City of Lubbock Seeks Health Insurance Audit – Does TPA Have Veto Rights?

The City of Lubbock is seeking proposals for “Self-Insured Health Care Claims Auditing.” Will the city’s contract with third party administrator allow for audits, and if so, under what parameters?

For example, a careful review of a BCBSTX ASO contract reveals a common thread we see in most ASO contracts we have reviewed in the past which reads  “If you want to audit us, this is the way you will do it.”

Below is an actual audit clause in a TPA’s contract:

“Audit And Correction Of Audit Errors: During the term of this Agreement and within one hundred eighty (180) days after its termination, the Employer or an authorized agent of the Employer (as mutually agreed to by the Claim Administrator and the Employer), may, upon ninety (90) days prior written notice to the Claim Administrator, conduct reasonable audits of the Claim Administrator’s records in regard to Claim Payments made under the Agreement. 

Audits performed on a contingency fee basis will not be allowed or supported by the Claim Administrator.

All such audits shall be subject to the Claim Administrator’s external audit policy and procedures, a copy of which shall be furnished to the Employer up0n request to the Claim Administrator.

The Claim Administrator shall be responsible only for the correction of errors identified in specific claim payments subject to the terms and conditions of the Agreement and shall not be responsible for errors calculated to exist in a population of Claim Payments on the basis of a sample drawn from that population. Further, the Claim Administrator has the right to implement reasonable administrative practices in the administration of this Agreement. Minor deviations in claim payments from the provisions of the Agreement as a result of such reasonable administrative practices shall not be considered errors.”

Molly Mulebriar, expert forensic auditor, offers the following comments:

“Translation – You can only audit during the plan year or 180 days after termination with at least 90 days advance written notice. Audits can take a considerable amount of time and this is unreasonable”

“Also, you cannot audit on a contingency fee basis which is the vast majority of audit companies charge in this manner. “

“Also, the audits are subject to the claim administrator’s external audit policy? Basically this is saying if you want to audit us, this is the way you will do it. Basically you can audit this administrator but it will be extremely difficult to fix any audit errors.”

“The City of Lubbock may be in for some surprises here although I hope not. The Risk Manager and support staff are some of the best in Texas.”

Public Notice:

City of Lubbock , TX is inviting you to participate in Bid #RFP 11-10144-DT – Self-Insured Health Care Claims Auditing Services.  

Please click on the link below or enter the link information into your web browser address bar to view the bid.

You have been notified because you have marked the following region, agency type, and classifications as your industry of interest on BidSync:
  Region: Texas
  Agency Type: Municipality
  Classifications: Click on the link below or enter the link information into your web browser address bar to view matching classifications.

NOTE: Currently you will NOT receive Addendum notifications, Question and Answer notifications, or PreBid Conference notifications for this bid. If you would like to change your Notification Preferences for this bid then you must login into BidSync, view the bid, and there you may change your notification preferences for this bid.


 Bid Title:  Self-Insured Health Care Claims Auditing Services
 Bid Number:  RFP 11-10144-DT
 Bid Starts:     May 6, 2011 2:48:24 PM CDT
 Bid Ends: May 26, 2011 3:00:00 PM CDT
 Pre-Bid Conference:   Location:
City Hall, 1625 13th Street , Purchasing Conference Room 204, Lubbock, TX 79401
Will begin on May 17, 2011 10:00:00 AM CDT.
Attendance is optional


If you have any questions regarding this bid, please contact the soliciting agency.  For questions on using the system to respond to the bid, please contact Vendor Support at or 1-800-990-9339.