Managing Benefits Leakage

How advisors can help employers discover a hidden opportunity for saving money

by Doug Devlin

With 2021 upon us, a lot of people are breathing a sigh of relief to exit all that 2020 served up. But, you already know employers face an uncertain year ahead, on top of the added challenge of finding cost savings any way they can. The real puzzle — and one that you are very likely in a position to help them with — is finding those savings without reducing coverage, harming morale, or increasing turnover risk.

One thing employers are doing to fit those puzzle pieces together as the pandemic continues, is to take a hard look at all the technology they currently use within their organization. In other words, although employers are forced by financial constraints to stick with their current benefit plans, “COVID-19 has created additional awareness and focus by companies on their benefit systems and digital capabilities … given economic uncertainty, employers are not ripping out old systems to integrate new ones right now,” says William Blair’s recently published 9th Annual Benefit Technology Conference.

The good news is employers and the professionals who advise and support them have a puzzle-solving opportunity right in front of their noses: helping employers slow benefits leakage. Leakage in benefits has been a long-understood but hard-to-pinpoint challenge for employers. Discovering each cause of money lost because of benefits leakage has been not only difficult but hindered by years of using the same outdated HR and benefit technology and processes. Thankfully, there’s a new technology that easily helps detect and stop the continuous flow of lost cash.

Laying the Foundation

Every time an employee starts, stops, or changes benefits they create the possibility for their employer to lose money. That’s each time any employee is onboarded or terminated, retires, or has any qualifying life event. That’s a lot of opportunities for error. In fact, a study by Aberdeen Group found that:

• 12% to 15% of all billing from benefits carriers contains errors
• In a company with 300 employees receiving benefits, billing errors could amount to over $300,000 a year

Here’s the two-pronged problem: Employers typically handle plan enrollment of medical, dental, vision, and other benefits using EDI (electronic data interchange) technology or manual data entry. Then, reconciliation often happens with the HR department using a spreadsheet, and it comes sometimes a month or two after a benefit change has occurred.

All of that means it often takes one or two months after a change in benefits before it’s reported and possibly detected. Carriers, meanwhile, often require billing discrepancies to be identified within 60 days. The result is that employers are often left absorbing the bill for premiums that should never have been charged.

Small companies that you work with may not even realize the price they’re paying for each employee’s qualifying event premiums. With large organizations, the problem lies in the plethora of data sources that must all align:

• Payroll platforms
• Enrollment platforms
• Carrier billing platforms
• COBRA and all the work that flows around it

All of these platforms rarely work synchronously; the integrations needed to search for and report on errors that cause benefits leakage may not even exist.

The Integrated Benefits Institute estimates private employers in the U.S. spend more than $880 billion annually on healthcare premiums. A growing number of employers and healthcare insurance brokers recognize that the employer premium invoice processes create billing errors that are estimated to tie up at least $10 billion each month, not to mention significant write-offs for employers. With a 10% cost of capital, this equates to $1 billion dollars tied up in costly timing delays and mistakes — capital that could be used in other areas.

Solving The Puzzle With Robotic Process Automation

Robotic process automation (RPA) technology is the new kid on the block. It’s a form of process automation that lets businesses set up tasks in a way that a bot performs them. For benefits leaders and HR, RPA can:

• Mimic human interaction with web browsers and web-based applications
• Retrieve invoices from websites
• Run reports
• Download files
• Eliminate human error

The power of RPA transforms HR and benefits technology and immensely reduces benefits leakage by automatically:

• Downloading and comparing long lists of invoice information
• Identifying information that doesn’t match between systems and changes to existing data
• Finding variances, and tracking to resolutions, integrating any number of carrier and HRIS connections to coordinate important data flowing through existing user interfaces.

Along with much more that takes place out of sight, all of this happens at a much higher volume, at a much faster speed, and with far greater accuracy than RPA’s human counterparts can accomplish.

In short, an RPA platform performs a lot of the steps to provide and automate workflows, to give overworked benefits administrators time back to solve problems. No longer are they spending their time searching for the multitude of variances that are costing their organization money.

Bringing It Home

Large employers expect their healthcare benefit costs will surpass $15,000 per employee in 2021. With that number looming, leakages of any size in the billing process are going to add up to major budget drains. Implementing an RPA technology will make sure the employers you work with catch the budget drains before they become larger issues. That’s a big puzzle-solver for organizations looking ahead in another uncertain year.