Everyone knows health plan carriers sometimes make billing errors. But the common belief that overcharges and undercharges usually balance out is untrue.

In reality, incorrect billing alone causes 5% or even as much as 10% of total premium costs to be wasted. According to Business Insurance Magazine, there are 7% average inaccuracies in carrier bills, and only 2% are ever corrected.

For an employer with 250 employees, that’s $50,000 wasted a year. The cost jumps to $100,000 if there are 10% inaccuracies.

Carriers don’t mind - But you should

According to health industry data, there’s about a 10% inaccuracy rate on bills, but it’s a break-even proposition between overcharges and undercharges. But it’s the carrier who breaks even, according to brokerage and consulting firm Corporate Synergies, not the plan sponsor.

Let’s assume the overcharges and undercharges really did even out after you analyzed and reconciled the carriers’ bills to correct any mistakes. Guess what? You’d still be losing money because in-house billing reconciliation is a productivity drain.

The carriers’ calculations don’t take into account your company’s time commitment to do the reconciliation and spot the errors every month.

It also doesn’t figure in the time your company spends on the phone arguing with carriers to get your refunds every month, nor does it account for the hassle caused by carriers who fail to credit refunds against their maximum retroactive refund period of 6 or 9 months (depending on the carrier).

Proven solutions

Depending on your company size, the best practice is to audit your claims on either a monthly or quarterly basis. This can be done in-house, or outsourced. Some benefits brokers perform this service on behalf of clients as a way of differentiating themselves from their competitors.

Another important tactic to end the cycle of overpayment is to shop out your coverage every year. Carriers won’t work to correct the flaws in their bills to you unless you shop your plans aggressively.