Pricewaterhouse Cooper listed it as one of the Top 10 Health Industry Issues for 2010. Benefits Selling magazine (June 2009) described it as an all-too-often overlooked cost control tool. And a recent survey by Watson-Wyatt found that more than 60% of large U.S. companies conducted one in 2009. That percentage is predicted to increase in 2010. But what exactly is a dependent eligibility audit and why should employers consider conducting one?
What is it?
A dependent eligibility or verification audit is a complex, documented process that enables employers to verify the eligibility of claimed dependents under the employer’s benefits plan. Typically, employees are required to submit specific documents which provide proof that a claimed dependent is eligible for benefits under the terms of the Summary Plan Description (SPD). Disciplinary action may be taken for employees who fail to comply ranging from removal of dependents from the benefits plan to requiring the employee to pay for past claims paid on ineligible dependents to termination of the employee(in cases of fraud).
Why should employers do it?
Saves money—Studies show that between 5%—15% of enrolled dependents are ineligible for benefits. Since the average cost for each ineligible dependent is between $2,500—$5,600 per year, the cost savings of removing these ineligible dependents can be significant and can range in the millions of dollars. By reducing these health care costs an employer is able to provide the most comprehensive benefits at the best value which is a win‐win situation for the employer and the employee.
Reduces risk—Eliminating ineligible dependents saves the plan on claims it shouldn’t be paying. This includes claims within normal dollar amounts as well as catastrophic claims. A recent study indicated that over 80% of rejected stop‐loss claims were rejected because the dependent did not meet eligibility requirements. These high‐dollar claims typically become the financial responsibility of the employer.
Ensures legal compliance—Because of ERISA requirements, employers have a fiduciary responsibility to monitor their benefits plan to ensure that it is operating according to all of the plan conditions and provisions. The dependent audit is one tool an employer can utilize to show that it has exercised due diligence and prudence in the administration of the plan. It also helps an employer comply with the Sarbanes‐Oxley Act by demonstrating adequate financial controls over the plan’s health care spending.
Protects tax‐exempt status—Because of their favorable tax position, Section 125 plans are precluded from using pre‐tax dollars to cover ineligible dependents. Therefore, removing ineligible dependents through the use of the audit helps protect and retain the tax-exempt status of the plan.
Why should employers contract with Cornerstone?
Because of the significant resources required to verify documents, answer employee questions and follow-up with incomplete/incorrect documents, many employers decide to outsource the dependent verification audit process. Cornerstone can be a valuable resource in planning, executing and evaluating a successful audit campaign. Our staff includes licensed insurance agents with extensive benefits knowledge (some have advanced benefits certifications and/or designations) and call center experience who have the expertise to implement a smooth and effective audit. These professional, salaried benefits counselors work behind the scenes with the client’s Human Resources department to ensure that the audit process is simple and understandable for employees which, in turn, minimizes adverse employee reaction and helps maintain employee goodwill.
Cornerstone specializes in customizing our dependent verification audit process to meet our customer’s needs. Our services range from an aggressive, comprehensive audit of an entire employee population requiring specific dependent documentation to a less invasive, affidavit survey based on the honor system. Obviously, the tighter the process is managed, the greater the realized savings and ongoing management of the risk is required to prevent any relapse. Additional audit services include random sample audits and targeted audits. The best part is that, if done in conjunction with a voluntary benefits enrollment, our audit services are free of charge!
Our new softphone technology enables us to place a call center agent anywhere in the country with full call center capabilities including recording phone calls, receiving/sending faxes and receiving voice mails. Our other new technology, voice broadcasting, allows us to communicate audit information or deliver important messages to thousands of employees at the same time saving dollars and call center support time. Both of these technologies provide us more flexible and effective ways to communicate with our client’s employees and assist us in managing and storing the high volumes of documents generated by the audit. Secure document storage and retrieval-Dependent documentation and data can be stored on the client’s equipment or on Cornerstone’s. Storage will be in a HIPAA-compliant environment with backups of critical data performed daily.
The dependent eligibility audit process is a powerful, inexpensive tool that can help an employer reduce rising health care costs by as much as 10% without reducing employee benefits. For the broker it can be a means of strengthening an existing customer relationship or creating a new one.
At Cornerstone Enrollment Services we use a customized approach to meet each employer’s needs and to accommodate the employer’s corporate culture. We work seamlessly with your HR benefits department to provide you with effective and rewarding audit results and to ensure that adequate controls are in place for continued success.
Please contact us to discuss the significant savings you can achieve by implementing a free dependent eligibility audit!