Incorrect billing from health insurance carriers is more common than you might think. The average plan sponsor can get overcharged by 5% a year, according to brokerage and consulting firm Corporate Synergies Group.

Like most organizations, insurance carriers rarely keep perfectly up-to-date records on their clients. As a result, plan sponsors often get charged for people who shouldn’t be covered on the health plan. Here are two areas to watch:

Claims versus enrollment

It’s common to have terminated employees still in the carrier’s claims eligibility system – even after they’ve been taken off your enrollment list.

Reason: Many carriers use separate computer systems for tracking enrollment and claims – and the two systems use different technologies that don’t “talk” to each another.

Carriers have no incentive to upgrade their systems, according to CSG president Eric Raymond, because doing so would cost the insurers money. Leaving things as is, carriers simply charge clients when they put through claims for ineligible employees and dependents.

That’s why an annual claims audit is a must: That way, you won’t get charged fees for claims the carrier accidentally put through. Even if your firm outsources the work (it’s a rather time-consuming task when performed in-house), you’ll typically see several percentage points of savings on your total health costs.

Dependent eligibility

Poor carrier record-keeping also can be the cause for employees’ ineligible dependents not being taken off the enrollment files.

Few carriers have systems that automatically integrate with your Payroll department and your current enrollment forms (including the electronic “employee self-service” kind). Instead, data entry people employed by the carriers input the information in the vendors’ system.

Human error by the carriers’ employees costs plan sponsors another several percentage points. Solution: annual dependent audits.