Health and Welfare Benefit Plans and the Electronic Processing of Benefit Claims

Providers and claims administrators have been processing health and prescription drug claims electronically for years.

When claims are submitted and processed electronically, they are compared with the system parameters which have been programmed by the claims administrator based on the Plan's specifications. If these system parameters have not been programmed correctly, the claim may not be accurately processed.

Generally, the claims administrator is authorized by the Plan to initiate, execute, and account for the processing of electronic claims without specific authorization of the transactions. There is a low degree of interaction usually between the Plan and the claims administrators and it may be practicable for the Plan to implement effective controls over these transactions. After all, the majority of plan assets are spent paying these claims.

The Fund office should have procedures set up whereby periodic reviews of electronically processed claims are made to insure that the accuracy of the claims administrator's system parameters, for things such as deductible and co-payment levels, coinsurance, internal maximums, and so on, are in accordance with the Plan's specifications. The system parameters should also verify that negotiated fee arrangements with providers are followed.

Document Control

As auditors, one of the many things that we pay close attention to is the various Plan documents and service provider agreements all Plans are required to maintain. These documents and agreements are discussed in Section 104b of ERISA and are referred to as Section 104b files.

Most audits by the Department of Labor will involve a review of a Plans Section 104b files. Plan administrators should set up procedures that require the administrative manager of the Fund to provide an annual updated list of important Fund records, particularly Section 104b files.

Trustees should review with particular attention to:

  1. Inclusion of all amendments within preceding year.
  2. Execution of all documents.
  3. Filing or mailing of Summary Annual Report, Form 5500 and Form 990 (Welfare Fund)
  4. Date of most recent Summary Plan Description.
Click here to see a sample summary of Section 104b files.