In the quest to stem rising health care costs,
more executives are initiating dependent
audits with some surprising results. On average, 8 to 12 percent of the plan’s covered
dependents don’t meet the eligibility requirements, and one in four is an ineligible spouse,
not a child. While audits often produce savings, employers should consider a few best
practices to optimize the return and preserve
employee good will during the process.
“The savings opportunity will vary depending upon the company’s premium contribution for dependent coverage, the employee
base and the scope of the audit; however, in
most cases, there are significant savings to be
had,” says Greg Mansur, national leader of
Administrative Performance Review Services at Watson Wyatt Worldwide. “Companies
must look at their demographic profile, cost-sharing structure and potential ROI under
different scenarios, and then define an audit
scope and timing for the project.”
Smart Business spoke with Mansur about
the potential savings and the best practices
around dependent eligibility audits.
How have ineligible dependents crept onto
group coverage rolls?
Benefit packages are vital in recruiting and
retaining employees, so human resource professionals are often reluctant to make
employees jump through hoops to prove eligibility. Initial enrollment is often completed
online, and there’s no practical way to require
or submit eligibility documentation during
this process. Employees do a better job of
adding dependents to a plan than removing
them. It’s just too easy to forget that your son
or daughter is now finished with college and
is no longer eligible for benefits.
Comprehensive audits, where all of the
dependent population is verified for eligibility, are a relatively new phenomenon and
haven’t been part of the traditional audit
budget for HR. With word spreading about
the potential savings, more CEOs and CFOs
are requesting dependent audits.
What should CEOs consider when determining the appropriate audit scope?
It’s possible to develop savings scenarios
based upon the demographics of the employee population because historical data dictates that certain profiles yield certain
returns. While a comprehensive audit costs
more, it produces the greatest return and
allows the company to work from a clean
slate in maintaining savings by initiating
enhanced validation procedures. Alternatives include auditing a random sampling of
employees or specific employee segments,
but can have limitations by being too narrow
in scope to realize significant savings or
potentially alienating groups of employees.
What are the best practices for launching an
audit?
The first step is to establish an effective
audit communications plan. It’s important for
CEOs to articulate why the audit is necessary
and to help employees see how this effort is
good for everyone. Communicate the simple
message that maintaining an affordable
health plan works for the benefit of every
employee; I think that message makes more
sense in an era of greater cost sharing. Of
course, explaining that an audit might occur
means giving employees advanced warning
about the timing and any documentation
they must furnish. This gives them time to
‘self-audit’ the dependents they have enrolled
and remove those who are ineligible, saving
employees from an uncomfortable situation
when the audit does occur. An amnesty period where employees may remove ineligible
dependents without repercussions is always
a great way to start an audit.
What happens during the subsequent audit
phases?
Continue to articulate the audit process and
the timeline and spell out the ramifications,
such as the date when all unverified dependents will be removed from coverage. Many
employers outsource the verification process
because they lack the internal resources and
the technology, and trained representatives
can advise employees about how to obtain
documentation, such as duplicate copies of
marriage certificates.
Finally, establish an extension/appeals period to allow employees to challenge an audit
decision and to allow those who have been
nonresponsive extra time to produce supporting documents prior to removing their
dependents. These extra measures can help
to demonstrate the fairness of the process.
How can employers maintain dependent eligibility and savings?
Initiate a policy requiring employees to
present eligibility documentation when new
hires sign up for benefits or existing employees add dependents to group coverage. Some
employers are requiring employees to sign
affidavits or check pop-up boxes online stating that they understand the health plan eligibility rules and the penalties for noncompliance. Randomly audit a few employees each
month who have dependent coverage to
make certain the dependents are still eligible
and request documentation if needed. Be
sure to communicate to employees that
ongoing audits are now standard operating
procedure. With greater rigor and oversight,
the corporate culture will change and
employees will do a better job of self-policing
the eligibility of dependents.
GREG MANSUR is the national leader of Administrative Performance Review Services at Watson Wyatt Worldwide. Reach him at
(818) 623-4780 or [email protected].
