Ask Our Expert: Effects of Health Care Reform on Dependent Audits
We've asked Davin Bernardi, Aon Hewitt's Delivery Leader for Dependent Verification Services, to answer several questions about the effects of health care reform on dependent audits. If you'd like to ask a question about this topic, or about any other pressing human resources challenge you are facing, e-mail us. We'll share responses to select questions on a regular basis.
Question: How does health care reform affect an employer's ability to remove ineligible dependents?
Answer: Employers are facing numerous changes with the recently passed Patient Protection and Affordability Act (PPACA). While the full impact of this new legislation has yet to be measured, one thing is certain: group sponsored health plan costs are expected to rise once these modifications are implemented. It is essential that employers prepare for and react to the forthcoming changes with every tool available.
A dependent eligibility audit remains one of the most compelling means to obtain immediate savings and protect health plan(s) from unnecessary and fraudulent claim expenditures. At Hewitt, our clients have seen an average of 11% ineligible results from their comprehensive dependent eligibility audit projects and are electing to continue with ongoing unitization services to ensure ineligible dependents are not re-enrolled in the plan(s), or added as new hires and following a family status event.
As we know today, some of the first PPACA provisions that will be implemented begin with plans renewing as of September 23, 2010. PPACA Sec. 2712 "Prohibition on Recission" and Sec. 2714 "Extension of Dependent Coverage" are high priorities and will affect every employer's eligibility and plan participation.
Question: What does Sec. 2712 mean to employers?
Answer: A group health plan and a health insurance issuer offering group or individual health insurance coverage shall not rescind such plan or coverage with respect to an enrollee once the enrollee is covered under such plan or coverage involved, except that this section shall not apply to a covered individual who has performed an act or practice that constitutes fraud or makes an intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage. Such plan or coverage may not be cancelled except with prior notice to the enrollee, and only as permitted under section 2702(c) or 2742(b).
The impact of Section 2712 will make eligibility management more critical than ever.
Question: What does "Prohibition on Rescission" mean for your plan and what are the consequences?
Answer: Once an enrollee is covered, you may not be able to remove that individual retroactively to the date when first ineligible unless there has been an act or practice that constitutes "fraud" or made an "intentional misrepresentation" of material fact as prohibited by the terms of the plan or coverage. Ineligible dependents, such as ex spouses, nieces, nephews, girlfriends/boyfriends, neighbor's children, parents, etc. could have claims paid by the employer sponsored health plans during the period of ineligibility.
Question: How does a plan sponsor prove that an individual has intentionally misrepresented a material fact or performed an act that constitutes fraud?
Answer: Employers should clearly define what they consider to be an act of "fraud" or "intentional misrepresentation" as well as the dependent eligibility requirements to protect the plan from unintended beneficiaries.
Question: What can employers do right now?
Answer: If you have not completed a dependent eligibility audit on your population, there is still time to do so and remove ineligibles retroactively before the Prohibition on Rescission takes effect for your plan. After the effective date, a dependent eligibility audit is still of great value: You remove ineligible dependents on a prospective basis, or on a retroactive basis in the case of fraud or intentional misrepresentation.
Annual enrollment is also a good time to define who is eligible and require evidence of the relationship. Add an attestation process where the enrollee confirms that the dependents are eligible and that he or she will promptly notify the plan of ineligibility. This may help the plan prove future cases of fraud or intentional misrepresentation.
For all dependent eligibility audit projects, we recommend:
- Tighten SPD definitions of who is eligible. Organizations will want to clearly define a "qualified dependent." While the Department of Health & Human Services has not yet fully defined what constitutes a dependent child, we do know grandchildren need not be covered by plans.
- Conduct a comprehensive, evidence-based eligibility audit on all participants covering dependents. Meaning, employees must provide proof (e.g. vital records, such as birth certificates and marriage certificates) evidencing the relationship to the employee.
Question: How does Sec. 2714. "Extensions of Dependent Coverage" affect my plans?
Answer: A group health plan and a health insurance issuer offering group or individual health insurance coverage that provides dependent coverage of children shall continue to make such coverage available for an adult child until the child turns 26 years of age. Nothing in this section shall require a health plan or a health insurance issuer to make coverage available for a child of a child receiving dependent coverage.
Question: If an employer is considering a dependent eligibility audit and has concerns about using their current SPD definitions for an adult child or the new rules covering adult dependent children to age 26, what should you do?
Answer: We recommend employers audit their current plans with the new rules. We believe the mandate to cover dependent children to age 26 without financial, residency, enrollment, or marital status requirements could decrease an employer's ineligible results by as much as 3% of the total enrolled dependent population. However, multiple case studies have demonstrated the return on investment (ROI) by conducting the audit will not be impacted significantly as student age children typically carry a lower cost per dependent, than a spouse.
Please note: Within Sec. 2714 of the PPACA, which requires employers to cover dependent children to age 26, until 2014, the employer does not have to cover an adult dependent child if they have access and are eligible to participate in their own employer's plan.
In conclusion, we believe employers should react now to cover "only" the eligible participants as intended. Health Care Reform will continue to evolve over the coming years and the employers who are proactive and manage their plans closely will be able to mitigate some of the unwanted and sometimes fraudulent costs from ineligibles.
If you have not conducted a dependent eligibility audit and are considering doing so, we believe the time is right.