HMS Healthcare September 19, 2012

Fact: It’s likely that more than 5% of dependents on your health plan don’t meet the plan’s eligibility rules.

Fact: Each ineligible dependent is costing you, on average, approximately $3,000 per year in medical and prescription claims. That’s $250 every month!

These facts signal the need for a real-time, ongoing approach for reviewing dependents added to a health plan, as well as a reasonable re-verification timeline for dependents whose eligibility status may have been affected by a life change — such as a new job or a divorce — and gone undocumented.

Many companies have already conducted some type of dependent eligibility review, either by requesting documentation from new hires or by hiring a firm to ensure dependents meet the eligibility rules outlined in the organization’s summary plan description. Most organizations consider their internal standards to be sufficient. And if they have performed an audit in the past, they often don’t see a need to perform a follow-up audit for many years.

However, dependents may be added to your plan each month a result of new hires or family status changes, and it’s common for one out of every 20 dependents added during these transactions to be ineligible. If eligibility is not verified, your organization may end up spending money where it shouldn’t — on ineligible members. And if your employees are paying part of their premium, their money may be supporting ineligible dependents as well.

To ensure that money is only being spent on eligible participants, companies should conduct regular audits of all the dependents on their plan. If your organization has never conducted a dependent eligibility audit, you will need to conduct one to ensure your plan is only covering eligible participants. You should then implement an ongoing point-of-enrollment solution, which audits all dependents added as the result of a new hire or family status change as soon as they enroll. While it will still be necessary to perform company-wide follow-up audits with this approach in place, the frequency of those audits can be reduced from once every two years to once every three years.