Preliminary Considerations
What is a Dependent Eligibility Verification Audit (Dependent Audit)?
A Dependent Eligibility Verification Audit (Dependent Audit) is the inspection of an employer’s health & welfare plan to ensure enrolled dependent(s) eligibility. A Dependent Audit’s goal is typically related to one or more of the following objectives:
- Reducing healthcare costs by eliminating claims paid for ineligible dependents
- Ensure the organization is able to continue providing appealing benefits that help attract human talent
- Provide controls in support of Sarbanes-Oxley compliance
- Comply with ERISA or state-laws related to operating a benefit plan as designed and for the exclusive benefit of plan participants, as well as operating the plan in accordance with a “prudent man standard”
- Assist in the compliance of specific provisions within Health Care Reform (PPACA) legislation
Note: The goal of a Dependent Audit is not to maximize the number of dependents that are removed from benefit plans, but rather to ensure that covered dependents do in fact meet the guidelines to be on the plans.
WHY SHOULD WE PERFORM A DEPENDENT ELIGIBILITY AUDIT? 
HMS’ self-service Dependent Audit will allow your company to internally identify ineligible dependents that are being covered by your company’s health plan. In turn, your company will see cost savings.
In an era of Health Care Reform (PPACA) legislation, it is more important than ever before for employers to ensure that dependents enrolled on their sponsored benefit plans actually meet the guidelines of an eligible dependent. Newly enacted recession of coverage language makes it very difficult to remove an ineligible dependent from coverage retroactively. In these cases, fraud must be proven by the plan sponsor. This makes the only option for removal in most cases prospective termination for ineligible dependents. The use of Dependent Audits becomes increasingly important as a tool to ensure only eligible dependents remain on your company’s health plan, allowing more timely removal of ineligible dependents from sponsored plans and protecting your company’s financial interests in the process.
Control Wasteful Spending
Dependent Audits often find between 4% and 8% of plan participants had an ineligible dependent on a company health plan. These ineligible dependents are increasing your company’s, and your plan participant’s, health care costs.
Comply with the Law
The Employee Retirement Income Security Act (ERISA) mandates that Plan sponsors manage plans for the “exclusive benefit” of participants and beneficiaries. Checking for ineligible dependents helps to ensure your organization is meeting its fiduciary obligations. This also provides another internal control that helps your company comply with Sarbanes-Oxley.
Health Care Reform (PPACA) regulations stipulate that plans under a grandfathered status can refuse coverage to 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 audit.
Reduce Future Costs
Regular dependent eligibility audits show your plan participant that your organization is doing its best to minimize their costs of health insurance. Auditing will also help stem future abuses of the eligibility provisions in your plan.
BENEFITS OF A DEPENDENT AUDIT
Employers have experienced up to 10% reduction in healthcare participants by using HMS services; with a usual range of 4% to 8%. A reduction of ¼ to ½% of enrolled dependents is one out of every 200 to 400 enrolled dependents and will typically cover the costs of our program. Returns on investment generally range from 400% to over 1000%.
This verification will:
- Contribute immediately to a reduction in healthcare costs that are comprehensive and innovative;
- Verify that dependents claimed by your plan participants are eligible to receive healthcare benefits;
- Produce quantifiable and measurable results;
- Provide immediate savings throughout your entire benefit structure, including medical, dental, prescription drug, and vision plans; and
- Complement your existing efforts of containing healthcare costs
