Toledo, OH – Auditing health plans to determine if covered dependents meet eligibility requirements is not a new idea. Many employers have undertaken an eligibility audit to verify the dependents they are carrying indeed qualify for health coverage. While results have varied due to employee demographics, plan design, employee contributions, and how enrollment has been handled, most employers report their audit was worth the cost.
However, some recent articles have taken the position a dependent eligibility audit is contrary to building and nurturing strong employee relations. These articles advocate a “Mama Bear” perspective, saying something to the effect, “How can our employees trust us, if we don’t trust them?” That rationale does not hold up in today’s tough economic environment, and it reflects “old school” thinking, as leading HR executives transition their functions from parent to coach.
Findley Davies’ annual health care trend survey indicates average Medical/Rx trend (i.e. changes in per capita health claims costs) for 1/1/09 renewals is 12%. What other cost of doing business, besides fuel, is increasing as fast as health benefits? Furthermore, outside of a major worksite accident or product liability issue, what exposes a self-funded organization to more risk of loss and/or budget variances than catastrophic health care claims?
You don’t necessarily have to be subject to ERISA to appreciate its fiduciary responsibilities to ensure benefits are paid only to eligible beneficiaries. Similarly, you don’t have to be subject to Sarbanes Oxley requirements to have strong internal auditing controls to appreciate the need to protect your organization’s bottom line. There are compelling financial reasons to conduct a dependent eligibility audit, such as:
- It is likely an audit will find 2%-13% of covered dependents are ineligible;
- With annual per dependent health benefit costs averaging $2,500 relatively few ineligible dependents need to be identified and terminated in order to pay for the audit; and
- An ineligible dependent terminated now is stopped from filing future claims, resulting in significant long-term cost avoidance.
When the rationale for a dependent eligibility audit is clearly explained to employees, they understand the need for their employer to verify health plan eligibility. This does not translate into a lack of trust. Employees apply similar principles in their personal lives, when they:
- Count correct change received in a retail transaction;
- Check bank and/or credit card statements to ensure credits were applied;
- Call to see if their children are where they said they were going to be; and
- Review their pay stubs to ensure they were paid for all hours worked and all deductions were properly taken.
Employees know these actions make common sense. It’s a part of a life philosophy President Ronald Reagan famously characterized as “trust but verify” when he would admonish Soviet leader Mikhail Gorbachev in their negotiations.
Findley Davies believes employers can apply this philosophy, audit best practices, and audit lessons learned to optimize their dependent eligibility audit results and preserve employee relations. Based on our audit experience, best practices include:
- Effective employee communications is essential and includes explaining the reasons for the audit, the consequences of not complying, and following up with a thank you and recap of results;
- Use of an amnesty period to encourage employees to quickly act without penalty to remove ineligible dependents;
- Establish firm deadlines to respond to the audit;
- Use of a Call Center to which employees can call to receive instructions on where to obtain required documentation and to ask questions about their plan’s eligibility provisions, including how a working spouse rule operates;
- Educate employees about their responsibilities to notify HR in the case of divorce, or in what cases common law spouses are recognized; and
- Provide information on sources of individual health insurance for children reaching the limiting age.
Employers interested in conducting a dependent eligibility audit want flexibility in designing an approach that will best meet their needs; leverage their HR staff’s experience; and fit within their budget. In response, Findley Davies developed the TbV4 suite of dependent eligibility audit services. TbV4 is based on the “trust but verify” philosophy and consists of four (4) options, enabling an employer to select the audit scope that best fits their needs and objectives. The modules are outlined below.
Option 1: Findley Davies designs a letter to employees, reminding them of their plan’s eligibility requirements and providing a deadline to remove any ineligible dependents without penalty. The letter also indicates after the deadline, the employer reserves the right to request proof of dependency and to recover the cost of any claims paid on behalf of an ineligible dependent. Findley Davies also provides employees with education about their responsibilities for notifying HR in the event of a divorce, as well as resources for health insurance for dependent children reaching the limiting age.
Option 2: This is the same as Option 1, but with the added benefit of Findley Davies acquiring and comparing the carrier/TPA’s membership file with the employer’s eligibility data to identify any discrepancies, such as Joe Smith has enrolled for Employee + Spouse coverage, but the claims administrator’s system indicates his children are also covered. In addition, we are able to send eligibility verification forms to those employees with spouses or children having different last names to verify they meet the plan’s eligibility requirements.
Option 3: This is the same as Option 2, but involves an electronic audit of up to 100% of employees with dependents, the use of a Call Center (with extended hours available, if necessary), complete reports to the employer of audit results, and follow-up communications to the employees.
Option 4: This is the same as Option 3, but includes Findley Davies auditing the claims administrator to verify ineligible dependents were terminated in a timely and accurate manner. Any claims paid on ineligible dependents will also be tallied, so the employer can decide whether to pursue overpayment recovery. Findley Davies also provides support for this recovery process.
Senior leadership and key stakeholders will increasingly demand HR to design and execute effective strategies to control health benefits costs, so that the health benefits program remains affordable and sustainable. While it’s important to cultivate trust with employees, the risk of incurring high health benefit costs on ineligible dependents must be mitigated by verifying their eligibility.
Once an employer commits to conducting a dependent eligibility audit, finding the right audit partner becomes important. We believe Findley Davies’ TbV4 audit services offer unique advantages, such as:
- We deliver customized pre and post-audit communications to promote employee understanding and acceptance;
- Our Call Center engages and educates employees about their health plan’s eligibility requirements and their responsibilities for complying with spousal rules and/or notifying HR in the event of a change in family status;
- Our services are flexible and designed to leverage and compliment the strong experience of the employer’s HR staff; and
- Updated data and practical advice is provided to strengthen and improve the employer’s eligibility administration.
Verifying eligibility is not a fad, but rather a prudent operating procedure and administrative best practice. Employers will want to tailor their audit to best fit their organization’s culture so that employee participation and results are optimized. Findley Davies has a 40-year history of helping clients enhance their financial performance and mitigate risks. TbV4 continues this tradition by providing employers with the tools and services needed to complete a successful dependent eligibility audit.