Over the last five years we have seen the dependent verification audit industry significantly grow in both the number of audits completed every year, and the number of vendors who offer these services. One of the benefits of being a pioneer of the industry is that we are given a unique perspective into both its growth and evolution.
Unfortunately, we have noticed a glut of new entrants into the industry who tend to offer unreasonable promises that would be highly unlikely with even an experienced audit firm at the helm of your project. I thought I would take this opportunity to discuss a few of these myths.
Myth: “Every Company will identify and drop 15% or even 20% of their dependents during an audit.”
Yes, we are still surprised when we see this claim by numerous service providers within the industry. It tends to be used by those new to the industry, or those who seem not to care about long-term relationships with their clients. As with most hyperbole, it does not reflect reality.
Reality: Most companies experience drop rates of between 5% and 15%, depending on a number of unique circumstances.
A company’s rate of ineligible dependents depends on many factors including:
- Whether or not their current enrollment processes are rigorous and require documentation.
- The richness of their benefits. Organizations that offer unusually rich benefits tend to have a higher rate of ineligible dependents.
- Open Enrollment: is it active or passive?
- Geographical dispersion of their employees
- …and many others.
Myth: “Your enrollment vendor or current consultant is the best organization to perform a dependent audit.”
As some of the largest eligibility management houses and large consulting firms begin to enter this market, they often make the argument that since they are familiar with your organization’s plan and the eligibility data, they are the best ones to complete the dependent audit. However, this could not be further from the truth.
Reality: As with any audit, an outside perspective from an organization with properly aligned incentives is critical.
The very nature of an audit is defined by the objective nature of an experienced and knowledgeable outsider. Would you purchase a house that was inspected and certified only by the person responsible for constructing it? Enrollment vendors and large consultants are often the individuals responsible for putting in place the processes and guidelines that have allowed ineligible dependents to become enrolled in your plan. They also often have significant input into the language that defines what dependents are eligible to enroll in your organization’s plan. These circumstances don’t lend themselves to an objective process of ensuring that only those eligible for your plan are enrolled. A fresh perspective and interpretation of your enrollment language and processes has great value. Not to mention that large enrollment vendors’ payment terms often have a direct correlation to the number of dependents on your organization’s plan.
As you begin to plan your dependent verification audit be sure and consider the myths above. Careful planning and due diligence will set your organization up for a successful project.
