Measuring Performance

April 13, 2006

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Whether you outsource your benefits administration or your insurance company does the administration for you, you may want to set up a way to measure your administrator's performance. If so, generally, you will want to watch two areas: timeliness and accuracy. One good way to measure performance is to talk to your employees and ask them if they are satisfied with the service they are receiving.

Negotiating claim payment performance. The term "claim payment performance" refers generally to how quickly the administrator pays claims. Some employers discuss claim payment performance with their administrators; others have specific performance standards put in their contracts. If you have some idea of how quickly you want claims paid, you should ask that your requirements be put into the contract. More specifically, here are some items you may want to monitor:

claims appearing in the system
claims being adjudicated
claims being paid or denied
checks being mailed
phone inquiries being handled
claim payment accuracy percentages for dollar amounts

Using data analysis. Any administrator should be able to offer you a package of information that will help you measure your plan's effectiveness. For an additional fee, most will provide you with a customized package. Obviously, most of this information will be available only after you have been using the administrator for at least a year.

This information should help you determine the following:

Whether current costs exceeded last year's costs, and, if so, by how much and why.
What types of costs are being incurred and where employees are being treated.
Which doctors or hospitals offer the most cost effective treatments.
Which cost management or prevention provisions are effective in saving money.
Which providers your employees prefer.

You should also be able to compare your employees' experiences against other employees' experiences. Ask your administrator whether it can deliver such a report to you. The report should allow you to break down the comparison by geography and by industry.