The True Cost of Carrier Self-Reporting: What the Data Actually Shows

99% accuracy claimed. 1.4% errors admitted. Millions missing. Do the math.

UnitedHealthcare recovered $922 million for self-funded clients in 2022. Sounds impressive — until you read the footnote. UHC kept 25 to 35 percent of those recovered dollars. That's as much as $323 million extracted from the very plan assets it was hired to protect, routed through a bulk cross-plan offsetting system that commingles your funds with every other employer they administer.

That same year, UHC's own administrative services contracts acknowledged a 1.4 percent claims processing error rate — while simultaneously guaranteeing 99 percent accuracy. In September 2025, Aetna and Optum finalized an $8.4 million Aetna/Optum dummy code settlement: fabricated billing codes that buried administrative fees inside medical charges, inflating out-of-pocket costs for tens of thousands of plan members — for nearly a decade before litigation forced disclosure.

This is what carrier self-reporting actually looks like. And for the 67 percent of covered U.S. workers enrolled in self-funded health plans, the gap between what carriers report and what the data shows has real dollar consequences — and increasingly, real fiduciary consequences for the plan sponsors who trusted the numbers.

The Self-Reporting Promise — and the Structural Problem Underneath It

When a plan sponsor hires a carrier or large-insurer-owned TPA to administer their self-funded health plan, they enter a relationship built on a fundamental tension. The carrier processes your claims, manages your provider network, reviews your payments for errors, and then reports the results — all to you, but all on its own terms. There is no independent referee in the standard arrangement.

A landmark May 2025 Health Affairs article by Georgetown University's Center on Health Insurance Reforms put it plainly: while TPAs claim to lower medical costs, "allegations made in litigation suggest this is not often the case." The same researchers found that carriers are "imposing hidden fees, engaging in spread pricing on medical claims, and writing contracts that keep employers in the dark" — and that they routinely obstruct access to the very claims data that the Consolidated Appropriations Act of 2021 and ERISA require them to provide.

The core problem is not negligence. It is structural [conflict of interest](https://www.claiminformatics.com/your-fiduciary-duties/avoid-conflicts/). As ACHI documented, TPA contracts represented 76 percent of covered lives for Cigna, 59 percent for Aetna, and 42 percent for UnitedHealthcare as of 2020. These are not neutral claims processors. They are large corporations administering billions of dollars of employer assets while simultaneously managing their own profitability, protecting their own provider network relationships, and competing for your business at renewal.

"When your network administrator is also your claims gatekeeper, whose interests are really being protected?" — Stephen Carrabba, CEO, ClaimInformatics

What the Data Actually Shows: Four Patterns of Self-Reporting Failure

1. The Dummy Code Problem: Hiding Fees Inside Medical Claims

The Aetna and Optum dummy code case, settled in September 2025 for $8.4 million, is the clearest documented example of what carrier self-reporting failure looks like. Beginning in 2015, Sandra Peters — a retired Aetna health insurance member — alleged that Aetna and Optum Health had added fabricated CPT® codes to provider claims. These "dummy codes" bundled Optum's administrative fees into what appeared to be legitimate medical charges, elevating patient out-of-pocket costs and inflating claims for tens of thousands of plan members.

The 4th U.S. Circuit Court of Appeals found the conduct supported a breach of fiduciary duty allegation under ERISA. After a decade of litigation — and class certification covering over 87,000 health plan members — the case settled. The mechanism was only discovered through litigation. Under standard carrier self-reporting, the dummy codes would have remained invisible, embedded in the data carriers provide to plan sponsors.

2. Cross-Plan Offsetting: Pooling Recoveries Across Plans You Don't Control

UHC reported recovering $922 million for self-funded clients in 2022. But that figure obscures a critical reality: UHC retains 25 to 35 percent of recovered dollars — and the recoveries themselves are executed through cross-plan offsetting, a practice the Department of Labor has stated "punish and shortchange health plan participants and their beneficiaries" and that violates ERISA's exclusive benefit rule.

Cross-plan offsetting works like this: when UHC determines it overpaid a provider under Plan A, it recoups that overpayment by withholding future payments to the same provider from Plan B — even though Plan B had nothing to do with the original error. Your plan may be subsidizing another employer's overpayments without any record of it in the performance reporting you receive.

In Peterson v. UnitedHealth Group, the Eighth Circuit found that nothing in a self-funded plan's documents came close to authorizing this practice — and that it was "in tension" with ERISA fiduciary duties. The DOL filed an amicus brief concluding that cross-plan offsetting violates ERISA Sections 404 and 406. Following the decision, TPAs began inserting language authorizing the practice into plan documents — language many sponsors did not notice and that most still cannot evaluate without independent review.

