In the intricate world of employee benefits, navigating the financial language between insurance carriers and employers can sometimes make you feel like you need a Duolingo course. The terms “list bill” and “self-bill” can be particularly confusing. Here we will break down the differences, uses, and implications of each as related to employee benefits premium billing.
What are List and Self-Bills?
List Bills
Created by the insurance carrier, these detailed invoices itemize each enrolled employee, their chosen coverage, and the corresponding premium.
Self-Bills
Instead of relying on the carrier, employers generate the premium invoice, drawing on their own enrollment data and the insurer’s rates. Like the list bill, the information includes each enrolled employee, their chosen coverage, dependent information (where applicable), and premium amount for the designated period.
List Bills: Carrier-Generated
Who uses list bills?
Most companies, especially smaller ones with limited administrative resources, rely predominantly on list bills. While employers are required to enter employee enrollment activity in the carrier’s portal, or on paper, the carrier is responsible for the billing calculations. This can be convenient, especially for businesses with simple employee benefit structures and low employee turnover.
Why use list bills?
- Convenience: As long as the employer provides accurate and timely input regularly, the carrier handles all the billing legwork and claims payments.
- Transparency: The bill outlines the total premium amounts due that period for the specified coverages.
- Adjustments/Changes: Bills are paid as invoiced, with any adjustments or changes being reflected in the following billing period.
What does utilizing list bills mean for monthly premiums?
List bills reflect the premiums established by the insurance carrier, with little flexibility for the employer. Any negotiated rates are factored in by the carrier. Any employee life events that take place are reported to the carriers as they occur or by submitting the adjustment as part of the payment submission. The carrier has the responsibility to update their records in a timely manner. Once the carrier’s system is updated, the company should be credited or charged an adjusted sum on the next billing cycle. The accuracy and timeliness of this process are critical. However, it is frequently out of sync.
For companies reconciling list bill employee benefit premiums manually, two comparisons are required. The first compares last month’s enrollment with the current month’s enrollment. The second compares the current month’s enrollment data and premium with the carrier invoice’s data. HR professionals carry the burden of identifying any reporting discrepancies to each benefit carrier, which drives the billing process.
In addition to comparing enrollment and carrier data, employee payroll deductions play a role in funding premiums. Synchronizing the payroll deductions is another area of complexity, which we’ll dive into in another article.
Advantages of list bills:
- Simple and straightforward: The carrier performs all the calculations and sends the final premium amount due for that period. Best for companies with limited administrative resources.
- Minimal risk: The financial responsibility for claims rests with the carriers.
Disadvantages of list bills:
- Lack of flexibility: Employers have little control over the timeliness of updating invoice data and premiums, potentially creating service delivery and claims processing issues for the employees.
- Potential for errors: Discrepancies do occur, requiring reconciliation efforts, including multiple communications to resolve the issue with the carrier.
- Limited transparency: Employers may not have detailed insights into premium calculations at the individual employee level.
Self-Bills: Taking the Reins
In the world of self-billing, the employer reports employee benefits coverage data and calculates the invoice based on their employee data, plan information, and activity. They create their own monthly bill and submit the premium amount they have calculated.
Who uses self-bills?
Larger companies with established administrative systems often use self-billing on most benefits plans. It allows for greater control and flexibility, particularly for companies with complex benefit structures and higher levels of employee changes and turnover. It also enhances their cash flow management.
Employers who have embraced self-bills often hire Third Party Administrators (TPAs) to provide administrative services. This streamlines the interaction between claim payments and the billing process.
Why use self-bills?
- Control and flexibility: Employers and TPAs have greater control over data accuracy and timeliness, bill calculations, and timely adjustments.
- Payment Timeliness: Self-billing allows companies to reflect adjustments within the month they occur.
- Data insights: Employers gain deeper insights into employee activity (i.e. internal transfers, retention churn, demographics) and plan costs and utilization.
What does this mean for monthly premiums?
Self-billing allows employers and TPAs to factor in changes within that billing period. When an employee experiences a life event that causes a change in their benefits, companies that self-bill are able to update their records and adjust benefits premiums the month of the event.
For companies reconciling employee benefit premiums manually, those with self-bills require only one comparison per plan. They compare last month’s enrollment with current enrollment to identify month-over-month changes. Any discrepancies in data and premium can be immediately realized in the amount of premium paid each month and sent to the carrier.
Advantages of self-bills:
- Cash management: Ability to make adjusted payments (credits and debits) in the billing period they occur.
- Greater control in payments: Employers have the most timely enrollment data to use for billing.
- Simplified reconciliation: reconciling month-over-month activity vs. reconciling enrollment data to the current carrier invoice.
Disadvantages of self-bills:
- Increased workload: Requires knowledgeable staff and resources for data management and billing processes.
- Potential for disputes: Disagreements with carriers over rates or calculations may arise, (generally at the beginning of the plan year).
Choosing List or Self-Bill
The choice between list bills and self-bills depends on your company’s:
- Size
- Administrative Resources
- Desired Level of Control
- Your selected Vendors
List bills offer a convenient and reliable solution for smaller companies or those with limited resources.
However, larger companies with dedicated employee benefits teams and complex benefit structures may benefit from the flexibility of self-billing.
Ultimately, the best approach is the one that aligns with your company’s specific needs, resources, and risk tolerance.
To Note – The presumption is that your company is actively managing your benefits data and premiums to keep your “golden source of truth” in sync with carrier claim payments and billing. At AdminaHealth, the majority of our new clients haven’t necessarily built the on-going audit discipline required to keep benefit delivery to employees accurate and timely. Many are surprised at the advantages once they implement this regular practice. In addition to operational efficiency and savings for their companies, their employees greatly benefit from improved service delivery, which hinges on accurate and timely enrollment data and premium billing administration.
Streamline Employee Benefits List and Self-Bill Administration with Technology
Did you know that with the AdminaHealth Billing Suite, you can automate both list and self-bill reconciliation for both employer-sponsored (section 125) and voluntary benefits? Let our software catch inaccuracies and identify life events and changes, saving time and empowering HR teams with greater efficiency and accuracy with a single platform to synchronize billing data, reconcile, report on, and pay for benefits.
AdminaHealth clients can testify to the material time savings they have experienced: weeks of effort are reduced to hours. Click here to download our recent case study where Leading Edge Academy went from 27 hours of benefits billing administration a month to one to 1.5 hours.
Start regularly reconciling to improve accuracy, control your benefits budget, improve service delivery, and know you are paying the right amount for employee benefits premiums.
Start a conversation today!