One of the first (and most popular) changes brought on by health care reform was the mandatory extension of health plan eligibility to adult children up to age 26 regardless of student status or dependence upon the employee. Most people predicted that the rate of ineligible dependents would decrease after this provision took effect. Based upon a study my firm recently completed, comparing similar populations before and after the implementation of this provision, we can now conclusively state that the experts were wrong.
The rate of ineligible dependents on the health plans analyzed in this study has increased by approximately 1.5 percentage points. What caused this change? What do the results of dependent eligibility audits conducted after the passage of health care reform tell us about employee behavior? What should employers do based upon the results of this study?
Health care reform expectations
When health care reform passed, many experts analyzed the data coming from dependent eligibility verification projects in order to predict the effect of health care reform on the efficacy of these projects. Using our data as an example, prior to health care reform in a sample set of over 113,000 dependents verified, 48% of the ineligible dependents were under age 20, and 29% of the ineligible dependents were over age 26. Correspondingly, 23% of the ineligible dependents were between the ages of 20 and 26 (the typical ages of full-time students). Further investigation showed that half of these ineligible dependents were ineligible because they failed the “relationship” test.
As a result, it seemed reasonable to assume that with the testing for full-time student status eliminated, 11.5% of the previously identified ineligible dependents would now pass eligibility verification. Said another way, if 6.5% of dependents were found to be ineligible prior to the passage of health care reform, it was likely that the rate of ineligible dependents would be reduced by 11.5%. Based upon this hypothesis, experts expected the average rate of ineligible dependents post health care reform to drop from 6.5% to 5.75%.
This reduction, while significant, would have only partially mitigated the strong business case for an employer to conduct a dependent eligibility audit. For some employers, however, who anticipated that they might fall at the lower end of the ranges of ineligible dependents, this 11.5% reduction may have been enough to discourage them from the project.
The real effects of health care reform
In this most recent study, though, the opposite has proven true. Using a statistically significant sample of recent projects conducted by ContinuousHealth, we’ve found that the average percentage of ineligible dependents has actually increased to 7.99% after implementation of the Affordable Care Act. Additionally, it is interesting to note the percentage breakdown of the ineligible dependents by age demonstrates a shift in the ages of ineligible dependents. Specifically, 38% of the ineligible dependents identified in this sample set were under the age of 20, compared to 48% prior to Health care reform. The percentage between age 20 and age 26 is virtually unchanged at 23%. The percentage of ineligible dependents above age 26 increased from its pre-health care reform levels of 29% to a post health care reform 40%.
What conclusions wan we draw from increased ineligible numbers?
Certainly there were other factors in place during the time period studied. Part of this shift could be a result of the continued softness in the employment environment. This not only affects the percentage of dual-earner households, but also contributes to the rate at which employees might attempt to have non-spouses or other adults added to their plan wholack access to coverage due to unemployment.
Additionally, in 70% or more of the employers, the only verification procedure for dependents prior to health care reform was the verification of full-time student status conducted annually or biannually by the health care plan administrator. With the changes brought on by health care reform, this verification process was no longer relevant, thus eliminating the only stopgap against ineligible dependents.
A necessary response
Regardless of the root causes for this increase in ineligible dependent rate, the call to action is clear. For years, it’s been clear that if employers are not making arrangements to verify dependent eligibility with a thorough process that includes both education and document verification, there are likely to be ineligible dependents on the plan gratuitously driving up the cost of health care. In the post health care reform era where even more dependents are eligible, the exposure risk of covering ineligible dependents is more significant than ever.
Helman is the chief executive of Atlanta-based ContinuousHealth, an independent organization that uses proprietary technology to help employers optimize their investment in employee benefits programs. Follow the company on on Twitter, @CHealthUpdate, or visit www.continuoushealth.com.
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