3. Spread Pricing and Hidden Network Markups

Spread pricing — where a TPA bills the plan a higher amount for medical services than what it actually pays the provider, pocketing the difference — has been extensively documented in pharmacy benefit management and is now being identified in medical claims as well. A Health Affairs analysis found that repricing vendors and insurers acting as TPAs share a percentage of the "savings" generated on out-of-network claims — a shared fee that can be 30 to 45 percent of the difference between the provider's charge and the plan's ultimate payment.

The perverse incentive: a higher original charge means a larger "savings" figure — and a larger fee for the carrier. Paying claims correctly the first time, by contrast, generates no additional revenue. The data that appears in your performance dashboard reflects what the carrier wants you to see — net savings after fees, not gross errors before recovery.

4. Data Obstruction: The CAA Right You Aren't Getting

The Consolidated Appropriations Act of 2021 gave plan sponsors an explicit right to access their claims data and understand what they're paying for. The Georgetown CHIR research found that despite these statutory provisions, "TPAs continue to obstruct employer efforts to monitor health plan spending and quality of care." Employers have limited bargaining power to demand the data and fee disclosures they're legally entitled to.

When a plan sponsor cannot independently verify what they're being told, carrier self-reporting is not oversight. It is the absence of oversight — dressed in the language of transparency.

The Hidden Cost Multiplier: What Self-Reporting Failure Actually Costs Your Plan

Every carrier self-reporting failure has a cost structure that compounds across three dimensions that standard performance dashboards never show you.

• Undetected errors that are never recovered. Carrier post-pay sampling reviews typically cover only 3 to 5 percent of claims. ClaimInformatics' independent analysis consistently identifies 5 to 12 percent error rates across 100 percent of claims reviewed. The gap between what carriers find through self-reporting and what independent review finds is not negligible — it represents recoverable dollars that simply never appear in your performance report.

• Recovery fees extracted from your own plan assets. When carriers do find and recover overpayments, they charge for the privilege. On cross-plan bulk recovery, UHC retains 25 to 35 percent. On post-pay programs, carrier-affiliated vendors commonly take 40 to 50 percent of recovered dollars. Your plan funds the review of your plan's own adjudication failures — and a substantial share of what's recovered flows to the carrier, not to you.

• The premium leakage that accumulates before anyone looks. For self-funded employers spending $10 million to $100 million annually in healthcare claims, even a conservative 2 percent error rate represents $200,000 to $2 million in annual leakage. Pre-pay independent review — catching errors before they are paid — eliminates this cost at the source. Post-pay recovery can only recapture a fraction of it, after fees.

• The fiduciary liability that mounts while you rely on carrier reporting. ERISA requires plan sponsors to act prudently, monitor service providers, and use plan assets exclusively for participant benefit. Reliance on carrier self-reporting — without independent verification — does not satisfy this standard. It documents the absence of oversight, not the presence of it.

What Fiduciary Duty Actually Requires

ERISA's prudent expert standard does not require perfection. It requires a documented, reasonable process for monitoring the performance of the entities who manage your plan assets. That standard cannot be met by accepting carrier-generated reports as the sole source of truth.

The DOL's EBSA enforcement guidance makes clear that fiduciaries must independently monitor service providers — not simply accept vendor reporting at face value. The 2026 EBSA national enforcement priorities reinforce this: health plan oversight is now a top-tier focus, with increased scrutiny on claims administration practices, mental health and substance use disorder benefits, and No Surprises Act compliance.

A plan sponsor relying solely on carrier self-reporting cannot answer basic fiduciary questions: Does the TPA profit from errors through post-pay "savings" programs? Are cross-plan offsets being used, and is your plan receiving appropriate credits? Does the TPA profit from correcting its own errors? These are not hypothetical questions. They are the questions DOL investigators and plaintiffs' attorneys are asking right now.

Courts have made it clear: fiduciaries cannot outsource their responsibility. If your TPA mismanages claims, hides fees, or engages in conflicted practices, the liability ultimately rests with the employer's plan fiduciaries — not the carrier.

The ClaimInformatics Solution: What Independent Oversight Actually Looks Like

The alternative to carrier self-reporting is not more reporting — it is structural independence. True payment integrity requires complete separation between the entity that administers claims and the entity that reviews them.

The ClaimInformatics approach applies across every phase of the claims lifecycle:

• Pre-pay review — 100% of claims reviewed before payment using the ClaimIntelligence™ edit suite — a proprietary edit suite across 8 payment integrity categories aligned to CMS, AMA CPT®, NCCI, ICD-10-CM, MUE, and LCD/NCD standards — with transparent rationale for every edit. Independent pre-pay review achieves 2 to 8 percent reduction in inappropriate medical spend, versus 1 to 3 percent in post-pay recovery. Errors are stopped before they occur, not monetized after the fact.

