As healthcare costs continue to rise, employers look for ways to cut down on spending. Employers also have a fiduciary responsibility to adhere to the conditions in their summary plan description.
Covering ineligible dependents is not only costly, but leaves employers exposed.
Who are ineligible and eligible dependents?
With hesitancy to state the obvious, an ineligible dependent is any person who isn’t an eligible dependent. Eligible dependents vary by plan, but are typically children under 26, spouses, stepchildren, disabled adult dependents, domestic partners, common law spouses, and partners in civil unions. So, common ineligible dependents are typically children 26 and older, ex stepchildren, and divorced spouses.
Why is an ineligible dependent enrolled?
For the most part, many ineligible dependents are enrolled by mistake. Plan participants may neglect to take out an adult child that has exceeded the age limit determined by the plan summary, or forget to remove an ex-spouse. Some plans include spousal carveouts, where any spouse listed on the plan will lose their coverage if they get a job that offers health insurance. Participants may forget about the carveout and neglect to inform the plan sponsor.
Sometimes, fraud may be the reason. If an ex-spouse needs health insurance after a separation, a participant may intentionally avoid informing the plan sponsor so that coverage may continue.
How to prevent ineligible dependents from being listed on the plan.
While reasons for ineligible dependents being listed on the plan may vary, this is preventable. Performing a dependent verification audit identifies ineligible dependents.
Why perform a dependent verification audit?
To comply with ERISA, employers must adhere to guidelines put forth by the plan sponsor. Plan administrators who neglect to meet ERISA reporting requirements are subject to penalties. Penalties could be as much as $1,000 per day.
Covering ineligible dependents can be costly. Performing a dependent verification audit helps employers cut down on healthcare spending by identifying ineligible dependents that a business no longer need to cover. Even if a small amount of ineligible dependents are listed on the plan, this can cost employers thousands.
How are dependent verification audits performed?
There are two types of dependent verification audits: one-time audits and ongoing audits. One-time audits review all dependents enrolled in an organization’s health plan, while ongoing audits review all new dependents proactively before coverage begins.
During the audit, employees are asked to share documentation for verification. The plan sponsor will decide which documentation will be required for the audit. Usually, plan sponsors require a birth certificate, marriage certificate, or a recent joint document like a utility bill.
Dependent verification services with ebm
Conducting a dependent audit can lead to an employee’s loved one losing healthcare coverage, leading to difficult conversations. By working with us, we’ll protect the employer-employee relationship with fair, objective eligibility assessments to keep the good vibes going.
Our dependent verification services streamline the entire process for HR and employees. For employees, submitting supporting documentation is simple and straightforward. HR has access to dashboards that are kept up to date in real time, helping them keep a pulse on the status of verification. The entire audit is done on our secure web portal and is accessible from any device.