When it comes to dependent eligibility verification, most employer-sponsored health plans think of it merely as a cost containment tool. While it certainly delivers cost containment, quite effectively we might add, it is important not to overlook the risk mitigation benefits of a dependent eligibility audit.
What is the risk of an ineligible dependent on your self-insured health plan? Perhaps you may think of it in the terms of an average dependent’s utilization, which is around $3,500. But, this would be making the same catastrophic mistake that the Captain of the Titanic made—missing the iceberg directly in front of you.
“Iceberg right ahead!”
As plan sponsors design, implement and roll out their health benefit programs each year, it’s important that they fully account for the risk inherent in the process. With each passing day, new, unverified dependents are being added to the plan and spouses are opting out of work spouse rules, leaving the employer subject to considerably more risk than they may realize, potentially in excess of $1M if a stop-loss claim in denied.
Most self-insured health plans have some form of stop-loss coverage in place. But, what happens if you submit a claim for a dependent that does not meet your plan definitions for eligibility? You can be certain that your stop-loss carrier will do their due diligence before a claim has been paid. What would the denial of a $1M stop-loss claim do to your budget?
This risk is especially true for any plan sponsor with individual stop-loss coverage (vs aggregated). All things considered, mitigating this risk is rather straightforward. Our recommendation is that plan sponsors employ a full-scale dependent eligibility audit of all enrolled dependents every 3-5 years. Ongoing audits should be conducted for any new dependent being enrolled on the plan—dependents of new hires, those from acquisitions, those with qualifying life events, annual open enrollment, etc. Also, given the high rate of divorce, we recommend a complete re-review of your spouse population ever 18-24 months. A cost containment strategy that employs these strategies should dramatically reduce your risk of a stop-loss claim being denied.