Eligibility Risks Are Real and Costly - yet PREVENTABLE
By David Chojnacki, Chief Revenue Officer at Verifi1
MARCH 14, 2024
Just last month, in the February 27, 2024 edition of The Denver Gazette, the following headline (and key excerpts from the piece noted below) served to heighten among benefits managers across the country, the severe fiscal danger that can occur without having proper auditing tools in place:
AUDITORS FIND “ELIGIBILITY RISKS” IN DENVER’S $152 MILLION HEALTH CARE PLAN FOR CITY STAFF
Denver auditors found that the Office of Human Resources needs better enrollment oversight over the eligibility of city employees receiving its tax-driven health care plans.
Particularly, auditors focused on determining dependent eligibility.
The Office of Human Resources, tasked with overseeing city insurance coverage, told auditors they “found the process of auditing dependents difficult to manage,” according to the auditor’s release.
A spokesperson with human resources said the department conducts internal audits to verify “the eligibility of dependents at the time of enrollment.”
“We plan to audit dependent eligibility in 2024,” the spokesperson said. Human Resource’s latest internal audit came in 2017, according to the department.
“When the city took on the responsibility of funding its own health insurance plan, it also took on the responsibility of saving taxpayers and employees as much money as possible while still offering reliable coverage,” Auditor Timothy O’Brien said in a statement.
He added: “In order for Denver to keep being a great place to work, thorough oversight and administration of the self-funded health plan is essential.”
Employers that adopt a comprehensive, ongoing dependent eligibility verification program are engaging in a vital risk management strategy within the domain of employer sponsored health care benefits. As referenced repeatedly in The Denver Gazette article above, this endeavor can protect your enterprise from serious financial peril, when you consider that at any point in time, an ineligible dependent you are covering can quickly become a high-cost claimant - including those of the million dollar+ variety. Keep in mind as well, that if a dependent is determined to be ineligible, stop-loss claims can be denied, and you, the employer, will be responsible to cover the incurred claims.
Here are some additional statistics that ALL employers need to be acutely aware of, regarding the extreme financial impact covering ineligible dependents – many of whom fall within the “high cost claimant” category – can represent:
- The 2023 Kaiser Family Foundation Health Benefits Survey revealed that the average annual expense per dependent enrolled in employer sponsored benefits plans now ranges between $6,500 and $12,000
- High-cost claimants make up 31 percent of total spending
- High-cost claimants cost their health plans in excess of $50,000 or more per year
- The likelihood of a self-funded employer having a stop-loss claim in any given plan year is over 80%
- The number of $1,000,000 plus claims has increased by 90 percent since 2015
Additionally, by not performing a dependent eligibility verification, employers also run the risk of non-compliance with ERISA if they fail to adhere to plan eligibility rules as stipulated in their plan documents.
The resulting fines that could be assessed can substantially inflate your “unbudgeted healthcare expense” line and serve as a costly reminder of not properly identifying underlying risk within your plan administration responsibilities. Case in point: A recently filed lawsuit focuses on ERISA fiduciary obligations of employers in their role as group health plan sponsors, particularly the “duty of prudence” in selecting and monitoring health plan vendors. The lawsuit alleges that as a result of fiduciary failures, plan participants and beneficiaries were required to pay increased costs and premiums and thus harmed.
The overarching theme of this article is that time is truly of the essence for employers in both the private and public sector to swiftly enact a robust and expertly managed dependent eligibility verification initiative.
For more information on how Verifi1 can assist your company with all required dependent eligibility verification initiatives, contact us at info@verifi1.com
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