Document-based Dependent Audits are the most effective way to be sure that you are paying for only those dependents that are eligible for coverage under your plan. Best practice approaches include both an initial audit as well as ongoing audits. Using a layered approach to dependent verification provides you with the confidence that on an ongoing basis, you are covering and paying for only those dependents which you intend.
Initial Audit:
Conducting an initial document-based dependent audit on your entire population would be our recommendation. Requesting actual documentation from your employees and their dependents has proven much more effective at identifying ineligible dependents than questionnaire or affidavit-based approaches. It is important to conduct this audit on your entire population rather than a targeted or random sample of dependents. Auditing the entire population is clearly the most thorough and it provides you with the largest return opportunity for your audit dollar. By auditing your entire population, no appearance of discrimination or favoritism exists. This reduces the impact on your HR team and ensures that employees understand that they are being treated equally. Starting with a document-based dependent audit on your entire population sends a message to your participant base that you are serious about keeping the cost of healthcare down on their behalf.
Ongoing Controls:
When you are planning the implementation of your first dependent audit it is important to think about how you will prevent ineligible dependents from joining the plan after the audit is complete. Clients have two primary choices on how to prevent ineligible dependents from joining their plan:
- Require Documentation at the Time of Enrollment: Some employers choose to begin requesting documentation from each employee as they join the plan. However, this can present a unique challenge to resource-strained HR departments; it also causes a significant increase in the complexity of the enrollment process. Most employers opt to conduct periodic audits to verify the status of the dependents on their plan.
- Conduct Periodic Document-Based Audits: This approach is typically chosen because it does not require significant changes to the enrollment process that can require a large investment of both time and personnel. Periodic audits should be conducted at a minimum on an annual basis. Many employers conduct these audits quarterly or bi-annually. These periodic audits put controls in place for two situations: New dependents on the plan and existing dependents that may become ineligible. At the beginning of each periodic audit all new dependents are asked to provide the documentation required to prove their eligibility. Existing dependents are asked for documentation that verifies they still qualify as a spouse or student. Ex-spouses and dependents who are no longer students make up a large portion of ineligible dependents.
