In response to current economic conditions, many organizations are paying increased attention to carefully managing balance sheets in an effort to remain competitive, or, in some cases, viable. Companies are taking steps to free up capital and cut costs while also trying to keep their work forces engaged and productive.
In this climate, many employers are finding that health care programs present a cost reduction opportunity, as it’s one of their fastest-growing business expenses.
One way to reduce those costs is to make sure that you are only paying for dependents who meet the company’s eligibility guidelines for group medical benefits. Conducting a dependent eligibility audit not only helps reduce your overall costs but also avoids shifting those costs to your employees, or, for public entities, to taxpayers.
Smart Business spoke with Mark Heatley, vice president with Aon Consulting in St. Louis, about how to save money by conducting dependent eligibility audits.
Why should employers conduct audits?
For many years, most plan sponsors operated on the honor system when newly hired employees added dependents to group health coverage and other employee benefits. However, with the financial pressures of our current economy and health care costs continuing to increase at double-digit rates, employers are motivated to look to other options to reduce costs.
A variety of federal compliance requirements, such as Sarbanes-Oxley and ERISA, have also prompted employers to conduct audits on dependents.
What are the potential savings in health care plan costs as a result of conducting a dependent eligibility audit?
By removing ineligible dependents (typically 4 to 8 percent of enrolled dependents), there is the potential for employers to achieve cost savings of 2 to 10 percent of their spending on dependents.
The audit itself is not just a one-time opportunity to remove dependents that should not be covered under the medical plan but should be a part of an organization’s ongoing health care strategy. By implementing a long-term plan, employers can make sure proper controls are in place for future new hires, life events and annual enrollments to prevent the buildup of ineligible participants. These controls can ensure a maximum return on the organization’s benefits investment and help sustain long-term savings.