• Post-pay analysis (with PAIR™ historical lookback) — Monthly claims review and 2- or 3-year historical retrospective identifying systemic payment errors, cross-plan offset exposure, and hidden fee patterns — the errors that never appear in carrier performance dashboards.

• Recovery services — Provider-friendly reclamation that returns plan assets to the plan — not to a recovery vendor's fee structure.

• Audit-ready fiduciary documentation — Compliance documentation for every finding — evidence of prudent oversight that stands up to DOL inquiry or litigation. Not carrier reporting presented as oversight, but independent analysis presented as evidence.

For plan sponsors concerned about their current ASO agreement's hidden risks, ClaimInformatics offers a complimentary ASO Agreement & SPD Analysis — identifying ERISA and CAA compliance risks embedded in existing contracts before renewal, with 1,100+ compliance checks across CLEAR™.

Across the ClaimInformatics client base: $16B+ in claims analyzed, 5–15% error detection rates, and average findings of $500–$1,200 per employee per year.

Frequently Asked Questions

What is carrier self-reporting in the context of self-funded health plans? Carrier self-reporting refers to the practice in which the TPA or insurer administering a self-funded health plan generates its own performance reports — claims accuracy rates, recovery amounts, network savings — and provides those reports to the plan sponsor as the primary evidence of plan performance. Because no independent party verifies the underlying data, these reports reflect what the carrier chooses to measure and disclose, which may not capture conflicts of interest, hidden fees, or errors that the carrier has a financial incentive not to find.

Is cross-plan offsetting legal under ERISA? The Department of Labor has stated that cross-plan offsetting violates ERISA Sections 404 and 406, which require fiduciaries to act exclusively for the benefit of plan participants. The Eighth Circuit in Peterson v. UnitedHealth Group found that TPA plan documents do not authorize the practice unless expressly stated. Many carriers subsequently amended plan documents to insert authorization language — but that language does not address the DOL's substantive ERISA position.

What is spread pricing and how does it appear in medical claims? Spread pricing occurs when a TPA bills the plan more for a medical service than it actually pays the provider, retaining the difference. In the pharmacy context, this is well-documented; in medical claims, it manifests through inflated out-of-network repricing fees and network access charges. Health Affairs / Georgetown CHIR analysis found that repricing vendors and insurers share 30 to 45 percent of the claimed "savings" on out-of-network claims — creating an incentive to pay providers less while billing the plan more.

What does ERISA require plan sponsors to do about carrier self-reporting? ERISA's prudent expert standard requires plan fiduciaries to independently monitor service provider performance — not simply accept vendor-generated reports. This means benchmarking fees against independent data, reviewing claims data directly, examining recovery practices, and documenting the oversight process. The Consolidated Appropriations Act of 2021 strengthened these obligations by requiring carriers and TPAs to provide full claims data access upon request. A plan sponsor who relies solely on carrier self-reporting without independent verification cannot demonstrate that it exercised prudent oversight.

What is the difference between pre-pay and post-pay independent claims review? Pre-pay review applies independent rules and clinical logic to claims before they are paid — preventing overpayments from occurring. Post-pay review analyzes paid claims to identify errors and recover overpayments after the fact. Pre-pay review achieves 2 to 8 percent reduction in inappropriate medical spend by catching errors at the source; post-pay recovery typically retrieves 1 to 3 percent — less the recovery vendor's share. Both work as two halves of one continuum. For fiduciary purposes, pre-pay documentation is stronger evidence of prudent oversight than post-pay recovery, which by definition confirms the error already occurred.

The Bottom Line

Carrier self-reporting is not a substitute for independent oversight — it is the absence of it. The Aetna dummy code settlement, the cross-plan offsetting litigation against UHC, the spread pricing documentation in the peer-reviewed literature: these are not isolated incidents. They are the predictable output of a structural conflict that puts carrier profitability ahead of plan assets.

ERISA does not allow plan sponsors to outsource fiduciary responsibility. It allows them to delegate management — but the obligation to independently monitor remains. In 2026, as EBSA enforcement intensifies and Schlichter Bogard has extended its ERISA litigation playbook to health plan fiduciaries, the question is no longer whether to implement independent oversight. The question is when — and what the cost of waiting will be.

Contact ClaimInformatics for a free consultation.

What has your experience been with carrier performance reporting? Have you identified discrepancies between what your TPA reports and what independent review finds? Share your experience in the comments.