Employers' dependent eligibility audits find 5% don't belong on the plan. Next step is voluntary opt-out followed by removal.
A Watson Wyatt/National Business Group on Health survey of 489 employers found that audit reviews are the fastest growing change that companies are making to their healthcare programs.
"Already, we have seen Aetna has partnered with a vendor to provide this type of capability to its clients," he says. "Health plans also may receive questions through their member services functions about these audits from plan participants, so it is always a good idea to know when a client is doing such an audit. Because these audits may identify ineligible participants for whom claims were previously paid, the employer may want to recover claims-although in my experience not many companies pursue this strategy."
Health plans should have clear policies and communications around retroactive terminations to help clients understand what is possible.
"For other healthcare executives who are looking for opportunities to manage their employee medical plan costs, a dependent eligibility audit is definitely an opportunity to consider," he says.
Any company that sponsors medical benefits should consider a dependent eligibility audit as part of due diligence.
"Audit results we have seen show the problem of ineligible dependents is occurring in every industry segment," he says. "Once a comprehensive audit is done, ongoing audits of new hires or individuals who add dependents should be performed to maintain the integrity of the eligibility data; otherwise, there is a risk that those ineligibles will creep back onto the plan."
Employers and health plans do need to be cognizant of regulatory issues as they proceed with dependent eligibility audits.
Employers would have ERISA regulatory protections from state regulators, according to Clive Riddle, president and founder of MCOL, a provider of business-to-business managed care resources.
"But when self-funding is not involved, the health plans covering the dependents flagged in eligibility audits must be cautious in how they handle disenrollment and in particular, rescissions of any claims incurred," he says.
States such as California have clamped down on rescission activities, and health plans have to follow very strict guidelines in numerous states when dealing with this issue.
Although Martin J Wolff & Co. Inc. Insurance Agents has not conducted audits for its clients, Brian T. Sullivan, the company's president, employee benefits has "clearly seen the insurance carriers being more diligent in verifying eligibility, especially on dependent students, than in the past," he says. "This is more the case when the carrier is at risk on a fully insured program."
What Sullivan also has observed is a different definition of what constitutes an eligible dependent.
"If a dependent spouse is eligible for his/her employer's own plan, then that dependent is not an eligible dependent under the primary employee's plan," he says. "While not widespread, it is a growing trend. This is more true when the employer funds a portion of the dependent premium."