Dependent Eligibility Audits – a final frontier?

A colleague recently forwarded a local article on employers and plan sponsors seeking alternative avenues for cost savings – tackling dependent eligibility audits to generate plan savings.

And the trend is catching on as benefits consultant groups like Mercer, Watson Wyatt, Hewitt can attest and as Mercer recently shared that it anticipates a doubling in its private sector dependent audit business since 2008. Similarly, if one were to look at the number of state and municipal government groups looking to audit their employees this year over last, it has at least doubled.

So why are dependent audits largely considered the final frontier and why are more employers just doing audits now? Well, as all of us who read the various health care blogs and are in the business know, cost-shifting is approaching its limits– employers have only so much latitude remaining with their employees relative to increased member responsibilities with deductibles and co-insurance without cutting benefits (even though many are forced to cut regardless in this economy).

Furthermore, creative cost-saving plan design options are pretty much exhausted (though we’re seeing some innovations in pockets). So what’s left if the employer is still to offer employees the more traditional health care coverage? Some estimate that anywhere from 3 – 20% of dependents are ineligible for health coverage (most say 3-8%). Employers are taking on these audits as a means to identify dependents who clearly should not be enrolled – divorced spouses, deceased spouses (yes, they are still enrolled), older children, boyfriends – you get the idea. At anywhere from $4,700 to $12,000 total average premium PMPY (excluding any medical costs on top of premiums) there are meaningful dollars to be saved that can be the difference between continuing, trimming or altogether dropping employer-sponsored health benefits. Whether you be large or small employer group, the cost savings can be significant – well north of $1mm for many groups. So the ROI is clear and delineating who is eligible, or not, should be a relatively straightforward proposition, right?

Well, not so fast. Getting employees to comply with audits as well as send in all the necessary documentation (e.g. marriage certificates, adoption paperwork, etc.) can be tedious and cumbersome for the employer. But despite the pain of an audit for both employee and employer, there is sufficient ‘green’ in those ineligibles that employers, small and large, are launching eligibility audits.

Once an employer is determined that an audit is necessary what are the keys to a successful audit? Fundamental program design and seamless execution are critical because as a few as one irate employee can brew a firestorm in employee relations. Here are the fundamentals…

  1. Education and communication
  2. Data analytics to find higher-risk employees
  3. Access to Information and resources during the audit
  4. Ease of document submission
  5. Verification and results

So where to begin? Granted each employee population is different so flexible communication and engagement tactics should reflect this, but the evidence behind dependent eligibility audits is clear so you need to think now on how to execute and execute quickly before open enrollment season is upon us. Here at Silverlink, we are offer comprehensive communication solutions that include multi-channel outreach, inbound solutions, web tools, data management, analytics and comprehensive program management so clients can optimize their outreach goals and realize substantial cost savings so that there are no surprises during open enrollment.

Lastly, in some ways the spike in dependent eligibility audits seems too little too late for plan sponsors and it is bewildering why this is only coming onto the radar now with some gusto when eligibility verification should be a fundamental part of enrollment, shouldn’t it?

This posting was written by Cassandra Price, Payor Operations Subject Matter Expert for Silverlink Communications. Cassie has held leadership positions in managed care organizations and healthcare IT solution providers in strategic product management and client services including UnitedHealth Group, McKesson Health Solutions and Concentra, Inc.. Her healthcare background also includes private equity/M&A, care management software solution design, CRM design and implementation and managed care analytics and outcomes research.

Cassie’s work at Silverlink Communications focuses on designing multi-channel communication solutions for managed care organizations and self-insured employers where driving operational efficiencies and cost-savings are critical. Solutions areas include coordination of benefits programs, enrollment & eligibility campaigns, broker communication programs, member and provider call center call obviation solutions, and various other member, provider and employer communication programs. Cassie has her MBA in finance from Babson and an A.B. in History from Hamilton College.


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