Health care reform impact on dependent coverage
For plan or policy years beginning on or after September 23, 2010, young adults can stay on their parents’ group health care plans until age 26. Others who have come off a plan because they were age-ineligible can now rejoin.
Although reform may shift the focus, benefits professionals like Beth Carpenter at Frederick Memorial Hospital believe the need for dependent eligibility audits will continue.
“To meet our obligations under ERISA, we still want to make sure those enrolled qualify for coverage,” she says.
Other considerations under the new standards:
- Continually monitor the definition of eligibility as it is likely to evolve
- Incorporate an affidavit process into new hire enrollment to protect your plan going forward
- Clearly define for employees what constitutes fraud or misrepresentation with regard to dependent coverage
Employer focus
Dependent eligibility audits: A way to reduce health plan costs
An average of $1,900 a year. That’s the cost to an employer for each spouse or child enrolled in a company’s medical plan, according to an estimate based on data from Mercer’s 2008 National Survey of Employer-Sponsored Health Plans. After health care reform takes effect, government estimates peg the cost at nearly double that figure, according to Employee Benefit News.¹
Clearly, employers have more reason than ever to find ways to reduce health care premiums and claims costs. Saving money represents a strong motivation for self-funded plans to sponsor a dependent eligibility audit. It’s also the right thing to do. Under ERISA’s fiduciary rules and responsibilities, knowingly allowing ineligible individuals to be covered under the plan is a no-no.
Since 2006, all new hospital employees at Greater Baltimore Medical Center (GBMC) in Towson, Maryland must document their dependents’ eligibility by providing marriage and birth certificates within 30 days of hiring. Those who cannot may not enroll in GBMC’s health and welfare plans or its voluntary benefits. Debbie Chilaris, compensation and benefits manager, estimates the initial audit saved the hospital $1 million in premiums and claims expense.
Do-it-yourself or go outside?
“Our employees have a good rapport with my benefits staff, and I like offering personalized service,” said Chilaris, who took the do-it-yourself route. “We believe we know our audience best.”
In contrast, Beth Carpenter, manager of compensation and benefits for Frederick Memorial Hospital in Frederick, Maryland, believes there are advantages to hiring a third party specialist, particularly if a percentage of staff members comes from overseas. Carpenter recalls an example of an Iranian employee who submitted documentation in Farsi. “Our vendor supplied an interpreter who could vouch that the paperwork was legitimate,” she says.
Another plus: the third party’s call center recorded all calls and kept a paper trail of incoming and outgoing correspondence. Those services made it easy for Carpenter to resolve employees’ questions.
“I could listen to the call or look in their system and pull up the submitted documentation,” she says. The vendor also had sample documents from other states, some dating back several decades, that helped validate eligibility more quickly than if the benefits staff had to do their own research.
Even with a vendor’s help, a dependent eligibility audit can be demanding. “The audit took 25 percent of my four-member staff’s time over a three-month period,” says Carpenter.
But the effort was worth it. Three percent of the hospital’s 2,000 benefit-eligible employees’ dependents were removed from the plan as a result of the audit – a statistic in line with Mercer’s 2008 survey, which estimated three to eight percent of covered dependents cannot produce valid verification of eligibility during an audit. In terms of dollars Carpenter estimates annual savings of $200,000, which in the first year more than paid for the cost of the audit.
Planning to avoid surprises
Not all employees will be happy when you question their dependents’ eligibility. An audit will inevitably identify plan participants that should not be covered and perhaps even fraudulent coverage for grandparents or non-relatives.
“Some felt we didn’t have the right to question eligibility,” says David J. Pastor, manager of corporate health and welfare benefits for Ferro Corp when the Cleveland provider of technology-based performance materials conducted its audit. “We respectfully disagreed,” he says simply.
Pastor says gaining employees’ cooperation requires perseverance. He attributes his organization’s 95 percent audit response rate to two things: sending “lots of reminders” to Ferro’s 1,600 U.S. employees and the assistance of the company’s HR representatives at 23 sites around the country.
Chilaris suggests conducting an audit in stages – new hires first and the entire staff later, for example – but to avoid scheduling one during open enrollment.
At GBMC, offering an alternative to dependents dropped from the plan was important. The medical center furnishes a discount on an individual health policy to those who no longer qualify for the employer plan. Chilaris also offers an appeals process and an amnesty period on prior paid claims for those who voluntarily acknowledge their dependents are ineligible.
For some employees the prospect of losing coverage may provide the spark they need to make a “status” change. Before GBMC introduced domestic partner benefits, for example, the boyfriend of a female employee proposed after 20 years of living together. He cited the audit as the catalyst for the marriage proposal and dubbed Chilaris with a new title – matchmaker.
¹Lydell C. Bridgeford, “DOL, Treasury, HHS issue regs on dependent coverage,” Employee Benefit News, May 12, 2010.
Resources:
Affordable Care Act
