Responding To A Dependent Eligibility Audit: Five Tips For Employees

A company could lose hundreds of thousands or even millions of dollars on providing health care for ineligible dependents — people who do not meet its definition of a dependent for benefits purposes. Losses of this magnitude can affect a company's bottom line, and its ability to fund other important employee benefits.

In addition, under the Federal law known as ERISA (Employee Retirement Income Security Act), a company has a legal responsibility to pay benefits only to a health plan's eligible participants.

That's why more and more companies are conducting a dependent eligibility audit of their employees, to determine if they are covering ineligible dependents. These audits typically find 5 to 7 percent of dependents do not meet eligibility criteria. Currently, common scenarios for ineligible dependents include ex-spouses, or nieces or nephews living with an employee.

What should you do if you are asked to participate in a dependent eligibility audit? Here are five tips to help make the process go smoothly and successfully. It is important to learn as much as you can about a potential audit, and promptly gather all the information that is requested when your company conducts one.

Gather legal documentation.
In the past, employers typically asked that an employee simply sign an affidavit stating that the dependent was eligible to be on the plan. Now, you will most likely have to provide legal documentation such as birth certificates, marriage certificates, bank statements, divorce agreements, or more.

Review your employer's eligibility requirements.
Read the eligibility definitions in your summary plan description or ask HR to spell out the eligibility requirements to determine if your dependents meet the criteria. Employees often have a broader view of what defines a dependent than a company does.

Determine if a dependent has another primary policy.
Your company may require that a dependent who has access to their own insurance use that policy as their primary plan. A common situation is where a spouse can get insurance through his or her own employer. Or, a retiree who is eligible for Medicare may be required to use the government plan as his or her primary coverage. If an employer discovers the existence of other primary coverage, it is likely dependent coverage will be stopped immediately and it is possible that an employee will be asked to return money paid for doctor or hospital bills.

Respond quickly and accurately.
You usually have 30 to 45 days to respond to a dependent eligibility audit, and some offer an amnesty period. If your dependent is found to be ineligible during this period, you will likely not be held responsible for any past payments.

Plan for coverage extension for children under 26.
Due to the Patient Protection and Affordable Care Act, children are eligible for their parents' plan until age 26, regardless of the child's financial dependency, student status, residential status, or marital status.