More companies checking out dependents on health insurance plans
By Greg Griffin
A new kind of audit is becoming standard procedure in many workplaces.
Looking for ways to cut costs, employers are requiring workers to produce marriage licenses, birth certificates, student IDs and partial tax returns to prove their listed dependents are eligible for health-insurance coverage.
Such "dependent audits" are on the rise in the private and public sectors. A survey released by human-resources firm Towers Watson in March found that 69 percent of large employers planned to audit their plans this year, up from 55 percent in 2008.
The audits uncover children who are too old for coverage or aren't students as claimed, ex-spouses who are not eligible for coverage and non-family members. Employers typically don't delve too deeply into whether the oversight was intentional; most are satisfied to resolve the issue and move on.
Among those that have conducted dependent
audits are Denver-based Qwest and the
Health reform concern
ConSova, a Lakewood-based company that conducts audits for clients including Tyco, Nissan Motors and Nokia, finds ineligibility rates of 11 percent to 13 percent, said chief executive Michael Smith.
"Health care costs are on the rise, and we're trying to help employers manage that. Health care is the third-largest cost-containment area available to them," Smith said. "Removing 12 percent of your ineligible beneficiaries can reduce your overall spend in health care by 4 to 6 percent."
Many employers are worried that costs will climb even more under the health care reform act signed into law in March, Smith said.
Towers Watson found that 2 percent to 5
percent of dependents were ineligible in audits it conducted for
clients in the last three years, though in at least one case the
figure was as high as 10 percent, said John Fazio, a senior
consultant for the firm in
"It's not just a cost-cutting move, it's a good business practice. You're trying to make sure those covered really belong there," Fazio said. "You're not taking anything away from anybody who has a right to it."
Examples include grandchildren, nieces, nephews and children-in-law being improperly claimed as dependents; ex-spouses remaining on the coverage without a court order; grown children claimed as dependents even though they're not students; and live-in partners counted as spouses. Each company has its own policies regarding who does and does not qualify as a dependent.
While cumbersome, the audits are justifiable as long as all employees take part, including senior managers, said Demetra Estephana Koelling, an adjunct professor at the University of Denver Sturm College of Law who specializes in employment law.
CU wraps up audit
Still, introducing a new and intrusive task in the workplace isn't easy. The University of Colorado sent out multiple letters and packets to staff earlier this year but is still working to finalize the paperwork for a few stragglers, said Jill Pollock, CU senior associate vice president and chief human resources officer.
The audit found nearly 1,000 ineligible dependents, or 5.6 percent of those covered by the university. Removing them from coverage, as the university did July 1, will save $2 million to $4 million annually, Pollock said. That's roughly 2 percent to 3 percent of its $120 million in annual health care costs.
Some employers require workers to reimburse them for past claims made by dependents found to be ineligible, but the trend appears to be moving away from that. CU didn't seek reimbursement, nor have clients of ConSova and Towers Watson. The idea, they said, is to cut future costs.
"We were not on a witch hunt. We were about behaving in a fiscally prudent way," Pollock said.
Qwest spokeswoman Diane Reberger said the company conducted a dependent audit within the past four years, resulting in "significant savings."
It's important for employees to provide documentation during dependent audits, the experts said. If they don't, they may lose coverage for all dependents, eligible or not.
Many employers are waiting until 2011 to conduct dependent audits because the new health care reform law extends coverage to dependent children through age 26, whether or not they're students. The change goes into effect next month, but most new health-plan years start Jan. 1.
"Companies don't want to take someone off the plan they'll have to put back on" in a few months, Fazio said.
Smith of ConSova said that while the majority of ineligible dependents are children improperly claimed, most of the savings come from eliminating ineligible adult dependents whose health care costs are higher.
Greg Griffin: 303-954-1241 or email@example.com