Dependent Eligibility Audit

[Guest JMcD]

I am helping a client conduct a DEA; the problem is that we are approaching the deadline for eligibility verification and only half (170 of 343) of the affected members have submitted their forms. We don't want to terminate 50% of the dependents knowing the majority are eligible but also want to have some "teeth" in the deadline.

We recently reached out to all of the employees who have not turned in their forms and had them sign for a second DEA packet. Beyond that I'm not sure what else to do to ensure compliance.

Suggestions? Ideas? Help!

Thank you.

[Chaz]

The DEA packet should clearly explain (1) the dependent eligibility requirements, (2) what needs to be submitted for proof of dependent status, (3) the deadline for submitting the proof, (4) without such proof, coverage will end on X date, and (5) the consequences of the end of coverage (i.e., no claims will be paid after that date). If this information is clearly communicated (emphasis on clearly, especially with respect to the last one), you should be a better response.

There isn't much else you can do (absent a personal visit to their doorstep) to ensure compliance. Is it possible that a number of the non-responders do not in fact have eligible dependents?

[Guest JMcD]

Chaz: Thank you for replying. The DEA packet we used contains exactly the items and directions you mention. The closer we get to the deadline I am beginning to think that we may have a larger number of ineligibles than we originally thought.

What do you think of this? As the deadline passes all dependents who have not been certified through this process will have their claims denied until proof of their eligibility is submitted. I am considering this route because this allows for the elimination of those not eligible for the plan and a path to have eligibles covered, w/o a significant PR problem (however unjustified).

Thanks again for your time.

[jpod]

Does the group insurance contract (or the plan document if self-insured), permit the employer to drop dependents due to a failure of proof? Be careful.

[Chaz]

JPod's comment is well-taken. Whatever you do should be coordinated with your insurer (assuming the benefit is fully insured; you didn't say). Of course, the insurer is not likely to want to cover individuals not meeting the eligibility requirements to begin with so it probably won't be an issue.

You should probably run this by your counsel, but I have suggested to clients that they stick to the same deadline for everyone. You can extend the deadline a few times but make it clear that after X date, absent sufficient proof, coverage will end. There is no way around the negative PR that the DEA will result in, but if you communicate the process clearly and apply the rules consistently, it is more likely that the only employees who will be affected will be the ones with ineligible dependents.

I have seen DEAs where it turned out that 20-30% of dependents were ineligible.

[Guest bobolink]

Are these dependents mostly ineligible because of age? If so, what is the consequence of the required coverage up to 26? Has the legislation unwound all the dependent audit work of the last 5-6 years?

[Guest Benefit Audit Consultant]

Are these dependents mostly ineligible because of age? If so, what is the consequence of the required coverage up to 26? Has the legislation unwound all the dependent audit work of the last 5-6 years?

About 1/3 of ineligible dependents found during the course of an audit are individuals listed as students who are not actually full-time students. Health care reform will cause most of student dependents to remain eligible regardless of student status in the future. However, it is important to check whether or not these adult dependents have access to coverage by virtue of their own employment. If so, those with health plans that maintain their "grandfathered" status do not have to offer them coverage. The Congressional Budget Office estimates that almost 3 million dependents will join employer sponsored plans in 2011. This massive influx is going to make tight controls on dependent eligibility much more important. You can read about how health care reform is going to impact dependent eligibility in the white paper I have linked below.

I have also included a link to The Dependent Audit Guide. It is a free resource to learn about dependent audits and doesn't require any type of purchase and/or registration. We are always interested in comments on the guide if you have a suggestion or question.

Dependent Eligibility Under Health Care Reform

The Dependent Eligibility Audit Guide

[Guest Kathy D]

Chaz: Do you really want to collect premium for dependents who may be ineligible for coverage? Would constructive receipt of withholdings when you know a dependent may be ineligible form a binding relationship?? I am not sure and I am not sure if it would be different for a fully-funded plan than for a self-funded plan.

[Chaz]

Kathy D - I most certainly do NOT want to provide coverage or collect premiums with respect to a dependent who I know is ineligible. If I intimated that, it's not what I meant. Rather, if proof is not provided, the "dependent" should be taken off the plan (in accordance with the plan document or insurance policy, of course).

I am not sure what you mean by your second sentence but the only difference between a fully and self-insured plan in this context is that with an insured plan keeping a dependent on the plan that you know is ineligible likely constitutes insurance fraud.

[LRDG]

Benefit Audit Co, good presentation, material in both the DE Under HCR presentation and what I've read so far in the Audit Guide. Timing is getting tight for publishing regulatory rules for Plan implementation by 09/23/2010?, without an extention of some type or relief within the regs.