employees. In conducting a claim audit, employers need to determine stakeholders involved, resources (internal or external), data gathering methods, goals, and processes. While the ideal time may vary by employer, the question of when to conduct the audit is another integral component of your claim audit strategy and should not be overlooked.

If you are interested in conducting a claims audit but need guidance or an objective partner to assist, please get in touch with the Spring team.