A little over a year ago, I wrote a column about my plans to jump on the dependent eligibility verification audit bandwagon, along with thousands of other employers eager to remove ineligible dependents from their health insurance plans to hedge against ever-rising health care costs. (See "When all else fails, pull a DEVA" in the March 2010 issue of EBN, available online at ebn.benefitnews.com/news/when-all-else-fails-pull-a-deva-2683012-1.html.)
Statistics show that the average dependent can cost an organization anywhere from $3,000 to $5,000 in annual claims, and it isn't unusual to find as much as 5% to 15% of a dependent population ineligible for coverage.
I was full of optimism about the project - certainly it would be a money saver and my boss would be thrilled with my innovation on behalf of the County.
And it was. I projected saving about $1.3 million dollars this year, and so far, claims reflect that.
Audit yielded more than savings
But the audit yielded much more than savings - it's yielded many lessons learned, and not all of them have been pleasant. If you're planning a DEVA, there are a number of things to consider before, during and after the project that will save your sanity along with your money.
Most employers are not of the mindset that employees are trying to get away with something inappropriate when they add a dependent to their plan. I certainly wasn't. And so, when I rolled out the DEVA my intent was more to educate employees than to hunt for fraud and abuse. But I am only one person in a large organization and, as we all know, most benefit professionals find themselves somewhere in middle management and we don't always have the final word. (Come to think of it ... do we ever have the final word?)
So, before you roll out a DEVA, take the pulse of what others in your organization hope to achieve. Speak with your CEO, mayor, or whoever fills the C-suite in your world. These projects can make headlines - how do you want those headlines to look?
Will your shareholders, constituents or customers be delighted about your projected savings, or will they be critical of your program because, in their opinion, before there were savings - there was waste? How will you respond to such criticism?
Have a prior understanding of your plan's enrollment history and be prepared to compare it to national statistics. Maybe you'll find that your percentage of ineligible dependents is on the lower end of average.
Discuss with internal auditors
It's also wise to discuss the project with your internal auditors prior to signing your contract. It is likely that you'll be contracting out for a service they may feel they should have been able to do in-house. Get their blessing on the scope (and even the intent) of the DEVA. Perhaps they may feel that an amnesty period is a bad idea, or they may be more interested in fraud prosecutions than summary plan document education. It's best to gain a comprehensive understanding of where the heartburn lies in your organization before beginning the audit. This will save you from having heartburn of your own once it is complete and the chips are falling where they may.
Be aware in advance that if you go looking for ineligible dependents, you will find them. What will you do with them when they're presented to you?
Your contracted firm will have a predetermined end date for the project. During negotiations, do what you can to avoid having hundreds of unfinished records dropped in your lap when that date arrives.
Regardless of how many follow-up letters and percentage of completion promises you can negotiate with your auditors, at some point, you will receive a number of files that have been deemed ineligible because they are incomplete. In some cases, this will be due to returned letters because addresses aren't up to date in your system, or employees will receive the letter but procrastinate or forget to act entirely. Others will send in proof of eligibility on some, but not all, dependents.
Plan in advance how to deal with ineligibles
Know in advance how you'll handle those records. You basically have two options. First, you can delete them all from coverage and await the frantic phone calls just prior to a dependent's scheduled surgery or admission to the maternity ward.
Alternatively, you can communicate with these employees and tell them that their coverage will end if they don't respond within a certain time.
But then you'll need to ensure you've got staff in place to track responses. This can take an enormous amount of time and if the project drags on too long, your organization can wind up bearing additional claims costs for ineligible dependents.
Either method has its pros and cons, but the best course of action in my humble - and now experienced - opinion is to take the former approach and delete all nonresponders and those who have provided only partial information in one fell swoop. It may not be user-friendly, and those panicked employee calls will be tough to handle, but it's a much cleaner approach.
Don't forget about PPACA
Finally, don't forget the 800-pound gorilla. The Patient Protection and Affordable Care Act has truly affected the way in which employers can handle enrolled dependents.
Although the extension of dependent coverage to age 26 provisions will likely make your audit easier, the prohibition of rescission of coverage without clear evidence of fraud or misrepresentation can impact your ability to remove an ineligible dependent from your health plan or recover the cost of claims paid out on him.
Check plan document language
Ensure your plan document contains language that specifically allows you to rescind coverage on ineligible dependents if an employee has enrolled one through misrepresentation or fraudulent means. Add signed affidavits to your enrollment procedures and reference them in your summary plan document.
The lessons learned during this project were exceptionally valuable, and the savings projected and now realized because of the project were well-worth the heartburn during and after the process.
Contributing Editor Nancy L. Bolton is the director of risk management for the Palm Beach County Board of County Commissioners in West Palm Beach, Fla. She can be reached at firstname.lastname@example.org.
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