Comprehensive Dependent Audit
A Comprehensive Dependent Audit will include both an optional Amnesty Phase and a Verification Phase. This approach will yield the greatest cost-savings results and will also require a greater investment of time and resources. In some instances, conducting an “Affidavit Only” or “Verification Only” program may be appropriate.
Notification
A well planned communications strategy each Plan participant will support the upcoming audit. The specific form(s) of communication should be tailored to your unique population and culture. If employees have access to e-mail, a broadcast e-letter would reach most (if not all) of your target audience.
Amnesty Phase (optional)
An Amnesty Phase is generally offered to allow plan participants the opportunity to carefully review the definition of an eligible dependent and remove any that do not meet the criteria. Other than having the ineligible dependent dropped from coverage, this period does not have any consequence to the Plan participant. A key question during this Phase is when to make the termination effective. Most employers make it effective at of the beginning or end of the amnesty period; therefore, no retroactive termination or other consequence occurs. This information should be included in the amnesty letter. First, an amnesty letter and amnesty FAQ should be mailed to all participants (Plan participants, retirees, COBRA participants, former spouses, etc.) with enrolled dependents. A response is only required when a Plan participant identifies a dependent who does not meet the eligibility criteria. They will return the letter indicating the termination. In addition, the amnesty letter may request information from the Plan participant about whether the dependent was ever eligible and if so, when they became ineligible. This information can be used to determine whether COBRA should be offered; however, many Plan participants do not provide this information so a decision would need to be made on how to handle those cases. Other employers choose to offer COBRA to all dependents dropped.
Verification Phase
During the Verification Phase, the plan participant is required to provide specific documentation to verify the eligibility of each enrolled dependent. This will not include any dependents removed from coverage during the amnesty period. The document requirements are based on the eligibility guidelines for each dependent type and are established during the planning process. When a Plan participant responds during verification, their documents will require processing. Consideration should be given as to how the documents will be handled, reviewed, stored, and destroyed. As a Plan participant’s documents are reviewed, their responses will result in partial or full completion of the Dependent Audit. A partial response may require additional review and additional communication to the plan participant.
Health Care Reform (PPACA) regulations allow Plans under a grandfathered status to refuse coverage by benefit plans for adult dependents who have access to healthcare through their own employer sponsored Plans. Dependent eligibility audits allow employers the opportunity to audit dependents for this access as a course of the custom program.
Grace Period
Following the Verification Phase, the program timeline should include a Grace Period for the close out process. This brief period of time will allow proper close out of the project, which includes additional time for employees to respond if you decide to allow this. A Grace Period will allow for the processing of documents received at the deadline. The overall audit response rate will determine if a formal appeals process will be necessary and whether or not you will process reinstatement. The Grace Period should not be widely published; else it will effectively extend the deadline of the Verification Phase.
Appeals
At the conclusion of the Dependent Audit, there will be plan participants whose files are in a no response or partial/incomplete status. As the verification deadline approaches a process for reviewing appeals should be considered. If an appeal process will be offered, instructions for submitting an appeal should be communicated in the Final Notice of Adverse Action.
Reinstatement
A system for processing reinstatement’s should be considered. Even if you do not offer an appeals process, there will be plan participants who unintentionally remove a dependent from coverage, requiring benefits to be reinstated.
Close Out
Upon completion of the Verification Phase and the conclusion of the grace period, you need to formally close out the program process. During the close out, program should be compiled, to include the number of responses and terminated dependents. Additionally you will want to report the estimated cost savings the program will generate.
The close out process should also include the proper storage and destruction of the documents collected during the Dependent Audit. The Health Insurance Portability and Accountability Act (HIPAA) and other government regulations require businesses to properly mange confidential information. Failure to do so can result in penalties and fines.
