Employees Must Prove Dependents for Health Insurance

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In an effort to cut rising health insurance costs, some employers are asking employees to prove the eligibility of dependents they list on their insurance plans. Although this is not a new request by employers, an increasing number of them are making the request in an effort to save money.

Recently, employers including the Commonwealth of Virginia, Navy Federal Credit Union, and Johns Hopkins University have joined the ranks of Fortune 500 companies such as AT&T and Ford in asking their employees to prove that the people they list as dependents on their health insurance plans are legitimate. Examples of ineligible individuals include ex-spouses, grandchildren, over-age children, and extended family members.

This year, more than 60 percent of large companies in the United States conducted audits to determine dependent eligibility on health insurance policies, according to a survey by Watson Wyatt, a benefits consultancy in Arlington, Virginia. Less than 50 percent of US companies engaged in such audits in 2007. Proof of eligibility can include a marriage certificate, utility bills that name both the husband and wife on the bill (to prove the couple has not gotten a divorce), birth certificates for children, and tax returns. College tuition receipts may be requested for children older than 18 who are claimed as full-time students.

In 2004, there were reports in the news about how some companies were scrutinizing employee health insurance plans for ineligible dependents. Although such audits are time-consuming and expensive, a USA Today article in April 2004 noted that eliminating people who were not eligible for coverage could save a significant amount of money for employers.

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An audit conducted at Daimler Chrysler, for example, uncovered 27,000 employees who had listed ineligible family members on their health insurance policies. The company required some of the employees to repay what it had spent on health care for those individuals. Ford Motor found 50,000 ineligible dependents had received health care between 2000 and 2004. At the time, New York state representative Sam Hoyt (D) noted in a USA Today article that weeding out ineligible dependents could be “a practice in all of government across the country.”

Hoyt’s prediction did not come true entirely: although some state and local agencies are auditing dependents, the federal government is not. Audits conducted by various firms continue to find a significant percentage of ineligible dependents, such as the 50,000 uncovered in 2006 at AT&T during an evaluation conducted by Budco Health Service Solutions of Highland Park, Michigan. A recent audit of 14,000 dependents performed on health insurance plans at Johns Hopkins found 454 individuals not eligible for coverage. Once these ineligible people were removed, the resulting savings was estimated at $2 million per year.

Recently, the Commonwealth of Virginia initiated an audit of its 52,000 state employees and dependents who signed up for health insurance benefits in 2010. The state has announced that state workers who attempt to include an ineligible person in a health insurance policy risk having their own coverage suspended temporarily and their dependents dropped permanently. The state is also requiring everyone who included one or more dependents on their policy to sign an affidavit attesting to their dependents’ eligibility.

The practice of asking employees to verify the eligibility of any dependents on their health insurance plans will likely become even more widespread as health costs continue to rise. Employees should review the features of their health insurance policies and be aware of who is and who is not eligible. Questions about what happens in the case of a divorce, whether full-time college students are covered up to a certain age (they are not in all cases), and whether stepchildren or live-in grandchildren are eligible should be discussed with the employer.

SOURCES:
USA Today April 6, 2004
Washington Post October 13, 2009

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