Many organizations are expanding their benefits offerings to compete for scarce talent. While effective as a recruiting and retention tool, that strategy also can prove costly if HR and benefits leaders don't protect against a growing problem: cost "leakage" from billing errors that often are discovered too late because of outdated auditing or reconciliation processes.
A study from Aberdeen Research found that up to 15 percent of invoices from benefits carriers contain serious errors, and some benefits experts believe that number to be higher. Trevor White, a research manager specializing in benefits management and HR technologies for Nucleus Research in Boston, said his research found that the error rate can be as high as 25 percent on some open enrollment applications.
When you consider the continuous stream of life- or career-change events that trigger benefits changes—and the chance for invoicing or eligibility errors originating either from the client or benefits carrier side tied to those events—the accumulated costs for such leakage can run into the millions for larger companies, experts said.
Mistakes also can create regulatory compliance issues, such as those that impact a worker's ability to receive required medical coverage.
Changes to benefits tied to onboarding, pay raises, policy renewals or offboarding—as well as life changes like marriage or childbirth—typically require HR and benefits professionals to reconcile premium invoices from benefits carriers and ensure employee enrollments and payroll data are accurate. Much of that work still happens manually.
"The issue of benefits cost leakage is a bigger problem than many realize," said Rhonda Marcucci, vice president and HR and benefits technology consulting practice leader for Gallagher, a consulting and risk management firm in Chicago. "There often are both cost calculation or benefits eligibility issues."
Marcucci said sometimes benefits carriers calculate rates incorrectly or send inaccurate employee payroll deductions to client companies. Other times organizations might pay a carrier's bills but never check, for example, to ensure employees who are no longer on benefits plans officially have been removed from those plans. One example is employers who continue paying benefits premiums for terminated employees because those employees are mistakenly kept on plans.
"On the calculation side, I've seen errors happen both ways," Marcucci said. "I've seen the client company pay too much and also too little to the benefits carrier. Eventually someone will catch the error, but by then it creates problems."
Correcting such errors after the fact has its own costs, as money can effectively be tied up for extended periods, impacting the bottom line. "Every dollar wasted on these errors is a dollar that could be better spent on employees' health care plans, and every error erodes trust," said Dan Anastas, vice president of total rewards and HR operations for UiPath, a technology provider based in New York City.
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How Automation Can Help
Although many companies use integrated platforms to send HR data between themselves and their benefits carriers, that process still usually requires reconciliation of benefits premium invoices. In many cases, HR or benefits specialists conduct that reconciliation on spreadsheets.
Experts say that whether it's a specialized benefits administration platform or a solution like robotic processing automation (RPA), the use of technology often can help perform those audits faster and with greater accuracy.
"Broadly speaking, what we see when organizations move from a simplistic benefits system to an automated benefits system is a reduction in errors ranging from 50 percent to 60 percent," White said.
For example, the "bots" used in RPA can automatically download and compare benefits billing data and identify discrepancies across different enterprise applications and systems.
"There are a number of companies who use RPA to compare bills from the carrier to the data in their benefits administration system," Marcucci said.
Anastas said his organization uses bots to check the accuracy of carrier invoices. "Automation can be set up to read the invoice, log on to your HRIS [HR information system] or benefits administration system, pull the number of enrolled employees in each plan and compare them against the invoice, for example."
Bots also can be created to automatically approve invoices or enter information into an accounts payable system when invoice data in the two systems matches up. "Otherwise, if there is a discrepancy, the automation can notify you or send a prewritten e-mail to a billing specialist or account manager notifying them of the problem," Anastas said.
In addition, RPA can be used to check time-sensitive payroll data to ensure no benefits changes are missed or incorrectly loaded.
"The automation acts as a second pair of eyes to our payroll team to catch discrepancies before they become payroll errors," Anastas said. "The automation also is able to check every single item on the entire payroll, something the payroll team wouldn't have the bandwidth to do on its own because of the large volume of data."
Forrest Whyte, vice president of total rewards and HR technology for Automation Anywhere, a technology company in San Francisco, said he uses automation to proactively protect against benefits cost leakage and ensure more-trusted integrations between his company's HR data and benefits vendor systems.
Whyte said he's found that systems integrations with some benefits providers' platforms can become less reliable over time.
"We've found the data being received and interpreted downstream by a benefit carrier's platform was usually accurate when an integration was created, but over time something changed in the system, meaning the data that ended up in a carrier's system wasn't what we wanted it to be," Whyte said. "So we decided to use bots to audit those integrations, which allowed us to more easily compare what's in our system to what's in the carrier's system in real time."
It's important not to take for granted that benefits data is being transferred accurately and on time, Whyte said. "That's particularly key in areas like employee terminations, where it's important that benefits transactions get turned off when they should be to avoid overpaying when it's not needed," he said.
Marcucci said it's rare that benefits technology included as part of broader human capital management (HCM) platforms has the functionality or sophistication to match specialized benefits administration platforms.
"Sometimes the benefits functions on HCM platforms have trouble performing calculations correctly," she said. "That's in part because of the technology and in part because those who implement HCM systems don't always have specialized benefits knowledge."
The judicious use of technology can help free up time for HR and benefits staff for more-strategic work, experts say. Nucleus Research found that benefits administrators spend 45 to 120 minutes processing each new employee benefits activation and up to three full workweeks (120 hours) to complete benefits enrollment every year.
"By using technology, organizations can expect to recover between 70 percent and 90 percent of that administrator time, which we view as another cost area," White said. "Whether it's the use of RPA or something as simple as an integrated general ledger, the less times employees and administrators have to touch data, the better off organizations usually are."
Dave Zielinski is a freelance business writer and editor in Minneapolis.