What Does a Plan Sponsor Look For in a Claims Audit?

Why do plan sponsors audit TPAs?

Plan sponsors conduct a TPA claims audit because they act as the plan's fiduciary and control the plan's funds. Under the Employee Retirement Income Security Act (ERISA), a fiduciary that hires a service provider retains a strict fiduciary duty to monitor that provider. A claims audit provides concrete proof that the sponsor has fulfilled this legal obligation.

Audits are typically executed by the sponsor's internal benefits team, an external broker, or an independent claims audit firm. The administrative services agreement establishes baseline performance standards for accuracy and turnaround times. The audit simply reveals whether the TPA met those contractual standards, successfully implemented new plan designs, or neglected certain processes.

How does a sample-based claims audit work?

Auditors do not evaluate every claim processed during the year. Instead, they draw a claims audit sample divided into two distinct parts: a random sample and a targeted sample. The random sample represents the entire population of claims, while the targeted sample isolates high-risk categories like high-dollar claims, out-of-network billing, and manual overrides.

For each sampled claim, the auditor manually rebuilds the adjudication process from the source material. They verify eligibility on the exact date of service, cost-sharing requirements, accumulator tracking, and pricing validity. The auditor then compares their rebuilt outcome to the TPA's paid result. Only findings from the random sample can be extrapolated to the broader population.

What is the difference between financial accuracy and procedural accuracy?

A self-funded plan audit measures two distinct, equally important metrics: financial accuracy and procedural accuracy. Financial accuracy confirms the claim was paid in the right amount. Procedural accuracy confirms the claim was handled the right way, regardless of the final payment amount.

The two metrics predict different operational realities. Financial accuracy quantifies what the plan already overpaid or underpaid. Procedural accuracy predicts what the plan will overpay next quarter, because a skipped step will inevitably repeat.

What documentation does an auditor ask to see on a single claim?

For every sampled claim, the auditor expects a complete file exactly as it stood when the claim was finalized. TPAs must be able to produce the file a claim should carry when it is released seamlessly.

The standard required documentation includes:

• The original claim, date received, and any resubmitted versions.
• Member eligibility records active on the exact date of service.
• The specific plan document provision and configuration used for adjudication.
• The pricing source (network contract, repricing vendor result, or reference price) and the document that produced the number.
• Pending items (e.g. itemized bills, coordination-of-benefits answers) with precise request and receipt dates.
• Examiner notes indicating who handled the claim and where, along with the explanation of benefits.

Why do claims audits turn into a scramble for TPAs?

Gathering this documentation often triggers a scramble because the necessary records live in disconnected systems. The claim sits in the core system, eligibility history lives in the enrollment platform, and vendor pricing arrives via external emails.

When a TPA reconstructs a file weeks later, sharp auditors easily recognize the post-dated compilation. A compliant audit trail requires records written at the exact time of the action. It must explicitly connect the preparation steps directly to the person who made the final decision.

How does automated claim work change what the auditor sees?

Automated claims processing shifts file preparation from human examiners to software. Consequently, auditors want to scrutinize what the auditor sees when an agent prepared the file, including timestamps, data sources, and the software's step-by-step logic.

Daybook Health deploys AI agents that chase itemized bills, retrieve medical records, and track coordination-of-benefits answers. These agents write the notes directly back to the TPA's claims system so the required audit file is natively generated. The TPA's human examiner releases every claim; Daybook's agents pay or deny nothing. Daybook utilizes a usage-based pricing model per claim adjudicated and assigns a dedicated forward-deployed engineer to handle onboarding.