Health care costs continue on their seemingly unending rise. As a result, employers continue to look for ways to responsibly contain those costs. One tool – the dependent eligibility audit – offers a relatively easy way to do just that.
This audit does exactly what the name describes – it determines whether all dependents being carried on an employee’s coverage are in fact eligible to be there. Those who should no longer be covered include children who have reached the maximum age limit, divorced spouses, or ineligible friends, roommates, or relatives. Industry estimates state that between 3 and 12 percent of dependents currently being carried on employee policies should not be there. Eliminating these ineligible individuals can represent a meaningful cost savings for the employer.
Ensuring that only eligible people are included on a health care plan protects employers from violating federal law, and can also impact tax penalties associated with covering ineligible dependents.
Some general guidelines when preparing for a dependent eligibility audit include:
- Communicate with employees about the upcoming audit, asking for their prompt and complete cooperation in providing any necessary documentation, and assuring that the process will be fair and open.
- Senior management, managers, and human resources representatives must support the audit and be prepared to answer any questions from employees.
- A period of amnesty should be announced, allowing employees to identify and remove any ineligible dependents without penalty.
- Following the amnesty period, employees will be asked to provide documents verifying a dependent status/relationship, and that such a relationship still exists. Examples may include: marriage certificates; domestic partner affidavits; legal documents establishing custody, guardianship, or foster care; birth certificates; tax forms; medical documentation of disability; and adoption papers.
If an employee is unable to verify a dependent relationship, the employer may impose penalties, terminate coverage under the plan, or seek reimbursement for the claims paid for ineligible dependents.
The Benefits team at Evergreen Insurance has information on dependent eligibility audits and other ways to ensure that your health care plans are cost-efficient and sufficient for your specific company’s needs.
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Evergreen Insurance provides these updates for information only, and does not provide legal advice. To make decisions regarding insurance matters, please consult directly with a licensed insurance professional or firm.
