Dropping Dependents Could Depend on Audit

By Rita Pyrillis

Sep. 29, 2014

Employers are finding many ways to trim health care costs — from asking employees to pay more for their coverage to penalizing those who bypass company wellness programs to imposing surcharges for covering spouses.

But one cost-saving strategy is growing in popularity: conducting audits to ensure that every dependent is eligible for health care benefits.

So far, about 22 percent of employers have implemented eligibility audits in 2014 and another 14 percent plan to add them later this year, compared with 5.6 percent in 2013, according to a recent study of Houston employers by benefits consulting firm Arthur J. Gallagher & Co. and HR Houston, a professional association.

During an audit, employees with spouses and dependents are asked to submit documentation, such as marriage and birth certificates, to verify eligibility.

Mark Rosenberg, a consultant with Gallagher, attributes the big upswing in this practice in part to the Affordable Care Act and its requirement that employers cover dependent children up to age 26. He said that he expects more employers, not just in Houston but nationwide, to conduct these audits over the next several years.

“Since employers are now required to cover dependent children to age 26, and with the upcoming employer mandates, employers are focused on looking for other ways to save costs,” he said. “One relatively simple idea is to ensure that you are not covering individuals who are not eligible to be on the plan.”

While the audits don’t uncover vast numbers of ineligible dependents — about 3 percent drop off the plan following an audit, according to Rosenberg — most say the effort was worth the time and money spent.

Most ineligible dependents are divorced spouses, not adult children, according to Karen Frost, a consultant with Aon Hewitt, who said that skyrocketing health care costs are driving this trend, not the Affordable Care Act.

“Interestingly, you would have thought that extending coverage to adult children would put the verification business out of business, but the reality is that the highest number of dependents that stay on a plan is divorced spouses.”

Most of the time, the employee doesn’t understand the eligibility requirements, she added.

Rita Pyrillis is a writer based in the Chicago area.

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