Andre Jacobs, Business Unit Head - Healthcare National Operations for Aon Consulting
In response to current economic conditions, many organizations are paying increased attention to carefully managing balance sheets in an effort to remain competitive, or, in some cases, viable. Companies are taking steps to free up capital and cut costs while also trying to keep their work forces engaged and productive.
In this climate, many employers are finding that health care programs present a cost reduction opportunity, as it’s one of their fastest-growing business expenses.
One way to reduce those costs is to make sure that you are only paying for dependents who meet the company’s eligibility guidelines for group medical benefits. Conducting a dependent eligibility audit not only helps reduce your overall costs but also avoids shifting those costs to your employees, or, for public entities, to taxpayers.
Commenting on how companies can save money by conducting dependent eligibility audits, Andre Jacobs, Business Unit Head - Healthcare National Operations for Aon Consulting says, “By removing ineligible dependents (typically 4 to 8 percent of enrolled dependents), there is the potential for employers to achieve cost savings of 2 to 10 percent of their spending on dependents.”
Jacobs says the audit itself is not just a one-time opportunity to remove dependents that should not be covered under the medical plan but should be a part of an organisation’s ongoing health care strategy. He says by implementing a long-term plan, employers can make sure proper controls are in place for future new hires, life events and annual enrollments to prevent the buildup of ineligible participants. “These controls can ensure a maximum return on the organisation’s benefits investment and help sustain long-term savings.”
Jacobs says there are a variety of factors which contribute to ineligible dependents covered on the employer medical plan, but the most common reasons are inconsistent or a lack of internal eligibility processes and procedures; poor communication about eligibility requirements; multiple acquisitions and divestitures, leading to multiple plans and eligibility criteria; and a shortage of internal HR resources to manage and/or conduct periodic audits of dependent eligibility.
“Consequently,” he says, “dependents who don’t meet the eligibility requirements set forth by the plan sponsors include overage dependents, stepchildren following a divorce of the natural parent, extended family dependents under no legal guardianship and unmarried partners with no recognized relationship under the plan or with children of live-in partners with no legal relationship.”
When deciding to conduct an audit, Jacobs says the first step is to get executive management buy-in. “This is critical as presenting the facts about how HR is helping to drive cost reductions, improve legal compliance and promote operational excellence establishes the business case for investing in an audit and helps to advance the brand perception of the internal HR team.”
The second step is to arrange options for those removed from the corporate plan. The most successful tactic to combat negative perceptions of an audit is to create coverage options for ineligible dependents who are removed.
Jacobs says you also need to “overcommunicate”. He says employers should communicate the mutual benefits of controlling health care costs for employees and the organisation, such as money to invest in research and development, training, etc. The communication campaign should contain a personalised notification letter that includes:
Explanations of the purpose of the audit, guidelines to protect confidentiality, the name and experience of the company hired to conduct the audit, and information about the call center to answer questions about the audit.
Information about which dependents are legally eligible and a list of the individuals currently enrolled under the employee’s coverage.
A list of valid documentation needed to verify all dependents, such as a birth or adoption certificate, marriage license, etc.
“Finally,” says Jacobs, “Companies should involve a third party. Using a third party whose core business is the administration of eligibility can ensure that the process includes best practices (such as offering health options for those removed) and adds a layer between an organization and its employees that can help allay concerns about confronting employees about the legitimacy of their dependents.”
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