Rising costs make health care into a make-or-break issue for many businesses, especially smaller ones. In fact, recent figures from the Bureau of Labor Statistics suggest that 57% of workers at firms hiring 100 employees or fewer have less access to employer-sponsored healthcare. And because the Affordable Care Act (ACA) expanded dependent eligibility to 26 years old, reducing costs is a top priority. To help with the rising costs, taking a closer look at employees’ dependents can help to make a dent in the cost of healthcare. Conducting a dependent eligibility audit can help identify and remove ineligible dependents accessing the company health care plan, thereby reducing the cost of the plans. It also helps with compliance because ERISA, the Employee Retirement Income Security Act, mandates that every dollar requested from a health plan be used solely for employees and their eligible dependents.
What is a Dependent Eligibility Audit?
It is estimated that 5-12% of covered dependents are not entitled to any healthcare benefits. This can include ineligible children as well as spouses. Below are some common reasons why the addition of ineligible dependents to benefits sometimes goes unnoticed:
1. High turnovers – When staffing is always up in the air, insufficient scrutiny is devoted to accompanying documentation.
2. Shoddy or Absent Document Examination – Every listed dependent should have their
documents and their relationship to the employee verified when enrolling.
3. Insufficient Dependent Eligibility Audits – Dependent audits should never be an
afterthought. On the contrary, they should be scheduled as a part of the company’s annual calendar.
4. Undocumented Status Changes – Unfortunate errors like forgetting to acknowledge status changes such as divorces account for quite a few ineligible dependents.
Prior to the Audit:
Conducting a dependent eligibility audit can create some anxiety among your employees. Many describe the process as intrusive, a criticism that is understandable and somewhat true. Determining dependent eligibility means asking fairly invasive questions and requesting sensitive documents. To combat these insecurities, you must ensure that the audit isn’t disruptive to employees.
1. Take a random sample – Consider its expensive and time-consuming nature, auditing a random sample of employees first can help identify whether a complete audit is necessary.
2. Compare notes with plan vendor – There is a possibility that your plan’s provider may not have the most current information for your employees or are simply not updating the data dutifully. Updated data can preclude an audit.
3. Communication – Employers must engage with employees explaining what the audit attempts to do, how it will be conducted, and more importantly, how it will benefit them.
4. Defining Eligibility – Employers must help remove employee doubt by clearly defining what makes a dependent eligible for healthcare coverage.
5. Demystifying the process – Making the process simple will help encourage employees to comply.
6. Explaining what’s at stake – Employers must explain to employees the risks of maintaining an artificially-inflated health plan such as higher premiums, plan shakeups or more out-of-pocket costs to the employee. Without coming off as threatening, explain that late document submission could mean temporary removal of legitimate dependents from the company’s plan.
7. Explaining the benefits – Removing ineligible dependents means freeing up more funds for employee benefits. This money can be used to upgrade current health plans, raise wages or improve the workplace and equipment.
8. Discuss penalties – Few companies penalize their employees for first-time violations. Some will even allow a grace period where the individual can stay on the plan briefly while making other arrangements.
An audit can either be conducted in-house or with the help of an outside firm. While in-house auditing may bring cost savings for your company, there are a few benefits to hiring a third party. Requesting sensitive documents like birth and marriage certificates can create some distrust between management and the employees. Employees may be wary of their private documents being perused by people with whom they have such a close working relationship. Having a third party carry out the audit means creating a buffer zone between their private documents and their coworkers.
With our Dependent Eligibility Audit services, employers stay compliant and save money while we take care of the administration. Furthermore, our audits almost always results in a positive return-on-investment with the average audit removing roughly 5% of ineligible dependents. We are an experienced administrator that has conducted dependent eligibility audits since 2009, and we provide each client with a designated compliance account manager.
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