Verifying dependent eligibility status is a good idea, especially if you have made changes to your plan that affect premiums or benefit provisions.
It can potentially save you 3% to 5% in premium costs. Here’s what you need to know about conducting a dependent audit on your plan.
As an employee benefit plan sponsor, you want to maintain a plan that is cost-effective and efficient. Verifying dependent eligibility status can be a good way to ensure your plan is both. Ineligible dependents enrolled in your plans can raise premiums overall and may ultimately require adjustments to out-of-pocket costs passed on to all employees.
Dependent audits are a best practice used by companies of all sizes. They are designed to help ensure you are only providing benefits to those who are eligible.
Employees are required to provide proof that any dependents they have covered under the plan are truly qualified to enroll. Proof may include copies of:
- Birth certificates
- Marriage licenses
- Court documents
- Affirmations that coverage under another health plan (including Medicare and Medicaid) is not available
Verifying dependent eligibility can potentially save you 3% to 5% in premium costs. More importantly, it can help maintain the integrity of your plan.
Before the audit
Conducting an audit of all dependents enrolled in your employee benefit plan can help you control plan costs and meet regulatory requirements. Before you begin, there are a few items you must address.
First, you will need to make sure current enrollment data are accurate. Work with the administrators of your plan to make sure the enrollment data you have are the same as that of your carriers. You will want to eliminate any errors or conflicts before conducting the audit.
Next, you will need to develop a strategy. Who will conduct the audit? Will you utilize your human resources (HR) team or rely on your third-party administrator (TPA)? If you choose to complete the audit in-house, be sure to have the appropriate processes in place to manage the flow of documents you will be collecting and maintain confidentiality. If you choose to work with your TPA or a professional auditing firm, check their track record and ask for references. They should be able to offer ongoing communication, quick response times and customer service support. HIPAA compliance is also a must.
Finally, you will need to lay the proper groundwork to avoid confusion and misunderstanding during the audit. It’s important for employees to recognize you are not accusing them of doing anything wrong. You want to be sure they know you trust them. And, you don’t want anyone to feel like you are looking for an excuse to kick people off the plan.
Communicating with employees
Each dependent audit is unique, and your materials should be too. The more open you are about the process and the easier you make it for employees to respond, the more successful you will be.
Communication is key. Your message should be clear and consistent.
- Announcing the audit — This is your first message to employees. It should describe the process, why it is needed and who you will be working with to complete the study. It should include the time frame for the audit and when results should be expected. Typically, dependent audits allow 30 to 45 days for employees to respond. In some cases, up to 90 days may be necessary.
- Collecting information — These requests for information should be sent directly to each employee. They should include details about who is eligible to participate in your plans and list what dependent information is required. Make sure to request supporting documentation and include all pertinent deadlines. If you are using an online system to collect proof of eligibility, provide complete instructions on how to access the site and upload documents. If you are collecting paper copies, provide employees with a self-addressed envelope with postage already paid.
- Following up — A few weeks into the process, you may want to send a reminder to any employee who has not yet responded. Remind them of the deadline and how to submit the required proof. Offer help, if needed. A second reminder may be necessary as you approach the deadline.
Employees who disagree with an eligibility finding may want to appeal the decision. Be sure to provide employees with detailed information on how to file an appeal, and allow them ample time to respond. Most companies typically require appeals to be filed within 40 days of the denial of coverage.
Penalties and subsequent audits
While many companies do not assess penalties for errors found during an initial dependent audit, you will need to decide what works best for you. It is common to notify employees of the error, remove the ineligible dependent from the plan, and offer continuing coverage if available.
You may want to implement a policy that does apply fines if dependents are found to be enrolled in error during subsequent audits. Most plans complete full dependent verification audits every two years and random audits of a sample of employees every 12 to 18 months.
There are some instances where an audit may not be necessary. For example, if your company is made up of mostly young, single employees, you may not need to complete a full dependent audit. A random sampling of employees should let you know whether there are any enrollment issues worth pursuing.
Talk to our employee benefits team, if you have any questions on how to complete a dependent audit. They can work with your HR team to develop a strategy and refer you to a professional auditor if needed. They are there to support you through the process and assist in any way possible.
This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem. Please refer to your policy contract for any specific information or questions on applicability of coverage.
Please note coverage can not be bound or a claim reported without written acknowledgment from a OneGroup Representative.
This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem.
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