As health care costs continue to rise each year, employers also continue seeking methods to curb overspending. One such method is particularly appealing because it doesn’t entail plan redesign, plan cutbacks, changing vendors, or cost shifting. It simply involves ensuring that only those eligible are receiving plan coverage and having their claims paid. This can be accomplished by using a dependent eligibility audit to monitor dependent eligibility, as it allows overspending and coverage errors to be caught.
From employee oversight, poor record keeping, unintentional error, to fraud, there are many reasons why someone ineligible for plan coverage might still be on the plan roll. Often times there are ineligible dependent children past the age of majority; a divorced spouse; or a grown child that was eligible due to a student status, but isn’t currently attending school still on a plan roll. Then, there is COBRA notice requirement and continuation of rights compliance. This could be relevant if a once eligible individual has lost their eligibility status during a qualifying event.
In any event, these ineligible individuals add up when they are maintained as eligible and are thereby having claims paid that shouldn’t be paid. The employer is incurring potentially high overspending and unnecessary added cost by doing allowing such to continue.
The eligibility audit, mentioned above, can help the employer determine if their plan is carrying any person that isn’t eligible. For example, an eligibility audit can catch those enrolled as dependents that don’t actually meet the plans written requirements for what constitutes an eligible dependent, thereby alerting the employer that this individual should be removed from the roll. The audit process will include asking eligible employees with enrolled dependents to provide proof (such as a domestic partnership affidavit, a marriage license, certificate of birth, decree of adoption, Social Security disability determination, or current college transcript) confirming that the dependent does actually meet the plan’s written dependent status requirements.
The employer will need to decide beforehand if the audit should be applied concerning all plan members or only in specific areas, such as verifying specific dependent classes (only college students for example.) The employer will also need to determine beforehand what types verifications of dependent eligibility will be required and whether it will need to be an original or copy of the documentation. Determining who will be responsible for examining and verifying the documentation is also an important consideration. If contracted out verses done within the internal human resource or benefits department, the audit is often more costly.
Aside from having a direct impact on what the audit will cost, all of the above decisions directly impact the quality of the results.
Two last important elements are deciding a time frame for the audit and whether an amnesty period will be offered. Often times the audit time frame will run congruent with the benefits re-enrollment/ renewal period. This also allows employees already thinking about their coverage to make any appropriate changes that have been neglected in the past. The employer should also determine whether an amnesty period will be offered to allow employees to report ineligible dependents and not have adverse consequences as a result. Whatever is decided, the employer must be sure to clearly communicate to their employers what the dependent eligibility standards are, what documentation will be needed to verify a dependent eligibility status, and what the consequences will be for ineligible dependent continuation.
An eligibility audit not only offers a considerable amount of immediate health plan cost-savings, it also provides an opportunity for the employer to review plan provisions related to dependent eligibility. Sometimes the definitions need to be clarified or revised.