Greenwich AeroGroup recently completed a dependent eligibility verification audit of its self-funded medical and dental plans which resulted in a return on investment of 853%. The aircraft sales, charter and management company has 835 employees located in nine U.S. cities and Rio de Janeiro, Brazil.
“The company is a montage resulting from a bunch of acquisitions and we recently fine- tuned the complete Greenwich AeroGroup benefits platform implemented in 2010 so we decided it was a great time to do a dependant verification audit,” says Terry Lough, director of human resources.
“We owe it to our employees to make sure we are not paying for employees who should not be on our plan,” Lough says.”The audit had about a 98% response rate and based on the results, 16 dependents were removed from the plans. This represents a potential annual savings of about $3,000 per employee or $48,000.”
But the ROI at Greenwich AeroGroup could be just the tip of the iceberg. A dependent eligibility audit case study from HMS Employer Solutions reveals that when the City of LaPorte, TX with 450 employees audited 659 dependents enrolled in the city’s health plan, 12.2% (or 76 people) were found ineligible based on the plan’s eligibility deadlines. These results represent $228,000 in annual cost avoidance.
Paul Passantino, senior national account manager at Dependent Specialists Inc. is not surprised. “The requests for proposal we receive are not just for large employers,” he says. “Increasingly smaller businesses and public sector employers are doing employee audits.”
Who are these ineligible dependents?
“In the majority of cases employees are not acting fraudulently,” says Karli Dunkelberger, national sales manager at Aon Hewitt. “They simply do not fully understand the eligibility provisions in their company plan.”
She explains that ineligible dependents may include a relative who does not qualify as a dependent, hired help such as nannies and housekeepers and “aged-out” children. She also notes that employees who are required by their divorce documents to continue providing medical insurance for their ex-spouse and the children may think they are doing the right thing by enrolling them, although they may no longer be eligible based on the plan provisions.
Another frequent catalyst for conducting a DEVA is to identify whether spouses enrolled in the plan are eligible for another workplace program. “With changes in the marketplace, some employers are carving out these working spouses from their plan or charging an additional premium to cover them,” says John Webb, managing director at HMS Employer Solutions.
Nevertheless, some companies are still reluctant to conduct a DEVA because they don’t want to disrupt employees, they perceive employee engagement is already low or they don’t believe they have a problem.
Dunkelberger says when employers offer these excuses for nonaction, she questions how shareholders or board members would feel if they knew the organization was using company dollars to pay for health insurance for people who do not meet the eligibility rules of the plan. “A thoughtful, thorough dependent verification strategy is really critical to being good stewards of the business,” she says.
And experts agree that effective communication is the catalyst that ensures a DEVA is a positive, productive, experience for both employers and employees.
The DEVA lifecycle
The HMS Employer Solutions publication Understanding Dependent Eligibility Audits divides a DEVA into four typical stages:
1. The planning stage. Twenty to 45 days to educate internal staff, identify the affected population and develop a project plan.
2. The verification period. Twenty five to 60 days or more depending on the vendor, the type of audit selected, and the intent of the organization conducting the audit.
3. The grace period. Twenty days on average after the verification period is over that allows for additional outreach that will decrease appeals at the end of the audit.
4. The follow through. Once the audit is complete the employer will receive a data file that will identify dependents that they can proceed to remove from the appropriate health plans.
One challenge employers face is that with the barrage of emails and the amount of junk mail delivered to peoples’ homes, employees may disregard important DEVA communications. Passantino says he encourages employers to use every form of media at their disposal to overcome this problem.
“The campaign generally begins with an internal announcement from an executive like the CEO or VP of HR telling employees the audit is going to happen, the vendor that has been retained and to watch for letters with their logo in the return address. We also give them posters for their break room, payroll stuffers and templates for email and snail mail letters,” he says.”Then we send a customized letter clearly telling employees exactly what is required, by when, and how to verify their dependents.”
In addition, Passantino notes that when developing a communications strategy it is important to consider the organization’s employee demographics. “If it is an older population, they may not be as inclined to use the Internet or mobile phone apps. So we give employees a wide variety of ways to submit copies of documentation such as by fax, regular mail or UPS in pre-addressed envelopes.”
Furthermore, he encourages clients to incent employees to submit necessary verification documents as soon as possible by awarding tickets in a raffle for gift cards, a lunch, a day off or a parking spot to people who get their materials in early.
The multi-ethnic workplace
Dealing with a multi-ethnic workforce may require an even more customized approach. However, Webb says that offering multiple language versions of a dependent audit verification letter is often not a best practice.
In fact, in a recent blog, he reports that out of more than 1,400 DEVA audits conducted by HMS, only about 2% have requested full translation. He writes that employers should consider how they are going to segment the population that receives communications in languages other than English and whether the approach could be considered discriminatory. He also notes that in 11 years, multiple language mail inserts have had no significant impact on overall participation results.
“There is a tremendous cost associated with translating, printing and mailing letters in multiple languages. Instead some clients include translated information only on the project website,” Webb says.
Because Spanish is the most common second language in many HMS client workplaces, he recommends instead that where appropriate, Spanish tag lines be inserted in all outbound communications referring employees to Spanish-speaking call center staff available during standard working hours. Call centre staff can also conference in employees who need to be serviced in a whole host of other languages to a language line that offers multiple translators who can facilitate discussions.
How often should employers conduct a DEVA?
“To get the best results, and to protect compliance with the plan, the employer should do an audit every one to three years,” says Dunkelberger. “We have some clients who are choosing to do a rolling re-verification every one or two years after the anniversary of each employee’s hire to ensure that they are keeping dependent eligibility for all of their [workers] up to date.”
In cases where audited employees voluntarily provide documentation revealing some dependents are ineligible, the last step is to remove these people from plan coverage.
“Some employers will remove them immediately, while others provide a one or two month grace period,” Passanto says. “They may even wait until the end of the year or the next open enrollment cycle.”
But he believes there are good reasons for employers to act quickly, as the Affordable Care Act does not permit employers to recoup funds from employees with ineligible employees enrolled in the plan. “It requires proving malicious intent by the employee to defraud the organization. The company would need a team of lawyers and investigators to meet the standard of proof,” he says.
Employers can assist employees who want to provide a “soft landing” for dependents who no longer have health plan coverage by supplying a list of health insurance exchanges and insurers with contact information. Dunkelberger says this may also take the form of an online portal with links to resources that will help with decision-making.
“Most of our employees understand that their annual rates each year depend on the number of claims we pay, so the audit helps to keep their costs down,” says Greenwich AeroGroup’s Lough. But dealing with employees faced with dependent disqualification was the most difficult part of the DEVA process for her.
“Employees tell me they’ve tried all the places on the ‘soft landing’ list and coverage is prohibitively expensive. It’s enough to break your heart, but unfortunately I have to tell them they could be penalized under the ACA if they do not purchase health insurance for dependents or former dependents who are no longer eligible under our plan.”
Sheryl Smolkin is a lawyer and freelance writer based in Toronto.
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