Many employers are surprised to learn just how much they’re spending on healthcare benefits for individuals who aren’t eligible for coverage. This can occur due to oversight, employee misunderstanding, or a lack of a dependent verification processes. Whatever it may be, ineligible dependents can quietly drive up your company’s healthcare spend year after year.
Addressing this issue doesn’t require overhauling your entire benefits strategy — but it does require attention, education, and the right tools.
What are ineligible dependents?
Ineligible dependents are individuals enrolled in your employer-sponsored health plan who do not meet your plan’s eligibility criteria. This can include:
- Divorced spouses still listed as dependents
- Children over the age limit or not in school (depending on plan rules)
- Stepchildren or foster children no longer in the employee’s custody
- Extended family members mistakenly enrolled
Often, these ineligible enrollments happen by mistake. Mistakes can happen if your plan documentation is unclear or if there’s no process in place to confirm eligibility during life events or open enrollment.
Why it matters more than you think
Covering ineligible dependents drives up your healthcare costs without delivering value. Consider the financial impact of even a small number of ineligible enrollments.
The average annual cost of covering a dependent can range from $3,500 to $4,500, depending on the plan. Multiply that by just 10 or 20 ineligible dependents, and your organization could be spending $45,000 to $90,000 — or more — on unnecessary premiums alone.
Beyond direct costs, ineligible dependents can also contribute to higher claims activity. This may affect future premium increases or stop-loss coverage negotiations for self-funded plans.
How ineligible dependents go unnoticed
Without formal verification, most plans operate on the honor system. Employers rely on employees to self-report eligible dependents correctly. But during high-pressure periods like open enrollment, mistakes happen. Employees may misunderstand who qualifies, or may fail to remove dependents after major life events like a divorce or a child aging out of coverage.
HR teams are often left without the time or tools to monitor enrollment eligibility thoroughly. This is especially when managing other priorities during open enrollment season.
The case for dependent verification
Conducting a dependent eligibility audit, either as a one-time event or an ongoing process, can help employers regain control over plan costs. These audits ask employees to submit documentation (such as marriage or birth certificates) to confirm that each covered dependent meets plan eligibility rules.
When conducted professionally and with a strong communication plan, audits can be completed with minimal disruption. The cost savings often speak for themselves.
Dependent verification is a smarter approach to benefits cost management
Dependent verification isn’t about taking something away from employees. Audits protect your benefits investment and ensuring fairness across your workforce. By removing ineligible dependents, employers can reduce wasteful spending, slow premium increases.
