In a previous post, it was pointed out the audits shouldn’t be a “once and done” activity. This is especially the case if your company is self-insured. Without ongoing verification to determine if everyone who joins the plan should be on the plan, the company is opening itself to two potentially expensive situations:
Payments for services accessed by ineligible dependents
Denial of a stop-loss claim due to ineligibility
In the first scenario, it’s estimated that an ineligible dependent on the plan can cost the company anywhere from $3,000 to $5,000 or more annually in premium costs. Add the second scenario to the mix and the cost can easily run to the millions.
It all comes down to mitigating risk: by avoiding unnecessary and costly healthcare expense.
How Ineligibility Errors Occur
While it’s true that in some cases employees deliberately and knowingly add ineligible dependents to the plan, in other instances, they are mistakes due to a lack of clarity around the eligibility rules. The employee may have mistakenly thought dependent was eligible for coverage, simply because the person resided in the home and was provided for by the employee.
The confusion could also be the result of a coverage requirement outlined within a divorce settlement. Specifically, employees often make the assumption that the maintaining of coverage needs to remain with the employer instead of being paid by the employee.
Finally, it may be a legacy issue, such as occurs when one company buys another and retains the employees. While the original employer may have agreed to include grandchildren or children who lived with the employees but weren’t legal dependents, the new employer doesn’t have the same agreement in place. But if the employees aren’t aware of that change, they won’t alert HR or the Benefits department to remove the now ineligible dependents.
When an audit or other activity uncovers these ineligible dependents, companies typically don’t demand reimbursement from the employees for any claims erroneously paid out, but instead adopt a “looking forward, not backward” approach. The ineligible dependents are removed going forward, with the company out of the money already disbursed to cover those claims.
How to Prevent Ineligibility Losses
There are two steps to preventing money lost through coverage of claims by ineligible dependents. The first is to conduct a full audit of all dependents enrolled in the plan(s). This initial verification ensures everyone on plan is eligible to remain on the plan.
The second step is ongoing verification, conducted both for new hires and dependents of current employees that are being added to the plan throughout the year. Any time dependents are added to the plan, they should be subject to the same strict standards of dependent eligibility verification, as all of the other dependents that were previously reviewed.
On average anywhere from 9 to 12% of newly-added dependents (spouse or child) are ineligible for coverage. The number is even higher —10 to 13%— when just analyzing spouses who have been on the plan for greater than 18-24 months without verification of marital status.
Why Include Ongoing Audits
After going through the process of an initial verification, it only makes sense to continue to protect the plan’s assets going forward. The ROI of an on-going verification is often measured in the form of risk mitigation since this process focuses on new dependents enrolling in the plan. Since nearly 10% of all newly added dependents are identified as ineligible, by having a solid verification process in place a plan sponsor is ensured that they are avoiding significant unnecessary future expense especially as the average annual cost per a dependent (spouse/child) is now running over $4,000 per year.
With Consova’s Ongoing Verification, you can be certain that coverage is provided only to eligible dependents while removing those determined to be ineligible from the plan.