One of the trickiest aspects employers face in providing healthcare is managing employee and dependent eligibility. Surprised? Yes, managing plan design, contributions, and communication is not easy, but falls completely in the employer’s control.
When data has to travel between several entities — HR, employees, Benefits Administrators, Health Plans — there is risk for inaccuracies, assuredly leading to added expense. Couple that with data for dependents and the risk only increases. This causes additional cost and exposure for the employer.
What can be done? Tight eligibility management ensures you are only paying for those that qualify. A Dependent Eligibility Audit (DEA) is a must for any employer, especially considering the high expense leakage. Often, a history of operating under the “honor system” can be perceived as hard to change. Be clear, it could be costing your company several thousands of dollars.
benefitexpress has conducted hundreds of dependent eligibility verification audits. The findings reveal that an average of 7% of dependents are ineligible. Multiply that by the average costs of family coverage of $17,545 and the expense for ineligible dependents quickly adds up (Average cost as reported by the Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2015).
Avoid These Practices
Here is a checklist of the practices that lead to ineligible covered dependents:
- High turnover in employee population often results in documentation not catching up, especially if coverage eligibility is immediate or with a short eligibility requirement timeframe.
- Not requiring documentation at the time of employee onboarding. Collecting documentation for proof of eligibility prevents ineligible dependents from getting enrolled at the start.
- Employer has never conducted a dependent eligibility audit, or if they have, it has not been repeated with any frequency.
- Employer does not require documents from employees when they have a family status change (marriage, birth of a child, divorce, children of live in partners with no legal relationship, etc.)
Tips for Success
Here are steps to take when implementing a Dependent Eligibility Audit / Dependent Verification process and policy:
- Buy in and Clarity - Senior management needs to be on board. This type of audit will turn up results and likely create “noise.” Provide clarity on the specific definition of eligible dependents and the implications for having an ineligible dependent enrolled. Will you offer forgiveness or require back contributions, and how will you manage appeals?
- Communicate, Communicate, Communicate - Provide a very clear explanation of the purpose and rationale for the audit. This will help employee understanding. Use all available communication vehicles to make sure employees and their dependents are aware of the pending audit. This will not only help with the response rate, but also reduce the element of surprise.
- Healthcare Plan Eligibility Updates - Your benefits administration partner will advise you on the process and timing to update eligibility files sent to the Health Plans. Building in a grace period for employees to find alternative coverage is often advisable to ease the impact of the loss of coverage. Your benefits administration partner will work closely with the Health Plan to assure a smooth transition. (They should also be able to aid in billing reconciliation, ensuring that the changes flow through to your billing.)
Does ACA Affect Dependent Eligibility Audits?
The Affordable Care Act (ACA) does impact dependent eligibility. Specifically, coverage of children until the age of 26 and surcharges, or exclusions for spouses with alternative access to coverage is important to accommodate. Employers can decide how they want to manage the process for spouses who are eligible for coverage elsewhere. The DEA provider can offer advice on how to validate alternative coverage.
Savings Can Be Significant
The savings from an initial Dependent Audit are often significant. Additionally, cost avoidance going forward is important. It is recommended that companies continue to audit eligibility and improve their process for documentation required when there is a family status change or children aging out of coverage.