Auditing of health benefits riles staff

PERSONAL FINANCE

October 07, 2007|By EILEEN AMBROSE

It's the hot topic in benefits, and no one is hotter about it than workers: employers demanding proof that family members qualify for insurance coverage.

Workers often are offended that their company seems to be questioning their honesty. Others are just irritated at having to dig out old tax returns, birth and marriage certificates, or college transcripts. Some don't respond to requests for documents.

"Everybody is peeved," says Susan Johnson, senior consultant with Watson Wyatt Worldwide, a benefits consulting firm.

Employers often do these "dependent audits" during open enrollment, which is going on now at many employers or will soon.

If you are audited, be mad. Be irritated. Just don't ignore it, or mail documents late.

Some employers are lenient and will allow dependents to be added after the deadline once documentation is provided, says Sara Taylor, a benefits expert at Hewitt Associates, a human resources consultant. But others take a hard line. Miss the deadline and your dependents may be off your insurance until the next open enrollment, Taylor says.

Of course, not every audit leaves workers feeling pitted against their employer.

Companies that do audits right will explain, using dollar figures, why they are doing them, Taylor says. These companies tell workers about the millions of dollars spent on health care and explain that less money is available for workers and their families when the employer pays for those who don't belong on the plan, she says.

Some workers come to welcome audits.

"You would be surprised. We get just as many calls saying, `I'm so glad if this will save us money,' and, `The guy next to me is cheating. I hope he gets fired,'" says Mark Rucci, senior vice president with Gallagher Benefit Services Inc., which conducts audits.

Employers bear the brunt of insurance costs, which is why they try so hard to contain costs.

Employers this year on average paid $8,824 - or 72 percent of the tab - for health insurance for a family of four, according to Kaiser Family Foundation. For singles, companies paid an average of $3,785, or 84 percent of the cost.

Audits are conducted in various ways.

Some companies start with an amnesty program. They explain who is eligible for coverage and allow workers to quietly remove those who don't belong on the plan. Companies warn workers they could lose their jobs if ineligible dependents remain on the plan.

The next step is the audit.

Employers may take a hard line by removing all dependents and then requiring workers to submit proof of eligibility before family members are added back on, Rucci says. "Essentially, everyone is guilty until proven innocent," he says.

Or, some audits have all workers fill out a questionnaire about dependents but only later collect documentation from a random sample, Rucci says.

Once an audit is done, new and current employees generally will need to produce documents before adding someone to the company plan.

Average reduction

Rucci says 5 percent to 10 percent of dependents will come off the rolls after an audit, including those dropped because workers didn't submit the paperwork. Taylor has seen 2 percent to 20 percent of dependents dropped, the higher number usually at companies with generous benefits.

Workers usually get the chance to appeal a dropped dependent.

Some cases are clearly fraudulent, such as workers putting neighbors on the health plan. But most often, ineligible dependents are honest mistakes, particularly when plan rules are complicated.

Workers may mistakenly assume that a niece or third cousin living with them is eligible or forget to remove a deceased spouse, says Watson Wyatt's Johnson.

Sometimes divorced workers required to provide health insurance to ex-spouses will leave them on an employer's plan although former mates aren't covered, she says.

Or, employees may confuse tax rules with eligibility rules. For instance, a 19-year-old daughter can be claimed as a dependent on your tax return if you're providing most of her financial support, says Hewitt's Taylor. But if she's not a full-time college student, she usually doesn't qualify for insurance.

Most employers will drop the ineligible dependents and leave it at that. In cases of significant fraud or where an ineligible person racked up huge medical bills, employers or insurers may try to recoup their costs, Rucci says.

Rucci says the savings can pay for the audit many times over.

Ford Motor Co. finds the audits worthwhile, although it no longer tracks the savings, says spokeswoman Marcey Evans.

Ford dropped 80,000 dependents since starting audits in 2000. It offered two amnesty periods. In subsequent audits where ineligible dependents were uncovered, some workers had to reimburse the automaker for benefit overpayments, Evans says.

Bill Custer, an economist and insurance professor at Georgia State University, says audits can save money at giants such as Ford. Smaller players might not realize much savings, he says.

A worker on the family plan, say, might have to remove one child who is too old for coverage. But if the rest of the family stays under the same plan, then there is no cost savings for the employer, Custer says.

My own employer, the Tribune Co., is conducting an audit. I figured I would be a likely candidate for scrutiny because my husband is on my insurance and has a different last name.

Not offended

I wasn't offended when the audit letter arrived. But I worried for days whether our Indiana marriage certificate looked too simple to be credible. Maybe I should bombard the auditor with every shred of evidence possible from tax returns to our wedding album? (OK, I didn't seriously consider sending photos, but would if necessary.)

My fretting continued until I sent in the copy of the certificate - certified mail, of course.

To suggest a topic, contact Eileen Ambrose at 410-332-6984 or by e-mail at eileen.ambrose@baltsun.com

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