List Bills vs. Self Bills: Which is Better?

What is List-Billing for an Employee Benefit Plan?

List-billing is the process by which the insurance carrier generates an invoice for premiums and sends the invoice to the employer. The source data from the enrollment system may be manually entered into a carrier website or larger employers may transmit this data directly to the carrier.

The employer is then required to pay the amount stated on the invoice in order to settle the transaction. Most insurance companies bill most employers using a list-bill published to the insurance carrier's website.

What is Self-Billing for an Employee Benefit Plan?

Self-billing is a financial arrangement between an employer and the insurance carrier whereby the employer creates an insurance premium invoice and sends the invoice to the insurance carrier along with the backup detail information. The source data to create the invoice is usually derived from the employer's benefit enrollment or payroll system.

The employer is then required to pay the amount stated on the invoice the employer created in order to settle the transaction.

Differences in Process

The main difference between self-billing and list-billing is who has the responsibility for creating and sending the invoice.

In self-billing, the employer is responsible for creating and sends the invoice, while in list-billing, the insurance carrier is responsible for creating and sending the invoice.

Differences in Reconciliation

The reconciliation process also differs between list-billing and self-billing.

With a list-bill, the employer typically will want to note any variances for timing that occur for new hires or for terminations after the statement generation date and the enrollment and/or payroll system in order to follow up to ensure these are resolved on the following month's invoice. Differences in premiums between the enrollment and payroll systems might also occur due to carrier invoicing the incorrect rates, carrier invoicing calculation errors or with the configuration of payroll deduction and or plan enrollment premium tables.

While Self-Bills may eliminate enrollment and termination timing differences, they do not eliminate system configuration errors, such as lack of payroll deductions, think leaves, missed first or last deductions from partial months of employment. Also, just as the carriers may have errors in their List-Bills you catch, your queries and spreadsheets to create a Self-Bill may also have calculation errors given the complexity of eligibility and possible wash rule algorithms. Lastly, your benefit or accounting team may be unaware that these calculation errors even exist if you are not reconciling these premiums against a third-party invoice.

Conclusion

While List-Bills by their very nature create timing differences, the advantage is that the carrier is required to produce an invoice documenting what the carrier believes you owe and which plans employees are enrolled as backup on the invoice. You can then validate these details against your own systems.

Self-Bills, on the other hand, can help eliminate timing differences but leave you guessing what rates carriers attach or when rate increases may take effect for your plans. Your own Self-Bill programming or spreadsheets could also easily introduce errors you hadn't anticipated until you receive a surprise inquiry from a carrier or worse yet an employee.

In any event, thorough monthly invoice auditing against your enrollment, payroll and your invoices, regardless of who generated them, is a sure, belt-and-suspenders, way to avoid surprises.