In order to properly manage a health plan, the plan sponsor and its board need to receive a good deal of financial and non-financial data. (To the extent possible, the non-financial data should be integrated with the financial data.) This information needs to be accurate, timely, in context, and appropriate in order to properly manage the plan. Board reports will come from many sources –accountants, actuaries, third-party administrators, and pharmacy benefit managers – so compiling this information into a concise reporting package is often difficult.
Reports that provide too much detail are ineffective because board members will often get lost in the details, or worse yet, not even read them. Providing too little detail will not give the board members enough pertinent information to evaluate performance and make appropriate decisions. Board reports should be clear, concise, and complete, and in most situations, this can be achieved by keeping individual subject matter reports to no more than three pages.
The board chair will manage the agenda, which generally remains consistent from meeting to meeting, to set the tone and serve as every meeting’s foundation. An effective agenda highlights the topics that will be covered – including the information that should be reviewed in advance – and indicates what actionable steps to take after the meeting. The board secretary typically compiles the board package and sends it to members prior to the meeting.
The board package will include, among other information, the plan’s detailed financial performance, healthcare claims analytics, plan trends, funding level, and performance guarantee reporting.
Financial Reports
These reports detail the financial position and plan operations results. It should contain sufficient detail to support KPIs but not so much that it becomes unwieldy. A monthly cash basis balance sheet, and income statement with prior period comparable numbers and budgets, is a must. Additional plan demographics are also helpful to interpret the information presented, and significant variances should be explained. At least annually, an accrual basis balance sheet and income statement should be provided in the format described above. If accruals are significant, the board should start obtaining this information quarterly.
Healthcare Claims Analysis
Standard claims data analytics and KPI reporting are necessary to meet the board’s objectives. Reporting can vary greatly and will depend on the oversight and monitoring process of the board. Some common reporting includes provider network assessments, utilization reviews, monitoring of high cost claimants with chronic healthcare conditions, and wellness program effectiveness. Certain reports will be provided as standard monthly reports, while others may be ad hoc in nature.
Trend Reporting
The board must understand and monitor the plan’s healthcare trend rate to properly project its short- and long-term funding needs. The historical plan trending rate should be benchmarked against industry averages to set reasonable expectations for future trends. Trending reports may also be useful in assessing the success of various cost containment initiatives undertaken by the plan.
Funding Reports
The board is responsible for ensuring the plan has adequate funds to pay current and future benefits. Monitoring funding monthly allows the plan sponsor to make slight changes when necessary, and mitigate the risk of significant unexpected fluctuations in funding obligations.
Performance Guarantee Reporting
Each quarter, the board should review performance guarantee reports to monitor vendor performance against the plan’s contractual standards and established expectations. These reports will alert the board to substandard performance so it may react in a timely manner.
The board chair plays a vital role in making sure the board members have timely, relevant, clear, reliable, and integrated reporting to manage the plan and properly evaluate risks, opportunities, and challenges for strategic planning purposes. Therefore, the chair should periodically evaluate the reporting to make sure it continues to satisfy the board’s needs and make any necessary adjustments.
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About the Author:
Jamie Bartynski, CPA, MBA | Manager
Jamie provides assurance and compliance services to large and jumbo self-funded health and welfare plans. As a Certified Public Accountant, she has vast knowledge in the areas of GAAP, GAAS, and ERISA matters for single, multiple, and multi-employer plan sponsors. She often shares her expertise in these areas in nationwide publications.