Defining Claims Leakage
Claims leakage refers to financial losses arising from overpayment, duplicate billing, coding errors, or fraudulent claims that pass through the adjudication process undetected. According to the National Health Care Anti-Fraud Association (NHCAA), healthcare fraud accounts for approximately 3% of total healthcare expenditure in the United States, with some federal agencies estimating as high as 10%.
While precise leakage figures vary by market and plan type, the NHCAA data illustrates that even conservative estimates represent substantial avoidable costs. For an employer with significant annual claims spend, structured governance can recover meaningful savings.
Common Sources of Leakage
The most prevalent sources include upcoding (billing for a more expensive procedure than performed), unbundling (separately billing components that should be billed as a single service), duplicate submissions across different provider locations, and claims for services not covered under the plan but misclassified to appear eligible.
Both intentional fraud and unintentional billing errors contribute to leakage. Effective governance must address both categories, as the financial impact of systematic billing errors can be as significant as deliberate fraud over time.
Building a Governance Framework
Effective TPA governance starts with establishing clear performance metrics: claims turnaround time, error rates, provider dispute frequency, and cost-per-claim benchmarks. These should be contractually defined and reviewed monthly.
Employers should require TPAs to implement automated red-flag detection for high-cost outliers, duplicate submissions, and frequency anomalies. Manual audit sampling of a meaningful percentage of processed claims provides an additional verification layer.
Maintaining Employee Experience
Claims governance must not create friction for employees. The goal is to detect and address leakage at the provider and TPA level, not to burden employees with additional documentation or approval steps.
Transparent communication about the purpose of claims governance, framed as protecting the plan for all members, helps maintain employee trust. Regular benefits communication reinforces that governance measures exist to ensure plan sustainability.