Spousal Carve Out Still An Option

You might remember reading our May 2012 newsletter on whether or not spousal carve out would be allowed after 2014.  At the time, we were unsure how spousal carve outs would be affected and our debate was centered around two main points: The PPACA requirement that coverage must be offered to all employees and their dependents and the fact that legislative intent does not mandate how the final law is interpreted. Now that we now the PPACA definition of “dependent” specifically excludes spouses, disallowing or charging extra for spouses who have access elsewhere is a good way to make sure employers can continue to offer compensation by way of rich benefits right now.

There are several different options for employers looking to save benefit dollars by implementing some type of spousal carve out.

·    Spousal surcharge – employees are charged a fee each pay period when they choose to enroll a spouse that has access to group coverage from their own employer

·   Spousal Exclusion with a monetary limit – spouses can enroll in coverage only if their own employer sponsored coverage is more expensive

·    Spousal Exclusion – spouses can enroll in coverage if they are unemployed or they do not have access to group coverage from their own employer

As you may expect (and have probably already noticed) more and more employers are choosing to implement one of the options above.  Once an employer decides which type of spousal carve out will best fit their needs, the next question becomes “how do we ensure compliance?” Without a full documentation verification (including a Spousal Affidavit signed by the Spouses Employer AND page one and two of a redacted Tax Return), studies suggest that only 44% of employees will “tell the truth” and comply with the new policy.

Over our five year history of verifying dependent eligibility for employers, we have dozens of working spouse verifications under our belt—we may have even verified a plan for one of your clients. Here, you’ll find three client case studies outlining some best practices and significant learnings. 

Client A: Spousal Surcharge

Operational Goal:

To implement new spousal surcharge as cost saving option in the wake of health care reform.

Business Challenge

As a brand new auto-manufacturing plant, Client A had a benefit program that was appropriately rich for its industry but significantly better than the majority of other employers in the region. Client A wanted to set the stage as a caring and responsible company in the way it treats its employees without becoming the default insurer for the area.

Implementation:

Client A determined that it would offer coverage to working spouses with a spousal surcharge. Spouses with access elsewhere who enroll in Client A’s coverage must pay $46 per pay period, which served to push spouses toward their own coverage while still offering the option to be on the client’s plan if the spouse’s employer plan was more expensive.

Spouses can have coverage without a surcharge if…

·         they are not employed.

·         they are also employed by Client A

·         they don’t have access to medical benefits at their employer.

Verification:

ContinuousHealth’s DA² dependent verification. The audit identifies ineligible dependents as well as informing on spousal coverage using proprietary software.

A spousal affidavit included in each audit packet required sign off from the employee, the spouse and the spouse’s employer. That reduces the likelihood of confusion or fraud, since the spouse’s employer is answering questions about current coverage rather than the spouse. ContinuousHealth also suggested requiring the second page of the tax return to generate more accurate representation of spouse unemployment/employment status.

Results:

As a fully-insured plan, cost savings are greatest when ineligible dependents resulted in tier changes.

○        21.8% of those who were in EE+ Spouse tier changed to EE Only

○        14% of those in EE+ Children changed to EE Only

○        5.3% of those in Family moved to EE Only

       With those tier changes, Client A saw extended savings of $635,000, in addition to any increased plan dollars from the spousal surcharge. After the success of the project, the client decided to integrate the ContinuousHealth software to verify both dependent eligibility and spousal exclusion in-house. This ensured HIPAA-compliance and streamlined the enrollment process.

Client B: Spousal Exclusion with Monetary Limit

Operational Goal:

To implement a spousal exclusion in order to continue to offer an affordable and rich benefits plan.

Business Challenge:

As a well-respected leader in the grain industry, Client B is very focused on providing just business practices, including having a compliant plan, and on treating employees well.

Implementation:

Client B’s consultant walked the client through best options and they decided to offer coverage for working spouses if the employer’s coverage was more expensive than being on Client B’s plan. This would apply only to traditional major medical coverage, which also serves to encourage adoption of the new consumer plan.

Spouses can have coverage if…

·         they don’t have access to major medical at their employer.

·      they have access, but the least expensive single plan offered costs the spouse more than $190 per month.

