BMI Audit Finding of the Month: Excluded Hearing Aid Expenses Mistakenly Covered

Audit Issue:

The plan document clearly described coverage for hearing aids for children up to age 19. Hearing aid expenses for adults was excluded.

Audit Finding:

Using AUDiT iQ, we identified claims paid for adult hearing aids. For the 3 samples chosen for onsite examination, we confirmed that benefits were paid in error for patients who were 45, 52, and 58 years old.

TPA Response:

The claims administrator acknowledged that their system had not been properly configured to exclude adult hearing aids. Corrections were immediately implemented.

Financial Error:

The administrator agreed to financial errors amounting to about $13,500.00 for the 3 samples we reviewed. They also agreed to thoroughly investigate past claims history to assess the total financial impact of similar errors.

BMI Audit Finding of the Month: Multiple Claims Paid in Error Due to Systemic Flaw

Audit Issue:

The audited health plan specifically excluded services relating to pregnancy of a dependent child except for complications of pregnancy.

Audit Finding:

Multiple claims were identified as being paid for excluded routine pregnancy services.

TPA Response:

The claims administrator agreed that claims were paid in error. In investigating the root cause of the error, they discovered a systemic flaw stemming from the plan’s allowance for complications. Apparently, the exception criteria were set up too broadly to automatically deny even routine services.

Financial Error:

The administrator agreed to recoverable financial errors of more than $79,000.

BMI Audit Finding of the Month: Prescription Drugs Did Not Get the Required Prior-Authorization

Audit Issue:

The terms of our client’s group pharmaceutical plan specifically stated that benefits for certain drugs could not be paid unless prior-authorization was obtained on behalf of the participant.

Audit Finding:

We confirmed that benefits were paid on more than 100 occurrences when the prior-authorization requirement was ignored by the Pharmacy Benefits Manager (PBM).

PBM Response:

The PBM agreed with our findings noting that prior authorization criteria had been erroneously eliminated from its system without detection.

Financial Error:

The PBM agreed to recoverable financial errors of more than $50,000.

Should an Employer Conduct Their Own Dependent Eligibility Audit?

When considering whether or not conduct an audit in-house, most employers don’t realize that a dependent eligibility audit will be a significant undertaking. An employer must consider they will need to:

• Review plan documents to determine the definitions for all possible eligible dependents.
• Determine the documentation required for substantiating eligibility. For example, in the case of a spouse, this may be not only a marriage license or certificate, but also a recently filed joint income tax return to show that the marriage continues to the present day.
• Establish a timeline for informing employees about the audit as well as a deadline for submitting the required documentation,
• Develop and distribute communications materials accordingly.
• Determine the process by which employees can submit their documentation, and set up a mechanism to receive materials.
• Review submitted documentation to determine whether they meet the requirements for establishing eligibility, and establish a notification and grace period process for employees who fail to submit materials properly and/or on time. Inform employees of the audit results.
• Arrange for secure storage and/or disposal of the materials employees have submitted.
• Assign a knowledgeable person or persons to field employee inquiries since the audit will likely generate questions.

Additionally, hiring an outside vendor provides a buffer between Human Resources and the employees. An experienced and knowledgeable dependent eligibility audit provider can compare the language of the plan and the administrative procedures in sure and make recommendations to integrate the audit process with current administrative procedures in use by Human Resources. In addition, an audit provider will leave the employer with a criteria map of eligibility verification requirements so, that if the employer desires to, can integrate those criteria into new enrollment and status change procedures to maintain updated dependent eligibility.

BMI Audit Finding of the Month: Client Saved an Estimated $151K

Audit Issue:

During our process of selecting audit samples, we identified multiple claimants who were no longer eligible for benefits. During our on-site review of documentation, we confirmed that the date of service for each of our selected samples was later than the termination date provided to us by the Plan Sponsor.

TPA Response:

In its written response, the claims administrator stated that it relies on its customers to provide accurate and timely eligibility information.

Audit Finding:

Termination dates are commonly reported by the Plan Sponsor on a retroactive basis. In this case, we reviewed claims for 16 terminated participants where the average delay between the date of termination and the date of notification was less than 30 days. Before these terminations could be processed by the administrator, expenses were incurred, claims submitted, and benefits paid. There was no process in place to retroactively identify and recover payments from these ineligible participants.

Financial Error:

For the 16 audit samples we reviewed on-site, benefits for terminated participants exceeded $151,000.00. Three of these samples were more than $16,000 each.

Coordination of Benefits Error Results in Benefits Overpayment of More Than $200,000

Audit Issue:

Benefits were paid on a primary basis rather than a secondary basis.

TPA Response:

In its written response, the claims administrator stated that at the time claims were first considered, the data file referenced for eligibility did not indicate the existence of other coverage. They stated that “other coverage info” was later obtained confirming that another plan should have paid benefits on a primary basis. No action was taken by the administrator upon its eventual awareness of other primary coverage.

Audit Finding:

The administrator relied solely on the information available to them at the time it paid primary benefits. There was no process to adjust claims payments based on subsequent correction of “other coverage” information.

Financial Error:

For four (4) audit samples reviewed on-site to assess the administrator’s effectiveness in administering the plan’s Coordination of Benefits provision, benefits were overpaid by more than $214,000. One claim alone amounted to almost $168,000 of that amount.

Excluded Prescription Drugs Paid as Covered Benefit While Discount Guarantee Doesn’t Add Up

For the month of September, BMI is pleased to present a recent finding from one of our prescription drug audits.

Audit Issue:

Our client’s group pharmaceutical plan specifically excluded fertility drugs as a covered benefit. In addition, our client had contract language in their administrative services only (ASO) agreement that specified certain aggregate AWP generic discount guarantees.

TPA Response:

The administrator confirmed our findings regarding several prescriptions for fertility drugs having been paid in error. BMI also identified a significant shortfall in the AWP generic discount guarantees.

Audit Finding:

The administrator confirmed that a fertility drug exclusion edit was not in place that should have been. In addition, as a result of BMI’s findings and the administrator’s subsequent reconciliation, the administrator confirmed the shortfall in the AWP generic discount which identified recoverable dollars back to the client as a result of the shortfall.

Financial Error:

The administrator agreed to combined financial recoveries of $70,000. The audit also identified an estimated future annual savings of $150,000 due to enhanced utilization management of hormone-enhancement drugs and an increased coverage in the prior-authorization program