Employers are finding many ways to trim health care costs — such as introducing high-deductible health plans alongside health savings accounts. But one cost-saving strategy is growing in popularity: conducting audits to ensure that every dependent is eligible for health care benefits.

A Dependent Eligibility Verification Audit looks at an employer’s health plans to ensure enrolled dependents are eligible under plan rules. By performing such audits, employers will be able to reduce healthcare costs by eliminating claims paid for ineligible dependents.

Kathy Houck, a risk management technician with Pinellas County Public Schools in Florida, says after performing an audit, the county school system saw a 744% ROI, totaling roughly $670,000 that year alone.

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When considering performing an audit, John Webb, director, employer solutions with HMS, a provider of cost containment solutions, says communication is key to getting employees to understand. “We started early and kept notifications [to employees] brief, clear and concise,” Houck adds.

Types of audits can very, Webb says, including comprehensive document-based audits, a comprehensive affidavit-only audit and ongoing audits.

The average cost of covering a dependent costs an employer $3,500 a year, Webb says. On average, 4%-8% of plan dependents are found ineligible following audits.

Other benefits of performing an audit, he says, include:

  • Wasteful spending controls.
  • A reduction in future costs.
  • Offsets transitional reinsurance fees.
  • The avoidance of benefit reductions for employees.

In her experience, Houck highly recommends working with third-party audit groups when considering an endeavor of this size. She says in her experience, PCBS alone had close to 10,000 inbound service activities.
“It’s also good to be at arm’s length,” Webb added. “You’ll find out things about your employees you might not want to know.”

Houck adds that when planning an audit to consider desired end results, and to think about processes going forward after the audit.

“What [performing the audit] did was make it easier for us going through life events, like childbirth,” she says. Providing the necessary dependent paperwork is now a “mindset” for employees, she adds. 

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