·         they are also employed by Client B.

·         they are unemployed.

·         they are on secondary coverage and are enrolled in their own employer’s coverage with no contributions to an HSA.

Verification:

ContinuousHealth’s DA2 dependent verification. The audit identifies ineligible dependents as well as informing on spousal coverage using proprietary software. A spousal affidavit included in each audit packet requires the employee, the spouse and the spouse’s employer’s signature and proprietary technology notes all results.

Results:

The audit identified 9.2% of dependents on group plan as ineligible for coverage, a first year savings of $658, 000. That represents 3.8% of Client B’s total annual budget for health care. Spousal verification identified that 11.3% of spouses are only eligible for secondary coverage and about 8% are only eligible for dental and vision, based on the response of the spouses’ employers.

Rather than burdening Human Resources with the project after the initial verification ended, Client B decided to continue using ContinuousHealth to verify dependent eligibility and spousal exclusion. Ongoing costs are minimal compared to an initial project, and the transition to ongoing was seamless.

Client C: Spousal Exclusion with Employer Premium Percentage Limit

Operational Goal:

To find a third party solution for current spousal exclusion practices.

Business Challenge:

The Architecture and Planning company had tried to do a dependent verification last year with a well-known audit company, but Client C had been displeased

Implementation:

Client C had a policy in place that offered coverage for working spouses only if the employer portion of spouse’s premium was low.

Spouses can have coverage if…

●        they are not employed.

●        they don’t have access to group coverage at their employer.

●   they have access, but the spouse’s employer’s group plan requires that the spouse contribute more than 50% of total annual premium.

Verification:

ContinuousHealth’s DA2 dependent verification. Client C was interested in feedback about ContinuousHealth’s responsiveness and educate/assist approach, something it had not found in the last firm. The process would identify ineligible dependents while streamlining the current working spouse verification. A spousal affidavit included in each audit packet requires the employee, the spouse and the spouse’s employer’s sign off.

Results:

The audit identified 7.70% of dependents on the group plan as ineligible for coverage. Despite the recent verification with the other audit company, 4.4% of the dependents were self-identified as ineligible once the plan requirements were outlined to them with the offer of amnesty. Employees opted out 8.4% of the spouses on the plan after reviewing the spousal carve out requirement, even though these were known requirements that had been in effect for over one year.

After the success of the project, Client C decided to continue using ContinuousHealth to verify both dependent eligibility and spousal exclusion on an ongoing basis.

If you’re working to implement a working spouse policy for one of your clients, let us know if we can help. We would love to talk through the options with you and help you serve your client through that transition.

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

It may be accessible, but is it useful?

The engagement of internet-accessible employee benefits tools continues to grow exponentially. Some firms have begun touting “web only” solutions as a viable alternative to more traditional approaches to employee engagement. As a leading provider of technology solutions for group benefit needs and with all the interest in online enrollment and HR administration tools, we thought it would be interesting to research how accessible web-based platforms really are for employees.  How much are your clients (and their employees) really using these platforms? Is the focus on web-based tools truly driving efficiency or is it also creating barriers for employees who have low levels of comfort with and access to technology? ContinuousHealth recently tracked employee and employer login data for our entire employee benefits technology suite of systems. Prior to pulling the data, we had certain predispositions about the results: As a technology company, we know that not everyone is comfortable working with software that they do not use regularly.  We refer to these types of systems as “single transaction platforms.” For these types of systems, we assumed employee web access would be fairly low, and employer access would be moderate to high. While we are proud of our systems, we realize many of our clients never walk through the technology, but those who do find it helpful and, in the words of one consultant, “slick.” But what is the real level of web access to our systems?  Who is really logging in, and how can we make our products better, knowing those results?

As we began to review the data across the several platforms we offer, using the employee and employer access from your clients’ projects, the results surprised us. First of all, let us be clear, ContinuousHealth has always been of the mindset that “all access” is achieved (like a brand marketing campaign) by using nearly every available medium and mode to reach employees. For both compliance and effectiveness reasons, HR applications can’t settle for 80% response rates. For us, web access has always been an “and” option as opposed to an “or” option. Having said that, let’s look at web access across a variety of platforms and needs.  

