Controlling health care costs is important for every employer who offers employee benefits. Under the Affordable Care Act, employers with 50 or more employees must provide health coverage to their workforce and dependents up to age 26.
But not spouses.
Thats an area where employers can curb expenses, and theyre using dependent eligibility audits to identify where cuts can be made. While some companies have dropped coverage for working spouses who have access to health insurance from another employer the United Parcel Service became one of the largest employers to do so a year and a half ago thats not an ultimate solution.
Trying to move spouses off the plan is not a silver bullet, says Kevin Schlotman, director of employee benefits at Benovation, a third-party administrator based in Cincinnati. Most employers dont want to completely eliminate spouses from their plans, he says.
Regardless, employers, whether fully insured or self-funded, should conduct dependent eligibility audits to ensure those who are receiving benefits are entitled to them, Schlotman says. As a general rule, audits should be conducted every three to four years, says Jim OConnor, national practice leader for employee benefits at CBIZ.
Larger organizations with higher turnover should conduct these audits more regularly, Schlotman says. Between 4% and 8% of dependents are ineligible for benefits which can translate into more than $3,000 in savings per year for each ineligible person, according to HMS, a company that conducts audits for businesses.
These audits cost time and money, Schlotman says, so its essential that employers ensure their workforce takes the audit seriously. The employer has to be willing to stick to their proverbial guns, he says. Employers might not be too keen on taking a hardline approach, he says, but the only way to reap the benefit of an audit is by having employees respond.
Managing the rising cost of health care is the main benefit of an audit, OConnor says. The employer should be diligent in making sure the limited dollars they are spending are going to the benefit of those employees who are truly entitled to them, he says. An employer would not allow a person to be on payroll or workers comp that is not eligible, so the same diligence should be applied to health and welfare benefits.
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One of the most difficult parts of managing benefits is that eligibility status can change frequently, says Keith McMurdy, a partner with Fox Rothschild. In one instance, an ex-spouse remained enrolled in Federal Express health plan for seven years.
I have actually seen situations where the plan has continued to list a deceased spouse as a primary beneficiary, McMurdy says. I have even seen a situation where a health plan accidentally continued coverage for a spouse of a deceased employee for years, apparently not aware that the employee had died.
Thats why recordkeeping is an essential part of plan administration, McMurdy says. Not all plans have open enrollment every year where dependent eligibility can be checked, he says. So consider some type of audit of your plans to verify dependents are still in fact dependents under the terms of your plan.
