Employee benefit land mines III Featured

7:41am EDT April 27, 2006
First there was “Rocky V” and “Die Hard 3.” Now — back by popular demand — is the follow-up to “Employee benefit land mine I” in 2004 and “EBL II” in 2005. Just when you thought you had cleared the mine field, we bring you episode III.

As in the movie “Kelly’s Heroes,” once you know you are in the mine field, you can work your way out. Don’t wait until you hear the click of the land mine to start taking these seriously. Remember, even seasoned veterans sometimes miss land mines until they explode.

  • Informing an employee a benefit will or will not be paid. It’s common to find an employee asking a human resource manager whether a benefit is covered or not. The H.R. manager, in good faith, looks at the benefit summary or even the certificate booklet and, in good faith, tells the employee that the benefit will be paid. The employee takes action ... and the claim is denied.

Although a certificate booklet is the contract that determines if a benefit will be paid, you may misinterpret that language. Certificate booklets or SPDs are often 50 to 100 pages of disclaimers, definitions, restrictions and requirements. The best answer an H.R. manager can give is an opinion on whether the benefit will be paid and to instruct the employee to contact the carrier or plan administrator before services are rendered.

In addition to contract language interpretations, there are always exceptions to the contract. We have seen time and time again where a carrier will pay outside of the contract based on circumstances surrounding a claim. Many appeals that are filed with the insurance carrier after claims are denied are paid based on these circumstances.

  • Failing to distribute certificate booklets. This task can become a monster project, because most insurance carriers do not send the certificates to employees’ homes. Most employers have benefits administered by multiple carriers. When your supply of booklets comes in at different times and in the event that booklets are delayed 60 to 90 days or longer after open enrollment, a host of serious problems can occur.

The law is very clear on the necessity to distribute certificate booklets to all enrolled parties in a timely manner. Although employers are encouraged to post the certificates on their company Web page, that may not satisfy compliance requirements unless 100 percent of your employees have access to the Internet. It is important to have proof that you have distributed certificates. Getting employees to acknowledge receipt of their certificates is ideal. Too many times we find employers with unopened boxes of certificates in a closet. An employee can have a valid claim against an employer for a denial of a claim if a certificate booklet was not distributed.

  • Failure to audit payroll records against health care benefit invoices. Although the best time to audit payroll and carrier invoices is immediately following open enrollment, it is also important to audit these throughout the year. Changes occur throughout the year: new hires, terminations and qualifying events.

Auditing is a time-consuming project, but you will find that most audits will reveal mistakes. Carriers will typically allow only 60 to 90 days for retroactive credits. In addition, employees typically will not volunteer that they are being under charged through payroll deductions.

Auditing will save you headaches and company money.

  • Not collecting enrollment forms from new hires and all employees during open enrollment. We all know how painful openeEnrollment can be in collecting enrollment forms from every employee. Some employers have taken the stand that if the employee fails to return a form they will not be enrolled in a benefit. This approach is acceptable only if your employee communications clearly indicate the consequence of failing to return forms. Even this approach is dangerous, because an employee can claim that he or she did return the forms.

The best solution to nonreturned forms is a letter back to the employee indicating his or her form was not received and the consequences of this lack of action. Keep this letter in the employee’s file. An even better solution is a post-enrollment confirmation letter of all benefit elections. These letters can resolve other issues, including confirmation of correct enrollment elections and payroll deductions.

The landscape of employees can be filled with land mines. Make sure you get your benefits agent to help you identify all of them before you enter the field of employee benefits.

BRUCE BISHOP (bruce@kybabenefits.com) is director of marketing and managing partner of KYBA Benefits. The company provides consulting and administrative services to more than 400 corporate accounts, ranging in size from 20 to more than 7,000 employees. Reach Bishop at (770) 425-6700 or (800) 874-2244 x205.