Why You Should Add a Dependent Eligibility Audit to Your Benefits Strategy

If you rely on the honor system for your company’s benefits enrollment, you could be picking up the tab for ex-spouses, adult children, or others who are not eligible to be covered. On average, we’ve found that 3-5% of the dependents on an employer’s plan are deemed ineligible.

A dependent eligibility audit can help you uncover any existing ineligible members. Not only will you save money for your company, but you will also improve compliance, reduce your HR team’s workload, and keep benefits costs down for your employees.

A dependent eligibility audit is the process of verifying the eligibility of dependents enrolled in your health, dental, and vision benefits plans. The audit can either take place at one point during the year as a one-time snapshot of dependent eligibility, or you can choose to have an ongoing verification process where dependent documentation is reviewed on a daily basis throughout the year.

We recommend clients communicate the dependent requirements during open enrollment and let employees know that an audit will be conducted in the new plan year. These audits are best to do in the first or second quarter after annual enrollment, but they can be conducted any time.

If you choose to conduct a dependent eligibility audit, you could bring significant savings to your company. When employers have performed a dependent eligibility audit, they’ve seen savings of $3,000 to $5,000 per plan member, per year.

It’s important that your benefits plans operate as intended, but if you’re covering ineligible dependents, you could be facing a major compliance concern. By confirming you’re only covering eligible expenses, you maintain compliance with insurance carrier eligibility requirements while minimizing litigation risks and reducing stop-loss exposure.

Dependent management can be a difficult and time-consuming task if you’re doing it all on your own. If errors are made or processes are inefficient, additional work and pressure is put on already overworked HR teams. Dependent eligibility audits give you peace of mind with your dependent management and outsourcing the audit process gives your HR team more time to work on other important tasks.

Dependent eligibility audits can also help keep employee costs down by not allowing ineligible dependents to be on the plan and add to the high price of claims filed. This is particularly important for large, self-funded employers. Communicating to your employees that dependent eligibility audits can help save money and provide better benefit options for them is a great way to alleviate any concerns employees may have about the auditing process.

Dependent eligibility audits typically begin with employees providing a legal document that shows their relationship to the eligible person. This could include documents such as a marriage certificate, birth certificate, adoption certificate, or legal adoption placement document. This documentation verifies that they are considered an eligible dependent. Employees are given a timeframe to return such documents and the review is conducted, with a grace period for documentation often given. Communications should be sent throughout the process reminding employees of any outstanding tasks.

If you choose to have a benefits administration provider conduct the dependent eligibility audit, make sure they can support you with:

• A carefully crafted process and employee communication plan.
• A secure and user-friendly website or mobile app for employees to easily submit documentation.
• Documentation management during the audit, including the retention of both paper and electronic documents.
• Reports to facilitate termination of ineligible claimants at the end of the audit.