Employees and internet accessibility

We first took a look at employee access of our benefits administration platform, individual insurance coverage system and our dependent verification technology. Across all client platforms, we show fairly low levels of access by employees.

Only 17% of the employees going through dependent audits log into the website, and just 5% actually upload documents to the portal to move forward in completing the process. You may have heard of dependent audit companies that advertise a web-only verification. They state that “98% of people have access to the internet.” That may be true of companies with a predominantly white collar workforce, but we find that, even among that population, most people don’t have the ability to turn a hard copy document, such as a marriage certificate, into a soft copy document. Our employee login data shows that internet access is still not the best way to identify ineligible dependents with minimal business disruption - especially if you want to reach high penetration rates. By offering an all-access platform, we typically see response rates in the 97-98% range. Achieving this consistently with a web only solution is next to impossible without a high degree of HR involvement.

In our benefits administration and individual coverage technology, 39% of all system logins are employees logging in to enroll or complete surveys for assistance with individual medical insurance. This is a good bit higher than we predicted, and it’s an argument toward the need for online enrollment options. 3-5% of all errors in enrollment are caused by manual keying in of enrollment requests, and this can be reduced by allowing employees access to the system.  The fairly high number of employee logins shows that online enrollment is accessible and a highly utilized option, viable for moving most companies to either an online employee or enroller-assisted option.

Employers and internet accessibility

The data showed, though that most vital is employer accessibility to technology.

For our benefits administration and individual coverage technologies, we found that 46% of all logins were employers logging in. This includes assisting employees with the technology, reviewing enrollment, and viewing statistics. The number is much higher than expected.

Employers also have access to our dependent verification technology, a system that we pride ourselves in for our intentional user-friendly, “single transaction” technology. We recognize that employers may not be logging in every day, so the system shouldn’t be software that you must learn. Instead, it should be user-friendly enough that employers can understand the first time logging in. That said, although we built our system with ease of access in mind, we were still surprised to see how many of our employers, your clients, are accessing it—80% of the employers who are going through dependent audits with us have logged in to the website, either to review statistics or download reports.

The details

Substantial money invested in giving employees access to web applications for human resources administration will only pay out if employees really do utilize these systems. Employees should receive non-web based communications and resources in addition to any internet access. Any time you’re trying to get employees to do just one thing, in this case provide documents or manage benefits, you have to offer options beyond online accessibility.

Enroller-assisted online portals are good options, and crucial to the success of human resources technology is quality access for employers. As employers manage their employees, for large and small companies alike, it is vital that the employer feels connected to the data, and, thus, to their employees.

For your clients

Rest assured – options that are exclusively manual and paper-based are bad. There are too many employees with access to the web to be tied down to old ways of doing business. But when you evaluate new approaches, keep an eye on reaching everyone.  

You know better than we do what your clients need, but these are the important questions to ask, and important adoption data to know, as you consider the next steps as their advisor.

This article was first featured in the April 10th 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.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

All Dependent Eligibility Audits Are Not Created Equal

Response Rate is Crucial

As employers seek out money saving options in their health care plans, dependent eligibility verification audits have grown in popularity. Recent national studies show that 74% percent of employers plan to do a dependent audit in 2012, up from 69% in 2011. And there’s good reason to do so:  the 10-14 week process identifies bottom-line savings of 3-5% of annual health expenses without changes to carrier or plan design. 

More often than not, employers contract with third party companies in order to ensure that the audits run smoothly and securely, since verification is typically too time-consuming to do in-house. All dependent eligibility audits, however, are not created equal.  

As the Director of Operations for dependent audit at ContinuousHealth, I can tell you that horror stories abound. Clients often come to us saying that they attempted a project internally and overwhelmed their understaffed Human Resources department. Other clients say they used a third party and their Human Resources department was still bombarded because the communications weren’t clear. They cite experiences from other firms saying that employees were treated like criminals when they truly didn’t understand what constituted a dependent.

And, overwhelmingly, we hear about companies that drag verification on for months but still can’t get as much as 30% of the population to comply.

