Authored by Nicole Olszyk

As a broker partner, many of the ongoing conversations you have with your clients are crucial to ensuring their employee benefits program is successful. There are always the typical renewal season type questions around cost, employee satisfaction with the program and plan selection, but there are other gaps you should consider filling. The most important being around compliance and administration to assist in reducing the amount of risk their benefits plan could create.

There are inherent risks with any employee benefits program. These risks include things like compliance, cost control, administration and communication, but below are a few risks you may not be considering and ways to mitigate them.

Enrollment and premium errors

Enrollment errors can come in many forms and each can have different consequences for you or your employees. These types of errors include:

• Enrolling someone in the incorrect group
• Enrolling someone in the incorrect plan with a carrier partner
• Eligibility (EDI) files not operating correctly or timely
• Response times lagging from not having access to the correct space to resolve issues for employees
• Bill miscalculations from self-administered invoicing

An example of this are self-administered benefit plans with complicated premium calculations, such as long-term disability. These can become quite complicated when invoices are prepared internally and if the calculation isn’t being verified by management or the carrier, your client could be overpaying or underpaying disability premiums to the carrier.

While enrollment errors may happen infrequently, when they do happen, they require a lot of time to correct. So, what can you do to mitigate these risks?

• Trusted EDI integration with your carrier partners: From the enrollment system, building those files for your carrier partners to enroll, disenroll or change employee records can reduce the number of errors for enrollment. Be sure your clients are reviewing fallout regularly.
• Centralized enrollment platform: Having a “single source of truth” for enrollment information and not having to switch between systems for different enrollments for different benefits reduces enrollment discrepancies.
• Access with carrier for immediate issue resolution: If a client is working with a third party for enrollment, there may be a time when you need something immediately or have an issue that needs to be resolved — do they have access to the carrier or to the system to resolve that issue in a timely manner?
• Sound audit procedures: If your client is trusting a third party or have someone doing these practices in-house, having an audit procedure for these practices is recommended to catch errors or discrepancies before they snowball. These audits include:
  • Monthly reconciliation of carrier invoices
  • Quarterly audits of self-administered plan enrollment
  • Claim data audit
  • Verified billing processes

Covering ineligible dependents

It’s important to ensure that client employees are aware of who they can cover with their benefits and are educated in the process. It’s equally important to ensure that there are systems in place to catch errors that may occur when employees try to cover dependents that are ineligible.

To reduce the opportunities for employees to add ineligible dependents on the plan, you can:

• Complete a comprehensive dependent audit: Ensure there is documentation on file for each dependent listed, to check that each dependent listed is in fact, a qualified dependent per the plan. It’s best to start this process during open enrollment and then a formal dependent audit can follow in the plan year.
• Ensure ongoing validation for new hires or life event changes: Ask new hires or employees who went through a life event change for the appropriate documentation during “off-season” enrollment or life event changes.
• Have an online tool for upload and retention: Easy tools to submit the documentation makes the process easier for everyone involved.
  Create an administrative practice for removal of aged out dependents: Ensure you have an administrative practice to determine which children are aging out of the program, so you can be timely but also give employees and their removed dependents a heads up and time to make other arrangements.

COBRA administration

Most often, we are relying on a third party to handle our COBRA administration. In doing so, consider who this population is — likely to include high claimants who value their coverage and are high utilizers, but are a small portion of the population. It’s worth looking at this group carefully to determine accuracy and if they’re abiding by COBRA regulations.

To ensure your COBRA administration is running soundly, consider:

• Consistent and compliant enrollment processing: Periodically sampling the notices the COBRA administrator has issued: who is enrolled and did they do it in the required timeframe as well as ensuring the COBRA administrator isn’t taking late payments or late enrollments that could compromise your client’s benefit plan.
• Payment processing: What are the COBRA administrator’s payment processing rules and deadlines? Are they in agreement with your philosophies? Are they strict enough to ensure your client is not keeping people on the plan longer than they should be kept? What are their appeal procedures for late payments? These are all the things you should review with your COBRA administrator as well as periodically sampling the population to see how they’re administratively being handled.
• Advisement and decision-making support: Ensure your COBRA administrator isn’t just a payment collections agency but is able to assist your client in partnership with you, the broker, and legal counsel, ensuring all parties are involved in advisement and the decision-making process.
• Regularly reviewing the population and audit against carrier COBRA subgroups: This should be part of the reconciliation procedures for any enrollment.

Uncollected contributions

Uncollected contributions are another small population and include leave participants or employees who miss a paycheck because they didn’t work enough hours. This could represent a significant value if you’re not collecting these contributions in some manner.

To collect missed contributions in real-time, you’re going to actively look for the scenarios where there could be missed contributions due to paid or unpaid leave and properly identify any missed contributions. Once identified, bill and collect for them through either your client’s in-house process or COBRA administrators offer this as part of their services. You’d also want to make sure your client has a policy regarding employees who do not return and the procedure for transition to COBRA is handled consistently.

Make sure you’re thinking about how your clients are handling unpaid contributions and making sure they’re accounted for, so that if this situation arises you can help, and they’ll know exactly what to do about it.

ACA compliance

This was a hot topic for a few years, but now that most employers have settled into a routine with ACA, it may be taking a back seat to other issues. It’s important to remind clients, however, that this is something that should be reviewed annually to ensure they’ve got sound procedures for complying with ACA every year.

You’ll want to:

• Reassess minimum essential coverage and affordability requirements with your client to ensure you’re offering and maintaining the minimum essential coverage.
• Know how your client is tracking variable hours. Have they had any changes to their population where they would need to reconsider their process and adjust based on business changes?
• Know how they’re handling their form and filing issuance. Are they partnering with a third-party administrator or doing it in-house? If they are doing it in-house, are they doing it correctly? These processes are something you’d want to consider annually and ensure everyone knows their ACA reporting obligations.
• Ensure integration of non-active members into the reporting. Ensuring COBRA participants or retirees are included in the data.
• Understand state-specific requirements. Your clients might have state-specific requirements that will need to be reviewed annually.
• Seek expertise in ACA compliance so your clients become and/or remain compliant.

Pre-tax account forfeitures

Something we can all take for granted as long as the pre-tax program is running smoothly – it can be easy to forget there’s a lot of money at stake for the plan and individuals if they don’t adhere to the appropriate program deadlines.

Clients should pay particular attention to:

• “Use it or lose it” accounts year-round: FSAs, HRAs, commuter accounts. Get balance reporting on those regularly – monthly or quarterly – so there isn’t a year end or plan year closure report that you’re surprised by for better or for worse. Typically, an FSA account forfeiture runs about $147 per participant that forfeits. It’s also important for clients to provide inspiration for spending for these types of accounts to help mitigate some panic on their employees part when they’re told they’ve got a balance and need to spend it before year end.
• Balances: Communicate to participants with balances so they can’t say they weren’t informed that they had to spend their money before they lost it. Make sure plan rules are clearly communicated ahead of time and regularly, as well as any deadlines as they are getting closer.

Lessons learned

It’s important to understand all aspects of the benefits program your client in running and what could go wrong so that you’re prepared to jump in and reduce the chance of an issue for your client. Assess the program as a whole and look at the benefits individually to identify the risk associated with each and how to prevent it. Know the partners that you’re working with, double check the work always, and don’t slip into complaisance with third party administrators. Compliance oversight is important, but equally important are the administration practices that ensure accuracy of enrollment, coverage and premiums. Inspire your clients to really dig in and understand their program and ensure it’s working the way it’s supposed to be and accurate all year round.

For more information on benefits administration risk mitigation, check out our recent webinar: