Anticipating the increase in age of covered dependents to 26 starting in 2011, as required by the Patient Protection and Affordable Care Act, the benefits team at Dick's Sporting Goods decided to clean the company's benefit rolls data with a dependent eligibility audit before this provision went into effect and before annual enrollment in the fall of 2010.
A large undertaking, the audit had to be carefully planned. Yet even with strategic preparation, the company was well behind the expected response rate by week three of the audit. Fortunately, the benefits team was able to come from behind and get employees to respond before the amnesty period ended. Ultimately, Dick's saved nearly $1.5 million in health care costs.
Occasionally, employees reported ineligible dependents participating in the self-insured plans. This reason, along with health care reform and the fact that Dick's had never performed an audit before (new hires were never required to submit dependent documentation since the plan inception), led the company to hire Aon Hewitt in March 2010 to assist with the audit.
In April, Dick's and Aon Hewitt started communicating the audit to field HR representatives; by the end of May, the team had begun data testing and opened communication with store mangers and regional vice-presidents.
The first time rank-and-file employees heard of the audit was in July when they received a letter to "explain why we doing it and [to] let them know what their role is to responding to the dependent audit," Kim Kapfer, benefits manager for Dick's Sporting Goods, explained to an audience of benefits professionals at EBN's 2011 Benefit Forum & Expo in Dallas, Texas.
Kapfer and her team provided coaching, talking points and email messages to managers to "make sure everyone was comfortable" with the process and communicating it to employees.
The audit officially ran from mid-July to mid-September 2010. Employees verifying eligibility for dependent spouses had to submit tax documents and/or a marriage certificate along with proof of joint ownership, such as a bank account. For dependent children, employees had to submit a birth certificate.
When employees responded to the audit, they received a confirmation email that HR would review their documents and get them results at the end of the audit cycle. Midway through the audit, HR sent a reminder notice.
By the third week of the audit cycle, only 36% of employees had responded-a far cry from the 58% response rate Kapfer's team had anticipated. By week four, when 72% of employees should have submitted verification documents, only 48% had done so.
"We had to start playing catch-up," explained Kapfer. "Twice a week, we had run-off reports that we would break up the list and send to [HR staff] and have them individually contact each individual [about finishing their dependent audit forms and submitting proof on time]."
To make up lost ground, the benefits team increased one-on-one contact in the field over the remainder of the audit period.
In the end, there was a 92% response rate. From the 7,105 total dependents covered as of Sept. 10, 2010, 6,562 (92.36%) were approved, 543 were denied. Of those denied, 29 were flat-out ineligible - ex-spouses being a big culprit - others were incomplete and 285 had no documents for their dependents.
After the appeals process, 6,617 (94.77%) were approved and 492 dependents denied.
Dick's only expected a 2% to 4% reduction in covered dependents, but ultimately they had a 5.2% reduction with $1,467,000 saved.
In hindsight, Kapfer said, she wished they had continued to communicate and email and snail-mail-blast employees.
Looking back, Kapfer also said she would change the timing of the audit to earlier in the year, rather than over the summer, to allow for separate timing between the audit process and the appeals process.
Still, despite the glitches, Kapfer strongly believes the dependent audit was worth it. There was a huge cost savings to the company, and it set the stage for an internal process change. Now, the company audits all newly added dependents as they occur - when onboarding new hires, processing status changes and during annual enrollment.
