Healthcare Fraud: Auditing and Detection Guide, 2nd Edition

The Employer/Plan Sponsor

Who Is the Employer/Plan Sponsor?

An employer is a person or entity that hires employees. As part of its employment offering, an employer provides wages to the employees in exchange for their labor. In addition to wages, an employer may offer employees healthcare benefits. Our previous discussion included the history of this offering. The specific type of employer, in our first example, is a self-insured employer. This type of plan sponsor is typically a third party in the process. Historically, a self-insured employer is not directly involved with the claims processing of its employees’ healthcare services. It typically contracts with a TPA, which then acts as the conduit for the process. With the rising cost of healthcare, a future market direction would be to watch employers actually take the TPA function in-house.

The second type of plan sponsor is an insurance carrier that sells health insurance directly. When employers purchase health insurance rather than take on the risk by being self-insured, they typically provide demographic information to the insurance company. The carrier determines rates based on this demographic information. The rates reflect the level of risk the insurance company plans to take with respect to that employer’s employee population. Variations of a plan-sponsored group are programs offered through an association, such as AARP or other member type organizations.

Other participants in the development and coordination of a health ...