Dependent Audit

[tsrl01]

We have an employer that conducted a dependent audit. Some employees did not respond and therefore dependents got kicked off. Now there are employees coming forward with the appropriate documentation verifying dependent status. If the employer wants to permit the re-enrollment of the dependents, is there anything that would prevent the employer from charging the employee an administrative fee of some sort? Kind of like a penalty for not reading their mail, taking it seriously, responding, etc...

[GBurns]

I don't think that what the employer wants matters as much as what the health plan documents allow. Do the plan documents say anything about re-enrollment ? Does it evven allow the kicking off for that reason?

[oriecat]

Agreed. Wouldn't the plan require a qualifying event to add coverage at this point?

[GBurns]

That could be so, but doesn't that raise the question as to what was the qualifying event for the "kicking off"? That was also a change in selected coverage.

[jpod]

There may have been nothing inappropriate about kicking the participant's dependents out of the plan if (a) the governing plan document(s) - insured or otherwise - permitted this (otherwise what leverage does a carrier or plan sponsor have in getting participant cooperation in connection with a dependent audit?), and (b) participant was provided notice of what would happen if he/she failed to respond. A bit dicey, but not necessarily illegal.

As to whether a fee can be charged for coming back in, what does the plan say? A more important question not yet asked is does the dependent come back in retroactively or prospectively only? Again, a document question, but I could understand if the document said that you can't get back in until the next open season.

[oriecat]

That could be so, but doesn't that raise the question as to what was the qualifying event for the "kicking off"? That was also a change in selected coverage.

Seems like that would just be failure to meet eligibility requirements for coverage. You can't cover someone who isn't eligible, and if documentation of eligibility is required and they failed to provide it, then they would not be eligible and should be removed. Or so it seems to me.

[tsrl01]

That's is how I see it - they aren't eligible, so they fail to meet the eligibliity and therefore shouldn't have been covered in the first place, so they are being "kicked out" as of the earlier of January 1, 2009 or the date they no longer satisfied the eligibility requirements.

[GBurns]

You still have not said anything about what the plan documents actually state. The plan documents not the employer.

[Guest Benefit Audit Consultant]

We have an employer that conducted a dependent audit. Some employees did not respond and therefore dependents got kicked off. Now there are employees coming forward with the appropriate documentation verifying dependent status. If the employer wants to permit the re-enrollment of the dependents, is there anything that would prevent the employer from charging the employee an administrative fee of some sort? Kind of like a penalty for not reading their mail, taking it seriously, responding, etc...

tsrl01 - My firm has audited over 1 million dependents over the course of the last few years. Most employers will allow the employees to enroll for coverage if they provide the documentation within a reasonable timeframe after the audit is complete. Most of our clients choose to include a generous unpublished grace period after the deadline is reached. This allows them time to send out notices of termination of coverage which can then spur the employees to complete the verification process. I agree that your plan documents should be referenced for this question.

For other employers looking at this that might be planning their audit, this example shows how important it is to lower the amount of employees who do not respond to the audit. We typically keep this number to less than 5% of the total. A multi-channel communication plan is the critical point that determines whether or not these audits are successful.

If you would like to read some other best practices for conducting a dependent audit you can find them here: http://www.chapmankelly.com/blog/tag/dependent-audit/