Why Claims Auditing Matters
Claims auditing is the systematic review of processed claims to verify accuracy, detect anomalies, and ensure compliance with plan rules. For employer-sponsored health plans, regular auditing is a governance obligation that protects the financial integrity of the plan and the interests of all enrolled members.
The NHCAA notes that healthcare fraud is a significant cost driver, and systematic auditing is one of the primary defense mechanisms. Without structured auditing, billing errors and fraudulent claims can accumulate over time, eroding the financial sustainability of the plan.
Establishing Audit Scope and Frequency
A practical audit framework includes three layers: automated real-time screening (applied to all claims), statistical sampling (reviewing a meaningful percentage of processed claims monthly), and targeted deep dives (investigating specific providers, benefit categories, or time periods flagged by the screening layer).
The frequency should align with claims volume. Plans with high monthly claims volumes should run automated screening continuously and conduct sampling reviews monthly. Smaller plans can operate on a quarterly cycle.
Red-Flag Detection Criteria
Effective red-flag criteria include: claims exceeding a significant multiple of the average cost for the same procedure code, providers with claim frequency significantly above the network mean, duplicate claims submitted within a short window for the same employee, and procedure codes inconsistent with the stated diagnosis.
These criteria should be calibrated using the plan's own historical data. The ISO 37001 anti-fraud management standard provides a framework for establishing detection and response protocols that can be adapted to health claims environments.
Escalation and Resolution
Flagged claims should follow a defined escalation path: initial review by the TPA's claims quality team, secondary review by the employer's benefits team or broker if the TPA assessment is inconclusive, and escalation to the employer's legal or compliance function for suspected fraud.
Maintain a documented audit trail for all flagged claims, including the reason for flagging, the review outcome, and any actions taken. This documentation is essential for regulatory compliance and for defending against provider disputes.