Dependent eligibility audits for health plans?

[Guest sarikfan]

Does your company perform health plan dependent eligibility audits? Our health plan administrators handle student status verification for us. We are beginning to work on spouse and domestic partner audits. We have recently uncovered through non-audit means significant fraud that cost big $$$$. (Mom enrolled as wife; we were notified by health plan 6 years down the line--at least they caught it--but six digit $$ of services from one of our self-funded plans went out the window; needless to say, the EE doesn't work here anymore).

The IRS says we can rely on certification of the employee. Do you require any certification of marriage when a new hire enrolls a spouse in benefits? Or, when there is a QSC of marriage? Do you have a general certification document or on-line/VRU questionnaire that you use?

For domestic partners, do you audit or pre-certify those who claim their DP as tax dependent and thus pay premiums pre-tax?

If you do require certification, do you ask for it annual.

We are a big employer--nearly 150,000 benefits eligible employees.

Thanks for your insights!

Sarikfan

[Guest ctopher]

You are absolutely right that dependent audits can create major $$$ for your health plan! Recent audits have found anywhere from 5-15 % of enrolled dependents are not eligible as defined by the plan. You are also right that most administrators only verify student status. This is unfortunate as one large employer who performed an audit found that nearly 35% of the ineligible dependents were spouse type dependents.

As to how to go about an audit, there are a couple of options. You can have some success asking questions, but you need to be prepared to leave a much larger ineligible population on the plan than if you were to do a full audit. Full audits will get you the maximum return, but involve quite a bit of work. For an employer of your size you would almost have to outsource the project. My guess is you would have nearly 75K inbound phone calls and something like 300K different verification documents. Quite a work load indeed!

For ongoing purposes here is what I recommend. Collect verification documentation for all new enrollees at the time of enrollment. For existing dependents, reverify their eligibility every couple of years. If you have a good audit vendor, they can carry forward already collected documentation that does not change (marriage certificates, birth certificates, etc) and only require those documents that expire (tax returns, college enrollment letters, etc). The beauty of this arrangement is you will experience a very large return at the beginning of the project (and if outsourced, minimal pain) and continue to reap the rewards year after year without having to reaudit the entire population.

Chris Heinefield

[Guest jrzgrl]

I was looking into domestic partnership coverage for our company, however we have decided not to offer it again this year. I do believe it will only be a matter of time, though. Here is what I found some employers do for the enrollment process:

They have domestic partners sign affidavits swearing:

You've lived together for at least _________

You are responsible for each other's financial welfare.

You are not blood relatives.

You are not married to or claimed by anyone else as a partner.

You have joint checking accounts.

You share utility, rent, or mortgage payments.

You're listed with domestic partner registries (where available).

You are not married to anyone and have not had another domestic partner within the prior six months.

You are not related by blood closer than would bar marriage.

And others require documentation as verification of their joint responsibility in the household such as:

Joint mortgage or lease

Designation of the domestic partner as primary beneficiary for a life insurance or a retirement contract or will

Durable power of attorney for health care or financial management

Joint ownership of a motor vehicle, a joint checking account, or a joint credit account

I found that some employers also have a year-long waiting period before they can add their partner.

[Guest ctopher]

Domestic partners and QMCSO's are definately the stickiest of the dependent audit wickets. The contents of the affidavit jrzgrl listed is a great list. One thing to keep in mind is that in certain states, you cannot put a greater burden on domestic partner relationships than on those of legal spouses. If you collect verification documentation for both domestic partner and legal spouse relationships you can bypass this problem. The legal spouse can be something like a marriage certificate and current tax return, while the domestic partner would be the affidavit and mortgage statement (or some other joint ownership type document).