Payers bear a unique responsibility for financial integrity. Poor internal controls and non-compliant financial reporting practices can put members' well-being at risk. Members and state and federal regulators must feel confident that payers are solvent and trustworthy. The Annual Financial Reporting Model Regulation (Model Audit Rule) is designed to improve state oversight of the financial condition of all insurers. It requires private payers to transparently disclose and independently verify their financial performance.
The National Association of Insurance Commissioners (NAIC) recently strengthened its commitment to the Model Audit Rule with rigorous new control requirements and standards for financial reporting. The Model Audit Rule may differ from state to state, complicating compliance. Management's first report of internal control over financial reporting will be due in 2011 for the 2010 reporting period. But payers need to begin now to implement the Model Audit Rule.
The experience of many public companies in implementing Sarbanes-Oxley serves as a cautionary tale. Many of these companies learned to their dismay that the internal controls they sought to document were inadequate or nonexistent. Early, thorough planning allows payers to identify deficiencies in their internal controls and financial reporting, and unhurriedly bring them into compliance with the Model Audit Rule.
You need to establish a top-down, risk-based approach to compliance with the Model Audit Rule. We can help you improve the reliability and transparency of financial statements. We can give you a clear understanding of the links between operational and financial processes. We can help you simplify and standardize policies and processes.
You need to begin immediately to identify and remedy weak internal controls and non-compliant financial reporting practices. We can make your audit committee more effective by providing deeper information. We can help ensure the accountability of individuals involved in financial reporting and operations. We can help identify risks and controls that have a material impact on financial reporting, and assess their effectiveness and compliance with the Model Audit Rule.
Subject matter specialist
US Healthcare Payer Practice