As Eric always says, “If the ship misses the harbor, rarely is it the harbor’s fault.” High response rates are a critical success factor for dependent audits. A dependent verification is not rocket science.* It should be based on a solid employee approach, one that educates and assists employees to complete, with multiple access points (mail, web, fax, phone and email) and hard-to-ignore communications. There needs to be consistent coordination between HR and a dedicated audit Account Manager, with the ability for the employer to track real time statistics. And above all, the external communication and contact with the employee must be such that response rates are driven into the 90% range.  The only thing that’s going to give your client credibility at the end of this is that the project was very, very thorough.

When we began doing these projects in 2008, at the request of one of our other advisor partners, we found 3 root causes of ineligibles:  lack of awareness of what constitutes a dependent (on family coverage; call this person “family”), timing (recently or not-so-recently divorced), and fraud.  We made a conscious decision to approach each employee as though his ineligible dependents are the result of a lack of awareness. This “Compassionate Compliance” approach has evolved into the leading method for high response/low disruption projects. In a project where the issue is a lack of awareness of the definition of a dependent, can you really trust the results if 10-20% of your population doesn’t respond?  The entire integrity of the project is compromised.  We’ve had clients who said that if fewer than 90% responded, they wouldn’t even drop the self-identified ineligibles. 

A dependent audit should not be an exercise in kicking undereducated or lazy people off the plan. If you do it right, you should be getting a 97% response rate consistently. We recently had a client finish the project in 8 weeks with a 99% response rate, another in 14 weeks with 100% (both had savings higher than a 3:1 return on investment). These results are feasible with the right audit company. 

It’s possible to design an audit where you find 20% ineligible, but we don’t think that’s the goal of most employers. When we initially designed our audit, we approached it with a marketing mindset: what does it take to get everyone to respond? Our job is to do the most thorough project we can, generating maximum compliance and minimal business disruption. We never want anyone to lose coverage because they were unaware of the verification.

Our company was one of the first to market with this product. We offer the industry’s leading response rate as well as the highest return on investment guarantee. If you’re like most of our consultant partners, you’re suggesting a dependent audit or ongoing eligibility maintenance to your clients this year.  There is a difference in the firm you choose and the approach they take. We would be honored if you would choose ContinuousHealth.

Kelly Hudson
Director of Operations
ContinuousHealth, LLC
http://www.continuoushealth.com

This article was first featured in the March 20th 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.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

The Jury’s In: Rate of Ineligible Dependents Increases with Health Care Reform

This post was originally published on the Employee Benefit Advisor's blog, Be Advised.

One of the first (and most popular) changes brought on by Health Care Reform was the mandatory extension of health plan eligibility to adult children up to age 26 regardless of student status or dependence upon the employee. Most people predicted that the rate of ineligible dependents would decrease after this provision took effect. Based upon a study my firm recently completed, 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 on the health plans analyzed in this study has increased by approximately 1.5 percentage points. What caused this change? What do the results of dependent eligibility audits conducted after the passage of Health Care Reform tell us about employee behavior? What should employers do based upon the results of this study?

Health Care Reform Expectations
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, and 29% of the ineligible dependents were over age 26. Correspondingly, 23% of the ineligible dependents were between the ages of 20 and 26 (the typical ages of full-time students). Further investigation showed that half of these ineligible dependents were ineligible because they failed the “relationship” test.

As a result, it seemed reasonable to assume that with the testing for full-time student status eliminated, 11.5% of the previously identified ineligible dependents would now pass eligibility verification. Said another way, if 6.5% of dependents were found to be ineligible prior to the passage of Health Care Reform, it was likely that the rate of ineligible dependents would be reduced by 11.5%. Based upon this hypothesis, experts expected the average rate of ineligible dependents post Health Care Reform to drop from 6.5% to 5.75%.

This reduction, while significant, would have only partially mitigated the strong business case for an employer to conduct a dependent eligibility audit. For some employers, however, who anticipated that they might fall at the lower end of the ranges of ineligible dependents, this 11.5% reduction may have been enough to discourage them from the project.

