PAYMENT INTEGRITY PROGRAMS: WHAT EVERY SELF-FUNDED EMPLOYER NEEDS TO KNOW
Healthcare claims are among the most complex financial transactions in any organization’s budget — and for self-funded employers, the stakes are high. Carriers work hard to adjudicate claims accurately, but the sheer volume and complexity of modern claims processing means errors are inevitable. It is estimated that for every $100,000,000 in health spend, overpayments translate to $5,000,000 to $10,000,000+ in waste.1
To address this, carriers have payment integrity programs designed to identify and recover overpayments. These programs go beyond routine random sample audits, which typically capture less than 0.5% of actual claim errors, conducting deeper reviews of claims history to surface additional overpayments. When an error is identified and corrected, carriers take a percentage of the recovered or prevented amount as a shared savings fee and return the remaining balance to the employer group. Fees typically range from 25-50% of the calculated savings amount.
These programs serve an important purpose, and when structured properly, they can meaningfully reduce costs for plan sponsors. However, plan sponsors should understand exactly how these programs work—and what questions to ask—to ensure savings are calculated correctly and fees are assessed only where appropriate.
DEFINING THE SCOPE FOR SHARED SAVINGS
Claims are complicated and can be processed through multiple sequences. As a result, savings may have been reversed and inadvertently not reversed on your shared savings invoice.
Each time a claim is adjusted that is part of these payment integrity programs, it should be tracked to determine if the identified issue should be captured under core administrative claims processing functions or if it reflects a broader issue related to provider submissions.
Contract terms should define how savings will be calculated. For example, savings should be calculated using the “pre-allowed” total as defined by your plan design rather than billed charges. Engage your legal team at contract renewal to ensure you have clarity on your program, ensuring reversal rationale alignment.
CASE EXAMPLE: SAVINGS CALCULATION ERROR
A provider submitted a duplicate bill for processing. Through the post-payment claims review process, the duplicate billing was identified. However, the claims administrator applied the procedure code (95165) instead of the billed amount ($240). As a result, the carrier identified the total savings of $95,165 and collected their percentage.2
SmartLight evaluated the claims details and notified the carrier of the coding error. The carrier agreed this was an administrative error, and returned their shared savings fee, $28,550, to the client.
IDENTIFYING AND CORRECTING THE ROOT CAUSE
Since payment integrity programs are paid at a contingency, carriers may have little incentive to correct the root cause of the issue, and ongoing issues may remain unresolved.
For example, if a provider continues to misbill a modifier code, the carrier should provide education on how that code should be billed instead of collecting revenue in perpetuity. If the provider continues to miscode, the plan sponsor may request pre-payment flags be placed on all of their billed services.
Plan sponsors should hold their carriers accountable for root cause resolution. When enrolled in a Payment Integrity program, the plan should request all data that substantiates the carrier’s evidence that fees are being reduced because the root cause has been resolved.
PROTECTING YOUR PLAN
Self-funded employers carry a fiduciary responsibility to their plan members — and that responsibility doesn’t get delegated away when they sign an administrative services agreement. Employers who want genuine protection should carefully review contract terms and ensure transparent reporting, independent oversight, and audit rights – not simply accept what carriers choose to report.
The bottom line: payment integrity should be a win for the plan—and not just the carrier.
SmartLight Analytics serves as your claims integrity advocate, fighting for every dollar in waste returned to your bottom line.
1. SmartLight internal data; American Medical Association. Per the AMA, more than 20% of medical claims contain errors resulting in billions in annual overpayments.
2. SmartLight Analytics payment integrity program analysis of fees assessed between August 2023 and January 2025.