Since that study was produced,
our total number of audits conducted has grown to over 1,100. We have completed
twice as many audits this year as last and the number of clients signing up for
our Ongoing Dependent Eligibility Verification Services has risen above 70%.
Moreover, we are now executing projects where the client has already conducted
an internal audit (or used another firm) and are seeing significant savings.
Dependent eligibility audits remain one of the only ways to take 3-5% out of
health care expenses without any changes to the plan or contribution strategy.
Brokers across the country are using this “weapon” as a way to win new
business.
I think you owe it to yourself to
do a top to bottom evaluation of your current book to be sure you have gotten
them to seriously consider doing a project. And, if you are prospecting during
this summer season, incorporate dependent eligibility verification into each
sales presentation. Read on to review a reprise of our article on how the rate
of ineligible dependents has increased from 6.5% to 7.99% with the passage of
healthcare reform.
*Report originally published
on the Employee Benefit Advisor blog and
November’s print issue of Employee
Benefit Advisor magazine.
Rate of
Ineligible Dependents Increases to 7.99% with health care reform
One of the first changes brought
on by health care reform was the mandatory extension of health plan eligibility
to adult children up to age 26 without regard to student status or other
dependency upon the employee. Many experts predicted that the rate of
ineligible dependents would decrease after this provision took effect and lower
the effectiveness of Dependent Verification Projects.
Based upon a study my firm did in
the fall comparing similar populations before and after the implementation of
this provision, we can now conclusively state that the experts were wrong. The
rate of ineligible dependents in the health plans analyzed in this study post
health care reform has actually increased by approximately 1.5 percentage
points.
Expectations prior to health
care reform
When health care reform passed,
many experts analyzed the data coming from dependent eligibility verification
projects in order to predict the effect of health care reform on the efficacy
of these projects. Using our data as an example, prior to health care reform in
a sample set of over 113,000 dependents verified, 48% of the ineligible
dependents were under age 20, 23% of the ineligible dependents were between the
ages of 20 and 26 (the typical ages of full-time students), and 29% of the
ineligible dependents were over age 26. Further investigation showed that half (11.5%)
of ineligible dependents in the 20-26 age range were ineligible because they failed
the “relationship” test. These wouldn’t be eligible for coverage regardless of
their age.
It seemed reasonable to assume
that with the dependent age limit increased to 26, about half of those who had
been previously identified as ineligible dependents would now pass eligibility
verification. The other half would still fail the relationship test and remain
ineligible. Our own data led me to agree with the experts’ expectation of
health care reform—that the average rate of ineligible dependents post health
care reform would drop from 6.5% to 5.75% (a reduction of 11.5%).
That reduction, while
significant, would have only partially mitigated the strong
business case for an employer to conduct a dependent eligibility audit. There
would be some employers, though, who anticipated falling at the lower end of
the 5-12% average range of ineligible dependents. This 11.5% reduction may have
been enough to discourage them from the project.
The real effects of health care
reform
The fact is, our research since
the passage of PPACA has proven that the opposite is true. Using a statistically significant sample of
recent audits conducted by ContinuousHealth, we’ve found that the average
percentage of ineligible dependents has actually increased to 7.99% after implementation of the Affordable Care
Act.
A 19% increase!
Additionally, we’ve seen a shift
in the ages of ineligible dependents.
Our sample set had 10% fewer ineligibles under the age of 20 and about the same
number of ineligibles between the age of 20 and 26. Ineligible dependents over
the age of 26 grew by 11%.
What conclusions can we draw
from increased ineligible numbers?
Certainly there were other
factors in place during the time period studied.
Part of this shift could be a
result of the continued softness in the employment environment. This affects
the percentage of dual-earner households and contributes to the rate at which
employees might attempt to have non-spouses or other adults added to their plan
who lack access to coverage due to unemployment.
The publicity surrounding
eligibility changes has been less than precise, even two years later. There is
more potential that employees will attempt to enroll dependents that do not
meet eligibility criteria. A person the employee calls “family” needs coverage
(perhaps due to the softness of the market), and the employee therefore thinks
he can cover them on “family” coverage.
With all of that, verification
methods have been eradicated for most companies. For 70% or more of employers
prior to health care reform, the only dependent verification procedure was
full-time student status checks conducted annually or biannually by the health
care plan administrator. PPACA’s changes eliminated the only stopgap against
ineligible dependents.
A necessary response
Regardless of the root causes for
this increase in ineligible dependent rate, I think the call to action is
clear.
For years, we’ve seen that unless
employers are making arrangements to verify dependent eligibility with a
thorough process that includes both eligibility education and document
verification, there are going to be ineligible dependents on every group plan,
gratuitously driving up the cost of health care.
In fact, I’d say that the need is
greater than ever to make sure ineligible dependents aren’t covered. The
changes brought on by health care reform allow even more dependents to be
eligible, so covering an ineligible dependent has a more significant exposure
risk than ever. With the prohibition on
rescissions in PPACA, the financial exposure lands on the employer for
ineligible dependents, since employers must prove employee fraud before
exposure for high claims could be passed on.
I want your clients to be
protected from the financial and compliance exposure of ineligible dependents,
especially since that rate increased by 1.5% since implementing the provision. On
top of all that, I’ll remind you again that dependent verification is a cost
saving solution that regularly reduce plan expenses by 3-5% with no change in
carriers or plan design. Our return on investment guarantee makes it a no-lose
situation. I think you owe it to
yourself to do a top to bottom evaluation of your current book to be sure you
have gotten them to seriously consider doing a project. And, if you are
prospecting during this summer season, incorporate dependent eligibility
verification into each sales presentation.
As you face a mid-market renewal
season, propose a Dependent Verification Project with ContinuousHealth. It’ll
be worth it.
If you’d like a copy of the original article or the case studies
detailing report specifics, email directions@continuoushealth.com.
This article was first featured in the May 29th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)
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