Why verifying health plan dependents is a must for any organization
Unaware employers are losing hundreds of thousands or even millions of dollars each year to ineligible health care dependents.
Having a good health plan is one of the few benefits employees value over compensation. In fact, health care is ranked third, below paid time off and overall benefit options as job satisfaction requirements, according to the Society for Human Resource Management.
Health care is especially important to those employees who are the main breadwinners for the family. However, not all family members can be added to an employee’s plan as a dependent.
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Whether it is done knowingly or unknowingly by the employee, these ineligible dependents are leading to many employers having to pay hundreds of thousand or even millions of dollars for unqualified medical claims.
The average cost per dependent in the United States is $4,570, according to Trustmark, and at least five to 12 percent of dependents are considered ineligible, according to a joint study by Hodges-Mace and ContinuousHealth.
The most common ineligible dependents found on health plans include spouses who have the option to enroll in health care through their own employers’ plans, divorced partners who have remained on an employee’s plan after separation, children who have exceeded the age to remain on their parents’ plan, and employees who have not become legal guardians of step children.
Other ineligible dependents have been identified, including elderly parents, nieces, nephews, cousins, close family friends and even illegal immigrants. Some dependents that are considered traditionally ineligible can receive exceptions based on the employer’s plan or individual state law such as common law marriages.
“It is based on whatever that specific client allows on their plan,” says Anna Simmons, team lead at Hodges-Mace. “The biggest trend we are seeing now are spousal exclusions and surcharges where employers are implementing those exclusions if the spouse has access to other health plan options.”
Companies such as Hodges-Mace have begun partnering with employers to evaluate plan participation and identify those employees who may have an unqualified dependent on the group health plan.
Using three separate industry as case studies — construction, health care and manufacturing — Hodges-Mace have found between 84 and almost 2,900 ineligible dependents and have saved these companies between $270,000 to $9 million.
Katy Dahlstorm, sales operation associate at Hodges-Mace, says having a third party evaluate a business’s health plan and the dependents helps employers avoid uncomfortable conversations around investigating dependent eligibility as well as avoid legal risk and financial disputes that come with knowingly allowing ineligible dependents to remain on the company’s coverage.
“To minimize the vulnerability of the company, it becomes absolutely vital for both the employer and the employee that only the dependents that are eligible to the plan participate,” Dahlstorm says.
For employers who want dependent verification through a third party source, it is recommended that the first verification process consist of evaluating the entire employee population. This way no employee will feel singled out, and the process is recognized as a standard practice.
The first four weeks of the verification process is typically considered the planning phase. This involves the most involvement from the employer by building portals and templates for the employees to access and for the third party verifier to gather census information.
For the next six weeks, the verifying service will communicate with employees by having them submit necessary documents on the dependents included in their plan. Once all documents have been received the verification process can commence.
The final four weeks consist of reminding employees of any last-minute submissions and the release of the verification results. Once the results are released employees can have the chance to appeal any decisions they deem incorrect and offer additional steps for employees who have unqualified dependents on the plan. Overall time for the full verification process should take at least 14 weeks.
Following the first verification, based on the number of employees and the frequency of new hires, quarterly audits can take place at the employer’s request. “We have some employers who require more frequent audits,” Simmons says. “Some as often as a weekly basis.”
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