The Real Effects of Health Care Reform
In this most recent study, though, the opposite has proven true.  Using a statistically significant sample of recent projects 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.  Additionally, it is interesting to note the percentage breakdown of the ineligible dependents by age demonstrates a shift in the ages of ineligible dependents. Specifically, 38% of the ineligible dependents identified in this sample set were under the age of 20, compared to 48% prior to Health Care Reform. The percentage between age 20 and age 26 is virtually unchanged at 23%. The percentage of ineligible dependents above age 26 increased from its pre-Health Care Reform levels of 29% to a post Health Care Reform 40%.

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 not only affects the percentage of dual-earner households, but also 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.

Additionally, in 70% or more of the employers, the only verification procedure for dependents prior to Health Care Reform was the verification of full-time student status conducted annually or biannually by the health care plan administrator. With the changes brought on by Health Care Reform, this verification process was no longer relevant, thus eliminating the only stopgap against ineligible dependents.

A Necessary Response
Regardless of the root causes for this increase in ineligible dependent rate, the call to action is clear. For years, it’s been clear that if employers are not making arrangements to verify dependent eligibility with a thorough process that includes both education and document verification, there are likely to be ineligible dependents on the plan gratuitously driving up the cost of health care. In the post Health Care Reform era where even more dependents are eligible, the exposure risk of covering ineligible dependents is more significant than ever.

If you’re interested in the details of this study, see also the case studies below.  For more information about Health Care Reform or dependent eligibility audits, follow ContinuousHealth and Eric Helman, CEO, on Twitter at @CHealthUpdate or visit www.continuoushealth.com. ContinuousHealth is an independent organization located in Atlanta, Georgia, that uses proprietary technology to help employers optimize their investments in employee benefits programs.  ContinuousHealth has performed over 300 dependent eligibility verification projects and distributes its products through an exclusive network of certified consultants and brokers.

Case Studies
Client A is a small company in transportation and manufacturing.  Anticipating the changes required after 9/23, Client A modified its policy into a non-grandfathered plan with extended child eligibility to 26 at their 9/1/2010 plan renewal, in advance of the PPACA requirement.  At the time of verification, the company had been following the Age 26 rule for four months.  As a small company that had already implemented the Health Care Reform changes, leadership expected to see low ineligible dependent numbers.  Instead, the Dependent Eligibility Verification found that 14.5% of dependents on the plan were ineligible.

Client B is a large retail chain with mostly white collar employees in a low-income tax bracket.  Its plan renewal was 2/1/11, and under its Ongoing Verification procedures, the company began verifying for the new Health Care Reform categories in mid-January.  Client B implemented a grandfathered policy with an Adult Child Exclusion policy:  if an adult child was eligible for coverage under his or her own employer’s policy, that dependent was not eligible for the policy of Client B.  Open Enrollment numbers showed a 20% increase of enrollees to the policy, which fit with its expectations for the 2011 year.  The biggest surprise, though, was the upswing of ineligibles:  during the original verification, between October 2009 and January 2010, the ContinuousHealth Dependent Eligibility Verification Audit found that 1,851, or 16.56%, of Client B’s 11,175 dependents enrolled were ineligible; during the first four months following the implementation of PPACA regulations, the ContinuousHealth ongoing dependent eligibility verification audit found 549, or 30.57%, of the 1,796 newly enrolled dependents to be ineligible for the new policy.  This number was nearly double the findings of the original project, when the eligibility criteria were more stringent.

Client C is a major automotive manufacturing company with a non-grandfathered plan and a February plan renewal.  The company began verifying for new categories in mid-February.  Prior to Health Care Reform provisions, the Dependent Eligibility Verification Audit identified 10.55% of enrolled dependents as ineligible.  After enacting the Age 26 requirement, as well as the non-residential requirement for stepchildren, the Ongoing Dependent Eligibility Verification found that 27.91% of new enrollees were ineligible.

