Nov 9, 2021

Benefit Plan Invoices:
Why They’re Different And Why You Should Care

If you’ve been involved in projects to automate US benefit plans, chances are that you’ve had to think about the back-end processes of gathering, reconciling, and paying carrier premium invoices.  As you might have discovered, benefit plan invoices are a different breed from your typical accounts payable invoices due to a combination of rules, processes, and systems involved.

Not Your Traditional Process

Benefit plan invoices start their journey from an employee facing benefit enrollment platform unlike traditional accounts payable invoices that start in large companies with a purchase order system.  These enrollment platforms allow employees to compare and elect, through a self-service portal, various employer sponsored and voluntary benefit plans. Many of these platforms also generate anElectronic Data Interchange (EDI) enrollment file to carriers.

Moreover, once EDIs are received, carriers pull enrollment EDI data into an eligibility platform and then into  (accounts receivable invoicing) platform where rates are applied.  This two-step process, between systems that can be dated, creates the employer invoice that is posted to the carrier website portal or mailed back to the employer for payment.

Pay In Advance Rules

In most cases, carriers generate invoices in advance of the policy period, which can cause timing differences or“In-transit” items that require reconciliation when an invoice arrives.   Timing differences can occur because of new hires, terminations, life-events, and employees still on a plan underCOBRA.  Timing differences need to be tracked to reconcile that the employer has received the corresponding adjustments and that they have been applied to future invoices.

Correction Rules

Another area where benefit plan invoices are distinctly different from traditional accounts payable invoices is when it comes to invoicing errors.  With benefit plan invoices, insurance carriers have rules around the amount of time employers are allowed to correct errors. This adjustment period, usually 60-90 days, is often cited by employers as a significant source of premium overpayment and write-offs if employees are not properly terminated in their platforms.  Tracking who is on the carrier platform versus who you believe is enrolled in benefits is one of the main reasons large employers may still require carriers to generate an invoice long after carriers may offer self-billing options.  

Too Many Systems...Too Little Time (To Audit)

Because premium rates are adjusted annually by carriers, carriers can having keying errors when entering rates on their billing platforms, can attach an incorrect rate table or have system that update rates incorrectly. Similarly, employer’s can enter rates incorrectly into their enrollment or payroll platforms. COBRA Administrators may also not receive rates in time for the participant notifications for a new plan year or may not track termination payments correctly.  

Why HR & Benefits Care

While these differences can cause premium variances to be over or under collected from participants and over or underpaid to carriers.  Either way, an employer may have possible financial and compliance liabilities not reflected on the books. That’s why HR and Benefit professionals are at the start of the process.   

Many of these reconciliations are performed by the Benefits or HR teams before the internal Accounts Payable team begins their payment process.  While HR tends to have the knowledge of benefit plan rules, the toolsets, which usually consist of a spreadsheet, don’t lend themselves well to such a complex matching of data between carrier, COBRA, payroll and enrollment systems.

Dealing With Complexity

Processes to combat the complexities include reviewing system setup and creating tight version controls of rate and rule documents.  Starting with good business process maps and looking at each process with an eye toward responsibilities is critical.  Ask you internal team and external vendors to weigh in on these processes to continue streamlining is also a must. Try automating, to the extent feasible, the processes that are repetitive and tedious in nature. RoboticProcess Automation (RPA) may be part of the answer. 

All in all, benefit plan invoices can be tricky with the processes, rules and systems not following traditional accounts payable workflows.  Consider automating as much as you can and put together auditing procedures to help validate data and systems before you begin to rely on them.  

For more information about these processes, visit our benefits reconciliation page