The ancient Roman philosopher Virgil once said that “The greatest wealth is health.” There’s a lot of truth in those words. Many companies, large and small, invest heavily in resources to attract and retain top talent and provide benefits that keep those employees and their families happy and healthy. According to a study conducted by SHRM, more and more companies are focused on providing a broader benefits package, with one-third of companies surveyed saying they had increased their benefits offerings in the previous 12 months to better compete for talent.
It can be challenging for employers and HR teams to manage rising benefits costs and to also keep track of all the regulatory requirements and deadlines. Offering and managing benefits feels like an expensive, uphill climb for many. With all the vendors, carriers and third-party administrators involved in offering benefits, mistakes and errors occur relatively frequently. In an effort to minimize errors, many companies conduct a monthly benefits reconciliation audit to ensure carrier records match employee enrollments and payroll deductions. However, in many cases the process is manual, time-consuming and doesn’t always catch all errors.
A common mindset among benefit administrators is that “manual reconciliation is better than no reconciliation at all,” but unfortunately the manual way of reconciling can carry hidden dangers that companies would do well to avoid. Here are some examples.
Costly Errors and Mistakes
In a perfect world, when employees enroll in benefits all of their elections are accurately reflected in the carrier invoices, and those elections line up perfectly with payroll deductions. Unfortunately that’s just not the case, and costly errors can be a regular occurrence, creating headaches for employers, HR staff and employees. A study by Aberdeen Group says 12-15 percent of all benefits carrier billing contains errors. In a company with 250 employees receiving benefits, billing errors could amount to over $250,000 a year.
A blog post by my company, EverythingBenefits, explains the cost of employee benefits to help calculate your company’s potential liability. There are a number of problems that could be difficult to spot when reconciling benefits manually. For instance, one HR professional we interviewed shared an error he encountered by chance: “Some employees had enrolled in a particular plan, but it wasn’t reflected with the insurer. Employees thought they had coverage and were having payroll deductions, but the deductions didn’t match what the insurer was billing us.”
In another instance, a new benefits manager uncovered that her employer was paying for the benefits of terminated employees: “I took over invoice reconciliation from the previous benefits manager, who was using paper and a ruler to reconcile. I found multiple discrepancies, including that terminated employees were still enrolled in health plans. It took months to clean up the data.”
Inefficiency and Wasted Time
Performing a manual, line-by-line reconciliation of carrier invoices, coupled with matching to employee enrollments and payroll deductions, is a tedious task. For companies with more than a handful of employees, monthly reconciliation might seem possible but can take several hours to complete, with no guarantee that the output will be accurate. Some companies, due to lack of resources, don’t even attempt to do it at all. The reality is that benefits reconciliation is necessary to ensure errors are caught and resolved, but a manual audit is highly inefficient and much too labor-intensive.
Not only does manual benefits reconciliation take time away from already-busy HR and benefits professionals, it’s just not as accurate as an automated benefits reconciliation solution. Human error can be an issue, particularly when there are multiple benefits options and employees are enrolled in a range of coverage levels.
Regulatory Compliance Liability
Regulatory compliance is a real concern for companies when it comes to the challenges of managing benefits. No one wants to run afoul of a compliance audit, or face reputational risk if an error affects an employee’s ability to get necessary medical care. A recent workplace benefits study by Guardian found that 60 percent of employers feel overwhelmed with the increased complexity of managing their benefits programs, and 70 percent believe they’re unable to keep up with changes to laws such as the Affordable Care Act, paid parental leave laws, FMLA, ADA and COBRA. For many companies, manual benefits reconciliation can end up exacerbating the problem, potentially putting the company at risk for regulatory fines or a lawsuit if certain errors are overlooked or not corrected in time.
An Alternative: Improve Benefits Administration with Automated Reconciliation
Benefits reconciliation is entirely necessary, because it ensures that enrollments, payroll data and benefits invoices are accurate and in sync each month. Fortunately, with modern automated benefits reconciliation technology, time-consuming manual processes are no longer needed. In a few mouse clicks, reconciliation of carrier invoices, payroll data and employee enrollments can be done in near real-time.
When it comes to ensuring billing accuracy and better understanding benefits spend, automated benefits reconciliation is a best practice for HR organizations supporting companies of any size. It eliminates benefit contribution errors and other costly mistakes, delivers regulatory peace of mind and helps to provide an improved benefits delivery experience for all.
This post is sponsored by EverythingBenefits.
Through next-generation technology, EverythingBenefits helps companies simplify the complete employee benefits cycle through market-proven enrollment and administration solutions. Our technology can seamlessly integrate with existing HCM platforms, payroll providers and internal company systems to bring greater efficiency and transparency to benefits management. Contact us to learn more about our solutions that make benefits simpler, more rewarding and more enjoyable.