Client D is a large hospital management system with 15 localized hospitals.  The management system did a Dependent Eligibility Verification Audit in 2010, prior to implementing Health Care Reform at their July 1, 2011 plan renewal, with 13 of its 15 hospitals. The two hospitals who did not participate initially were both located in Massachusetts and were excluded because they were covered under “RomneyCare,” a set of provisions that representatives of President Obama have cited as a model for PPACA[1] and which have been called an “ObamaCare preview.”[2] After the leadership team reviewed the results from the initial verification, the two hospitals in Massachusetts decided to undergo a ContinuousHealth Dependent Eligibility Verification Audit as well. The results were comparable with their non-Massachusetts counterparts:  the original verification found 10.1% ineligibles for hospitals that were not yet subject to PPACA; one Massachusetts hospital discovered that 6.34% of dependents were ineligible and the other found 9.64% of dependents were ineligible under the current plan guidelines.[3]

	Client A	Client B	Client C	Client D
Industry	Transportation / Manufacturing	National Retail Chain	Automotive Manufacturing	Hospital Management System - 15 hospitals
# Dependents	350	11,000+	3,500	17,000+
Grandfathered or Non-Grandfathered	Non-grandfathered	Grandfathered:  Adult Children eligible for own employers’ plan were ineligible	Non-grandfathered	2 Hospitals under “RomneyCare”
First Plan Renewal	9/1/2011, but implemented on 9/1/2010; Age 26 compliant for 4 months at verification start	2/1/2011; started verifying for HCR in mid-January	2/2011; started verifying for HCR in mid-February	7/1/2011
Results	14.5% of dependents were ineligible, far higher than leadership expected	·  20% increase in Open Enrollment numbers ·  Original project in 2009-2010 found 16.56% of 11,175 dependents were ineligible ·  First 4 months of PPACA showed that 30.57% of the 1,796 newly enrolled were ineligible	·  Original DEVA found 10.55% of enrolled were ineligible ·  Post-HCR DEVA found 27.91% of new enrollees were ineligible	·  Initial project:  10.1% ineligibles ·  2 Hospitals excluded from initial verification because they were under RomneyCare. These did a DEVA after seeing other 13 hospitals’ results ·  Results were comparable: RomneyCare project:  6.34% ineligibles in one and 9.64% in the other
Financial Exposure Reduction	Over $184,960	·  Original project:  $4,995,000 ·  First 4 months of PPACA: $1,482,300	·  Original project:  $1,114,345 ·  First 4 months of PPACA: $1,500,442	Total savings:  $4,165,246

---

[1] Carol E. Lee, “White House Again Jabs Romney on Health Law,” Washington Wire, Wall Street Journal, http://blogs.wsj.com/washwire/2011/05/13/white-house-again-jabs-romney-on-health-law, (May 17, 2011).

[2] “National Health Preview:  RomneyCare’s bad outcomes keep coming,” Wall Street Journal, http://online.wsj.com/article/SB10001424052748703864204576313370527615288.html?KEYWORDS=national+health+preview+romneycare, (May 10, 2011).

[3] The hospitals from the original verification were also not doing document checks, while the two Massachusetts hospitals believed their employee document records were up to date, checking student status as well as IRS dependency, per their SPD.

Early Results are In: HCR may increase the Number of Ineligible Dependents

Originally published at Executive Street, a Vistage International blog.
While Health Care Reform is currently a much-discussed item in the media, the Wall Street Journal recently reported that the majority of CFOs are not considering the repercussions for their companies. The following study proves the fiscal responsibility for corporate leadership to research the effects of the Patient Protection and Affordable Care Act (PPACA) on their health care plans.

Ineligible Dependents:  Previously 5-12% of Dependents on Group Health Care Plans

Many experts believe that the number of ineligible dependents on a company’s health care plan will decrease as the mandates of the PPACA take effect. Nationwide, prior to PPACA, between 5-12% of group plan participants were typically found to be ineligible. The early results are in for a study showing that wider eligibility criteria may, in fact, directly correlate to higher percentages of ineligible dependents. 

Reform guidelines now require that adult children up to the age of 26 be eligible for coverage on their parents’ group health care plans, regardless of marital or employment status.* Many employers assume that this will significantly increase their enrollment body, and recent news reports confirm.  The enrollment of this age group is even higher than expected, as many as 600,000 new dependents in the first year alone.

Relatedly, many employers believe that investigating ineligibles is no longer necessary. Full-time student verification of that age group was standard practice with most group health care providers, and with this demographic now under mandated coverage, why check at all?

