Reduce Expenses By Monitoring Dependent Benefit Eligibility

Posted on Wednesday, April 03, 2019

Despite the passage of the Affordable Care Act, the cost of providing health insurance to employees continues to escalate. According to the 2014 Employer Health Benefit Survey from the Henry J. Kaiser Family Foundation, the average cost to the employer to provide a worker with health insurance increased from $7,289 per year in 2004 to $12,011 in 2014.

Employees also weren't spared the pain. The average employee contributed $4,823 to his or her health insurance premiums in 2012 — an 81% increase over the previous year.

Employers have a responsibility to shareholders to control these costs, even as they keep benefits at a high level to attract the best available talent. But plan redesigns and vendor cutbacks can be difficult, time-consuming, and eat up valuable cash flow. And shifting costs over to employees can be difficult for morale. So what's a benefits administrator or plan sponsor to do?

Many times the answer is as simple as conducting a dependent benefit eligibility review.

Has Anything Changed?

Without regular reviews and audits, any employee benefits database will slowly become out-of-date. Employee dependents become ineligible for company health insurance benefits for a variety of reasons: people get divorced, they receive health benefits from another source or employer, they turn 65 and can apply for Medicare or they pass away. And yet they might remain on your company's books indefinitely unless you take steps to remove them from your rolls.

These costs naturally add up and if left unchecked will make your company less and less competitive as you pay benefits to a growing number of people who aren't making any contribution to your company.

Go over your list of employees with dependents who're collecting benefits. Have your eligibility criteria close at hand and ask yourself the following questions:

Have any spouse-dependents who're still receiving benefits — and for whom you're paying premiums — become divorced from the employee?
Have any minor children "'aged out" of the benefit?
Have any dependents who were receiving benefits while in college left school and are thus no longer eligible for their parent's benefit package?

Use caution before terminating benefits. You still must comply with COBRA advance notice requirements. In some cases you'll have to extend coverage under COBRA if the dependent lost eligibility due to a qualifying event.

Steps You Can Take

Generally, the optimum time to conduct a benefits eligibility audit is during open enrollment or plan renewal. Employees are already thinking about their benefit packages and it's usually a simple matter for them to bring birth certificates, a marriage license or other key documents.

Employers may also consider an amnesty program that allows employees to report having improperly received benefits in the past without suffering adverse consequences. The point here is to stop the hemorrhaging of cash from the company.

In all cases, effective communication is the key. The employer must make an effort to communicate to employees the exact eligibility standards, the documentation that will be required to prove eligibility and what consequences may befall those who improperly receive benefits.

Posted in Tax Topics For Individuals

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.