The State of North Carolina Health Plan recently conducted a dependent audit to remove ineligible dependents off their plan. The News and Observer discusses how the State “caught” 600 ineligible dependents.
The article assumed a $3.6 million savings by multiplying the $6000 average annual healthcare spend per ineligible members. However, the article raised some additional questions for me:
- Does the $6000 per member per year medical spend account for the payroll deductions that the State plan was collecting for dependents, or is the net savings amount much smaller?
- What was the cost of the 3rd party auditor to perform the dependent audit?
- How many of the 600 members who are being kicked off the plan were actually ineligible, and how many just did not jump through the administrative hoops and submit the necessary documentation that was required per the audit rules?
I would reserve opinion on whether to consider the audit a success until learning answers to the above questions.
For employers considering adding a similar initiative to their upcoming benefit strategy, I would recommend you consider a variety of factors before committing to a dependent audit. Considerations I’ve discussed with employers to weigh against the cost and employee hassle associated with an audit include:
- How many dependents are currently enrolled on your plan? Obviously, employers with more dependents would see more potential value.
- How much are dependents costing your plans in claims? Audits are more valuable for plans experiencing higher claims from spouses or children.
- How much the plan is subsidizing spousal and dependent tiers? Employers contributing very little (or nothing) towards dependents may create undue burden for employees and expense for the plan without generating savings.
- How many total covered lives are on your plan? The State plan found 600 out of 730,000 state covered members. That’s only .08%. If your plan only has 1000 employees and results are similar to the State plan, you may only find 1 ineligible dependent which is unlikely to justify the expense.
Like so many benefit cost savings initiatives, employers should take a thoughtful and strategic approach when deciding how to proceed. If your organization would like to speak to an HCW Consultant about dependent audits, contact us at any time!