Health plan audits have become a hot topic within the broker world. They range from the most common–dependent and Medicare plan member audits–to much deeper dives. For instance, advances in genetic testing now allow genomics service providers to audit plan member medications to ensure they are receiving the right medication and the proper dosage, based on their DNA.

The growing range of audits available not only saves employers considerable sums, but serves to establish best practices going forward that keep plan costs down. Dependent and Medicare audits remove plan members who are not eligible for benefits from the plans, thus ringing up a substantial savings the first time they are performed. But the next layer of audits, such as genetic testing, medical provider and pharmaceutical audits, can deliver even more savings.

Ortega was gratified by the couple's request for an itemized bill because she has been educating her clients about the value of reviewing everything in the plan that can be reviewed, from eligible members to hospital and pharmaceutical bills.

The basic audits–dependent and Medicare eligibility–are part of her core services to clients. Her Midwest firm has many family business clients in public entity, manufacturing, construction, and auto dealerships.

"With family-owned, but larger businesses, often times you have tenured employees who say, 'Here's my other dependent,' and they are added on with no questions asked," she says. "A dependent audit can reveal those who should not be covered by the plan."

She says fully insured plan administrators often dismiss the need for an audit. "They say, 'It's no skin off my back, the insurance carrier pays for it.' But if you have a couple of high claimants [who are not eligible], it does make a big difference."

Ortega says her firm sometimes takes the next step following a dependent or Medicare audit: seeking reimbursement from the carrier for costs incurred by the employer for ineligible plan members. "Often times, fully insured carrier will adjust for the cost of the extra premium that was paid for an ineligible dependent," she says. "But you have to go back and fight for it."

Public sector employers ripe for audits

Audits are particularly important for public employee plans, where employers have a fiduciary responsibility to taxpayers to ensure a clean plan population. These plans have boosted the prominence of audits as employers strive to better serve their taxpaying supporters.

Rachel Lyubovitzky, CEO of EverythingBenefits, says her firm has conducted audits of public sector employers that have "brought into light that ineligible plan members are receiving benefits."

Public sector tends to offer rich plans, which may incent unscrupulous employees to enroll an extended relative, driving hard cost and liability for employers, she says. With more of the larger companies going self-insured, the issue of supporting ineligible dependents is even more critical, as those employers are picking up their own tab for the claims. Playing the system may be fairly simple if there is no formal oversight in the process.

"You might do some trickery and enroll your uncle, cousin, etc if have the same last name," she says. "Former spouses are often still on these plans. You don't know unless you check the marriage certificate. Additionally, with some plans spouses may be ineligible to begin with if their employers provide coverage. But, again, without proper process to check, they too can get on the plan."

She says a typical dependent audit may reveal between 10 percent and 20 percent of those receiving benefits are ineligible.

"We check official records, marriage licenses and birth certificates. We run an audit and the system will send out a notification to employees that we are checking to make sure our plan is compliant. In some cases, you don't have to go through the audits, just announcing it usually does it. Oftentimes people will know if they are not supposed to be on the plan. Being clear and transparent about the rules during the enrollment process, will help eliminate most but not all abuses."

Antione Turner works mostly with public sectors employers, large to mid sized school districts, who have such a fiduciary charge. One of the benefits he offers these clients is Medicare migration.

"There is a tremendous amount of savings to be recaptured by those folks being eligible for Medicare benefits that the employer is paying for," he says.

When people are identified as not being eligible for the employer plan, Turner can help them find other coverage "to make them whole," he says.

Turner's firm, Total Rewards Insurance Agency, is in the process of implementing Medicare migration audits as well as a dependent audits with all of its public sector clients. Next, he is moving toward being able to provide audits "to deal with some of the costs centered around medications," where research has demonstrated considerable inefficiencies and unnecessary costs to the plan reside.

When the city of Hartford, Connecticut, audited its health care program, 77 ineligible employee dependents were discovered. California-based management consultant Secova Inc. conducted the audit, and reportedly saved Hartford $492,000 in health care costs.

According to a March 2019 article in the Hartford Business Journal, Secova said 3.1 percent of health plan members were ineligible, "which is below its average ineligibility rate of 5 percent to 6 percent for government entities," the newspaper said.

A 2017 audit of the North Carolina State Health Plan revealed that one percent of plan members were ineligible. Chump change? Hardly, when you consider that the plan has nearly 200,000 members.

3 tips for adding auditing

For brokers/advisors who are contemplating adding audit services for their clients, Ortega has a few pieces of advice:

• Audits are a good selling point in today's market. For a modest investment an employer can realize first-time and ongoing savings, with confidence that their advisor has infused the plan with built-in audit processes that will continue to deliver plan efficiencies.
• A broker should understand how audits fit with an employer's culture. Some employers may prefer "not to know" rather than remove ineligible plan members. Look for clients that embrace best practices, cost efficiencies, and fiduciary responsibilities.
• DO NOT promote your new-found audit services on social media where your existing clients can read about them. "I have gotten calls from employers asking me about audits. They are confused because their broker hasn't done one for them, but they are advertising them. Your current client may see you posting about offering dependent audits on social media and wonder why they have not heard about it from their broker," she says. "If you have not done audits for current clients, be cautious about promoting the service. If you are really going to offer auditing services, please start with your current clients and take care of them first!"

Another consideration for brokers: Offering plan audits is a valuable service, but it does add another layer of work to the job. For brokers committed to being full-service benefits advisors, though, failure to bring audits to the table represents a critical gap. And as the word about the cost-savings element of audits gets around, those who have not embraced them will be at a competitive disadvantage.

Read more: 

• Why verifying health plan dependents is a must for any organization
• Mercer: Dependent audits may save over $1 million
• How to improve transparency and take control over health care costs