With the rising cost of health care, more organizations are looking for ways to reduce benefit costs. One important option to find hidden savings is to audit health care plans to look for family members (dependents) of your employees who really are not eligible to participate on your health plan.
Ineligible dependents can be on a company’s plan for several reasons. For one, the rules about when someone needs to come off a plan can be confusing. When a child reaches age 26, that person is no longer eligible for coverage. In that case, it’s easy for parents to forget to change their child’s status.
Another confusing issue is in regard to divorcing spouses. If an employee receives a court order to provide medical coverage to a former spouse, that doesn’t mean your plan has to or can provide that coverage. But, your employee may not immediately realize the implications of your plan rules.
Historically, employers depended on their claim administrators to identify ineligible participants, but that process is reactive instead of proactive and often produces undesirable results. The process is reactive because claim systems are usually not designed to perform audits. Instead, ineligible claims are discovered and rejected after they are filed. In this scenario, the outcome is never happy. An employee may dispute the rejection, claiming he or she didn’t receive enough notice to remove the ineligible person. If the employee ultimately loses the claim, it creates hard feelings about the company’s benefits and the organization in general.
When a proactive audit is conducted for a company, auditors may find as many as 10 percent of a company’s plan participants are no longer eligible. Simply removing ineligible participants can save a company thousands if not millions of dollars, depending on its size, and it often only takes a 1 percent discovery to pay for the cost of the audit, making the return on the investment a smart business decision for a company’s bottom line.
Getting started with an audit does require some planning. Key process steps include effectively communicating to employees the business reasons a company will perform an audit, the process employees can expect and clear direction on what employees need to provide as proof of dependent eligibility.
In addition, many auditors recommend setting a future date for when dependents will be removed from a plan if they are discovered to be ineligible. This helps to ensure goodwill by providing time for employees to find alternative coverage. However, it may affect your COBRA rules, and your plan’s legal counselors need to be consulted in this process.
Finally, a company needs to be committed to routine audits. A one-time audit may clean up your records in the short-term, but a continual process ensures cost savings in years to come.
The reality is that a company can’t afford to not monitor the participants on its health plans as part of a solid strategy to control the rising cost of health care. Dependent eligibility audits save companies money and ensure the integrity of their medical plans.
Michelle Hicks, a senior professional in human resources, is a director in the communication practice of Buck Consultants, a Xerox company.