The High Cost of Health Plan Document Errors—And How to Fix It

For health plans, inaccurate documents aren’t just a compliance issue—they’re a financial and operational risk. Document errors in Summary Plan Descriptions (SPDs), Summary of Benefits and Coverage (SBCs), and provider directories can result in penalties, lawsuits, reprocessing costs, and even lost market share. 

Below, we break down the 10 most costly impacts of document errors—and how automation can eliminate risk and drive efficiency. 

  

1. Regulatory Fines & Penalties

Issue: Missing or inaccurate SPDs, SBCs, or COBRA notices. 

Financial Impact: ERISA penalties of $110 per member per day, ACA SBC violations at $1,362 per incident—a widespread issue affecting 10,000 members could mean $11M+ in fines. 

  

2. Legal Settlements & Lawsuits

Issue: Misrepresented benefits leading to denied services or coverage gaps. 

Financial Impact: Class-action settlements, especially for mental health parity violations, can exceed $50M. 

  

3. Claims Reprocessing Costs

Issue: Incorrect plan data causes erroneous claim denials. 

Financial Impact: At an average $25 per claim, reprocessing 100,000 claims totals $2.5M in costs. 

  

4. Member Appeals & Grievances

Issue: Coverage disputes due to misleading or unclear documents. 

Financial Impact: Each appeal costs $500–$1,000 in admin expenses—with 10,000 appeals, plans could spend $5–$10M. 

  

5. Customer Service Overload

Issue: Incorrect provider directories, cost-sharing details, or unclear benefits cause a surge in call center volume. 

Financial Impact: At $8–$12 per call, 500,000 extra calls translate to $4–$6M annually. 

  

6. State Department Investigations

Issue: Misleading plan details trigger audits and compliance investigations. 

Financial Impact: Investigations can cost $1–$5M in legal fees, plus additional fines and reputational damage. 

  

7. Loss of Employer Group Contracts

Issue: Persistent errors cause employer dissatisfaction, leading to contract loss. 

Financial Impact: Losing one employer group with 5,000 employees could mean $50M+ in lost premiums. 

  

8. Reimbursement Disputes & Provider Litigation

Issue: Incorrect fee schedules or coverage details lead to provider lawsuits. 

Financial Impact: Legal fees and settlements can exceed $10M. 

  

9. Market Share & Reputational Damage

Issue: Public exposure of errors (e.g., “ghost networks”) causes members to leave. 

Financial Impact: Losing 1% of membership (50,000 members at $500 PMPM) results in $300M in lost annual revenue. 

  

10. Technology & Operational Fixes

Issue: Large-scale document errors require system-wide corrections and quality control measures. 

Financial Impact: IT fixes, staff training, and audits can cost $5–$20M over time. 

  

The Solution: Automating Document Accuracy for Health Plans 

Document automation combined with a source of truth, can eliminate 70% of administrative workload in year one, reducing errors, regulatory risk, and operational costs. Leading health plans are leveraging automation to: 

• Ensure real-time document accuracy to prevent compliance violations. 
• Streamline claims and appeals by eliminating errors before they escalate. 
• Enhance member experience by reducing service call volume and disputes. 
• Protect revenue & reputation by avoiding penalties and maintaining employer trust.