Number of Health Plan Dependent Audits on the Rise
Number of Health Plan Dependent Audits on the Rise
April 21, 2009 — The immediate and long-term savings gained from health plan dependent eligibility audits and one company is seeing a significant increase in requests for these audits.
Since 2006 the number of Mercer-conducted audits has more than doubled every year, and growth is expected to continue this year. According to Mercer, 3% to 8% of covered family members cannot produce valid verification of eligibility during an audit. Mercer estimates that the average annual cost of providing health coverage for one dependent is $1,900.
Dependents in Plan
Estimated Ineligible Percent
Average Cost Per Dependent Per Year*
Potential Savings Per Year
10,000
3%
$1,900
$570,000
10,000
4%
$1,900
$760,000
10,000
5%
$1,900
$950,000
10,000
6%
$1,900
$1,140,000
10,000
7%
$1,900
$1,330,000
10,000
8%
$1,900
$1,520,000
*Employers should consider their own cost per dependent when calculating their potential
savings.
“Health plan dependent eligibility audits allow plan sponsors to identify ineligible dependents and then take action to ensure that only those dependents eligible for benefits are enrolled in a given plan. Particularly, with so many companies looking to cut costs any way they can, more and more are coming around to the fact that monitoring dependent coverage equates to sound
financial management,” said Dan Priga, national business leader of Mercer's performance
audit group. “Plan sponsors have a fiduciary duty to administer their health plan in the interest of eligible participants and their eligible dependents, known as the ‘exclusive benefit’ rule. So in addition to spending money on nonqualified participants, they risk running afoul of federal requirements as well as the Internal Revenue Code. Such negative outcomes can be avoided by the careful management of dependent eligibility.”
Rich VanThournout, health and benefits business leader for Mercer’s outsourcing business, said, “Mercer applies a rigorous dependent audit process that involves strategic planning, detailed employee communications, and summary reporting. “Because there can be employee relations challenges with an eligibility audit, Mercer also offers call center support and an intuitive employee website to help educate and support employees throughout the eligibility confirmation process. This approach helps ensure that dependent audits are as fair and effective as possible, while also helping to educate employees about rules surrounding eligible dependents and cost of care.”
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