The Effects of Health Care Reform

Statistics gathered from recently conducted dependent eligibility verification audits show the need still exists and is, in fact, greater than ever. Projects completed since the implementation of Health Care Reform guidelines show nearly double the number of ineligible dependents. The average number of ineligible dependents identified on group coverage has risen from 8% to over 15%. 

The same ineligible dependents who existed prior to 9/23/10, excepting non-students, are still attempting to gain coverage from group plans. Dependents typically found who are not eligible for most plans include:

Ø  former spouses,

Ø  non-spouses,

Ø  former stepchildren,

Ø  grandchildren,

Ø  grandchildren over the age of 18 who are not enrolled in school,

Ø  non-child blood relatives and

Ø  non-eligible dependents declared on tax returns. 

Additionally, Health Care Reform has created new potentially ineligible dependent types, namely spouses and adult children who have coverage on other plans.

Prior to Reform, approximately 24% of ineligible dependents fell into the age range of 19-26. Of that 24%, half are unable to prove relationship. Thus, only 12% of typical ineligible dependents were previously non-students and are likely to qualify for coverage as a result of the change in age requirements. To put that into perspective, if a hypothetical employer covers 1,250 dependents and falls in the middle ground of 8% ineligible, 100 dependents would exit the plan. Health Care Reform guidelines for adult children now make 12 of those eligible. The other 88 remain ineligible and underscore the importance of continuing to verify dependent eligibility in a post-Health Care Reform nation. 

While the wider eligibility guidelines of PPACA do result in more dependents on a plan, the instance of and the exposure risk associated with ineligible dependents has not decreased. Rather, early results show that Health Care Reform directly correlates with higher percentages of ineligible dependents and, thus, an increased fiscal responsibility for CEOs and CFOs to recognize and eliminate fraud.

Case Study Results from Recent Dependent Eligibility Verification Audits:

	Client A	Client B	Client C	Client D
Industry	Transportation / Manufacturing	National Retail Chain	Automotive Manufacturing	Hospital Management System - 15 hospitals
# Dependents	350	11,000+	3,500	17,000+
Grandfathered or Non-Grandfathered	Non-grandfathered	Grandfathered:  Adult Children eligible for own employers’ plan were ineligible	Non-grandfathered	TBD; 2 Hospitals under “RomneyCare”
First Plan Renewal	9/1/2011, but implemented on 9/1/2010; Age 26 compliant for 4 months at verification start	2/1/2011; started verifying for HCR in mid-January	2/2011; started verifying for HCR in mid-February	7/1/2011
Results	14.5% of dependents were ineligible, far higher than leadership expected	·  20% increase in Open Enrollment numbers ·  Original project in 2009-2010 found 16.56% of 11,175 dependents were ineligible ·  First 4 months of PPACA showed that 30.57% of the 1,796 newly enrolled were ineligible	·  Original DEVA found 10.55% of enrolled were ineligible ·  Post-HCR DEVA found 27.91% of new enrollees were ineligible	·  Initial project:  10.1% ineligibles ·  2 Hospitals excluded from initial verification because they were under RomneyCare. These did a DEVA after seeing other 13 hospitals’ results ·  Results were comparable: RomneyCare project:  6.34% ineligibles in one and 9.64% in the other
Financial Exposure Reduction	Over $184,960	·  Original project:  $4,995,000 ·  First 4 months of PPACA: $1,482,300	·  Original project:  $1,114,345 ·  First 4 months of PPACA: $1,500,442	Total savings:  $4,165,246

A White Paper detailing final results will be available after all members of the study have been subject to PPACA regulations for six months or more. For more information about Health Care Reform or Dependent Eligibility Verification Audits, reach out to Vistage member Eric Helman, CEO of ContinuousHealth, at ehelman@continuoushealth.com, or visit www.continuoushealth.com. ContinuousHealth is an independent organization located in Atlanta Georgia that uses proprietary technology to help employers optimize their investments in employee benefits programs.  ContinuousHealth has performed over 250 Dependent Eligibility Verification projects. ContinuousHealth distributes its products through an exclusive network of certified Brokers and Consultants.