In February you took my advice and checked the benefits bills to make certain that the rates are correct and employees are in the right categories. The March bills have arrived and now it’s time to think about an audit of health benefits for dependent coverage. I didn’t say it’s time to start an audit, this one requires more thought and planning.
Why conduct a dependent eligibility audit? Pretty simple, it is very likely that you are paying for healthcare for people listed as spouses or children that are not really eligible dependents. Your plan has a definition of who is eligible for coverage. Start by taking out the definition and making sure you understand it.
You may say, “But I know my employees, they are not cheating me.” I hope not. Or, “I don’t want to add to the list of Americans without health insurance.” I wouldn’t want anyone to grow the roles of uninsured but I would never advise an employer to create a benefits plan that allows employees to cover whoever they want to sign up.
An employee just came to you and said, “I really need to put my nephews on the plan, I’ll say they are my kids, we have the same last name. My brother just got laid off and he can’t afford COBRA.” Would you hand over the forms and add the nephews to the plan? What about in-laws, cousins, boyfriends and girlfriends? OK, these examples may be extreme, but if you would not allow coverage initially why should you keep someone on the plan if there has been some subterfuge?
This doesn’t mean you start next month, ask employees for proof of marriage, or birth certificates for children, and fire those who have been getting away with something. Start by identifying what documentation you will require. Don’t just ask a certain group of employees; if you require proof everyone will have to comply. If you don’t want to be the bad guy you can hire an external expert to perform the audit.
“I don’t mind being the bad cop,” states Howard Gerver, the founder and CEO of audit provider HR Best Practices. Gerver says the best time to audit is in conjunction with open enrollment. He recommends putting employees on notice. Announce the program, let them know what’s coming, specify the documentation that will be required and then have a third party review the information employees provide. Gerver sites some documentation as tricky, like divorce decrees, they require specific knowledge and experience to decipher who is eligible to be covered under a plan.
When employers balk at the appearance of ratting out employees Gerver explains the value of potential cost savings. “For an employer with 2 tier coverage, single or family, if one employee has someone signed up who is not really an eligible spouse the company can realize savings of $7,000 a year. That money goes right to the bottom line. It can pay for other coverage or go towards saving a job in tough times.” Employers should not use an audit as a tactic to ferret out employees to fire, Gerver suggests that clients provide amnesty from discipline for employees who comply with the audit.
As with mistakes in a benefits bill many errors in coverage of dependents can be inadvertent. An employee’s child graduated from college last May, they have a job and live in a distant city, and they are still covered under your plan even though your plan only covers children up to age 24 as long as they are in school. Your provider may require annual proof of continued eligibility for children over 18 but not all do.
Who is covered by your benefits?