Business Situation
An employer in the healthcare field with 4,000 employees partnered with Lumelight experts to conduct a post-implementation medical claims audit of its PPO health plan, administered by their new third-party administrator (TPA). The objective was to ensure that all benefit configurations aligned with the intended plan design documented in their Summary of Benefits and Coverage (SBC) and the Summary Plan Description (SPD).
Objectives
- Validate benefit setup accuracy across multiple PPO plan tiers
- Verify the application of deductibles, out-of-pocket maximums, copayments, and exclusions
- Confirm plan compliance with state mandates, where applicable
- Identify discrepancies between plan documentation and claim adjudication outcomes
Solution
After review of the plan documentation, Lumelight auditors developed and tailored over 400 claims scenarios to test a comprehensive range of benefit areas, including limitations, authorizations, exclusions, deductibles, out-of-pocket (OOP) maximums, and custom plan provisions.
All claims were evaluated in a live environment alongside the third-party administrator (TPA), without any pre-processing, to ensure an accurate assessment of real-time adjudication behavior. The audit included detailed validation of both individual and family-level deductibles and OOP maximums, as well as key plan rules.
Audit Findings
Twenty-two (22) inconsistencies between plan documentation and system setup were discovered in the audit process. These include:
- State Mandate Adherence
State mandates were applied inconsistently with ERISA expectations for self-insured plans - Preventive Services Coverage
CPT codes like 81000 (urinalysis) and G0403 (EKG) were processed with cost-sharing instead of 100% coverage, depending on the tier and documentation referenced - Mental Health & Substance Abuse Services
Copayments were not applied as described in the plan documents; services were paid only after the deductible - Women’s Health & Contraceptives
SPD references were inconsistent or unclear across different plan levels - Special Procedures
Services like TMJ treatment, bariatric surgery, infertility, and cochlear implants lacked consistent benefit level mapping in the SPD - Facility-Based Variances
Copays for various inpatient stays were waived, contradicting SBC information
The audit also confirmed the following:
- System Integrity – No programming errors were found; most claims were auto-adjudicated correctly.
- Accumulator Tracking – Deductibles and OOP maximums were correctly configured.
- Copay Policy – Properly excluded from standard OOP but applied to maximum OOP limits.
- Manual Processing – Required only for a few specific services.
RECOMMENDATIONS
- Update documentation to reflect true intent and maintain consistency between SBC, SPD, and system configuration.
- Clarify place of service policies by defining whether benefit levels differ based on service location (e.g., office vs. outpatient).
- Resolve Plan Intent Conflicts: Determine correct benefit levels for flagged services (e.g., wigs, hospice, vasectomy, gender dysphoria care).
- ERISA Review: Evaluate if the plan is exempt from certain state mandates and update plan administration accordingly.
Audit Outcome
The post-implementation medical claims audit validated the robustness of the third-party administrator’s (TPA) claims system for the employer’s PPO health plan, confirming benefits compliance. However, the audit revealed multiple inconsistencies in benefit interpretation, claims processing, and plan compliance with ERISA and applicable state mandates. Through this independent testing of the TPA’s setup, the employer identified, corrected, and ultimately prevented future costly mistakes while ensuring accuracy for their health plan members.
