Dependent Eligibility Audit
In this day of escalating employee benefit costs, employers are continuingly seeking for new ways to positively impact the bottom-line. And rightfully so, especially when employee benefits represent the second largest expense an employer has after payroll. But after switching insurance carriers, increasing employee exposures such as higher copays, deductibles and coinsurances, what else can an employer do? They can audit their plans for ineligibles that should not be on their plans in the first place. This is also known as a 're-certification and re-enrollment' process.
Ineligible Dependents
What constitutes an 'ineligible dependent'? Basically anyone who does not meet the definition of an eligible dependent as defined in your SPD (Summary Plan Description) plan document.
Examples of employees who might be covering ineligible dependents are:
Unmarried employees who cover a partner, relative, friend, acquaintance, etc. who are not their legitimate dependent
Unmarried employees who cover a domestic partner (if allowed by the SPD) but without the proper documentation
Employees who cover a child or children who are not their legitimate dependents, i.e.: step child(ren), foster child(ren) or married child(ren)
Divorced employees who cover their ex-spouse and/or child(ren) where the ex-spouse has legal custody
Parents of students over a specified age who are not full time students or not enrolled in an accredited educational institution
Abuse is rife
Many employees mistakenly believe that it is OK to add or keep ineligible dependents on their plan and often are not aware or do not realize that it amounts to insurance fraud. Many employers fail to communicate this to their employees and are often to blame for the employees' unawareness. Many employers are not very vigilant in policing dependent eligibility beyond a written mention in the company handbook or rely on the health insurance carrier to communicate this in the health insurance benefits booklet. An annual Dependent Eligibility Audit and regular year round communication are vital to curb the abuse and keep the employees honest and the employer only paying for those dependents that are truly eligible.
The Process
The first step in the process of a Dependent Eligibility Audit is to determine the time frame in which the audit is to be concluded and to meet a final effective date. This should also be accompanied by a concurrent Employee Amnesty Period during which the employee can voluntarily comply without any questions or repercussions such as back charging of premiums and/or claims through paycheck deductions, loss of all coverage until the next open enrollment period, termination or reporting to the Department of Insurance for an insurance fraud violation. This also becomes the date on which all the results of the re-certification and re-enrollment exercise are submitted to the carrier(s) and/or TPA for effectuation. Once the final effective date is determined, the employer should calculate backward to time the process so every employee is properly communicated to and has had the opportunity to participate in a group education meeting and individual counseling and re-enrollment session to complete the process.
Here are the steps of the re-certification and re-enrollment process:
Employee announcement memo and documentation distribution
Group educational meeting to explain the process and answer questions
Individual counseling and re-enrollment session to:
Collect signed Dependent Eligibility Statement
Collect signed Dependent Verification Documents
Laptop computer re-enrollment of eligible coverage
Generate Enrollment Election Form which contains:
Updated employee census information
Employee re-enrollment elections
Official Salary Redirection Agreement (Section 125 compliant)
Signature pad captured signature with date and time stamp
Deliver to employer:
Collected documents and data for submission to carrier(s)
Electronic output from all re-enrollments into 1 spreadsheet
PDF of all signed employee Enrollment Election Forms
Summary reports
"There's gold in them thar Dependent Audits!" - An Employer's Opportunity
Employees have a unique opportunity to save big by doing what is right in the first place. When the big 3 automakers audited their employees, they were able to cull 86,000 ineligible employees from their rolls and save millions in premiums and claims.
According to ERISA, the employer is the fiduciary in charge of verifying that all premiums are being spent on only those that are eligible. Sarbanes Oxley actually takes it a step further and requires that the person signing off on the quarterly financials is responsible that all numbers are 100% accurate. Without having performed a Dependent Eligibility Audit this is quite impossible and could create unnecessary exposure and undesired liabilities.
Dependent Eligibility Audits are Gaining Popularity
Check out these articles to learn about this new phenomenon that is slowly becoming mainstream:
Please contact us to find out how a Dependent Eligibility Audit can save valuable premium dollars on your employee benefit plans. We look forward to your inquiry.