Fearful that new federal Affordable Care Act (ACA) requirements will drive health coverage costs even higher, employers are turning to a controversial tool–the dependent eligibility audit–to get ineligible nephews, nieces, neighbors and identity thieves out of their plans now before the bills go up.
A dependent audit is a process in which auditors may ask employees to submit legal documents, such as birth certificates and marriage certificates, to prove that the individuals identified as dependents are really the employees’ legal dependents. Dependents who turn out not to be legal dependents can be removed from the employer’s health plan.
Other types of benefits audits, such as medical claims audits and disability audits, are still more common, but according to Towers Watson Inc., New York, the percentage of employers with at least 1,000 employees that use dependent audits is expected to will increase to 84% in 2011, from 42% in 2007.
Dependent audits are a very hot topic, says dependent auditor Michael Smith, president of ConSova Corp., Lakewood, Colo.. “We don’t see this slowing down any time soon,” Smith says.
WHY DO IT?
Dependent audits typically take 90 to 125 days to complete, and up to 15% of the plan members reviewed may prove to be ineligible for dependent health benefits. Aon Corp., Chicago, says divorced spouses, step-children, and members of extended families tend to be the ineligible plan members most commonly identified by the audits.
Amanda Johnson of Ceridian Corp., Minneapolis, says a successful dependent audit can save an employer with 100 employees about $23,000 per year, and an employer with 1,000 employees about $234,000 per year. Nationwide, these audits can save up to $22 billion annually.
“Back in 2003, people thought we were crazy,” because no one imagined that 8% of the dependents could be ineligible for health coverage, Smith says. Now, he says, employers understand how much money the audit process can save, and “employers just can’t ignore it anymore.”
“More and more employers are seeing the value in it,” says Paul Cantwell, president of HealthCorp Solutions L.L.C., North Canton, Ohio. “It’s a quick pay back.” In some cases, he says, employers can generate returns in just 3 or 4 months.
But dependent audits have their drawbacks. To avoid violating federal health information privacy standards, BMI Audit Services L.L.C., South Bend, Ill., asks employees to black out any Social Security numbers or other personal financial information when they send in documents such as marriage licenses.