Whether you call it dependent verification or dependent auditing, one thing is certain: This process has become a good way to save your client's money -- at no cost to your company.
When combining voluntary benefits enrollment with dependent auditing, you are not only able to increase your client's benefit package at no cost, you can also save them money. Dependent audits often find that between 5 percent and 12 percent of employees have an ineligible dependent on the company health plan.
The bottom line is that employers can cut their existing health plan costs by reducing benefits for eligible employees and their families by removing ineligible dependents who are enrolled in most health plans.
Who is the ineligible dependent? Anyone who does not meet the definition of an eligible dependent as defined in your summary plan document (SPD), such as:
- Unmarried employee, partner, relative, friend, acquaintance, etc. who are not their legitimate dependent.
- Unmarried employee's domestic partner (if allowed by SPD), but without the proper documentation.
- Employees' covered child or children who are not their legitimate dependents. Examples: step child(ren), foster child(ren), or married children.
- Divorced employee's ex-spouse and or children, where the ex-spouse has legal custody.
- Students older than a specified age who are not full-time students or not enrolled in an accredited educational institution.
Not only can you save your client's money by conducting a dependent audit, you also making sure that they are in compliance with ERISA and Sarbane's Oxley Compliance Guidelines. ERISA mandates that plan sponsors "manage plans for the exclusive benefit of participants and beneficiaries" in Section 401(a)(2).
Some voluntary carriers have built dependent auditing into their enrollment system, therefore allowing it to be combined with a voluntary benefit enrollment. Many brokers found conducting these types of audits themselves to be difficult and time-consuming. While a dependent audit is not a simple process, with the right software and an educated enrollment team, it's a streamlined process that can easily be implemented.
Generally, you want to begin with communicating to the employees prior to enrollment that clarification of eligibility status will be required for any currently-covered dependents. Employees are instructed to bring specific information to these meetings. During this process, it's imperative to communicate to the staff that this is for their protection, as well. If an employee has been covering a child who is no longer in college and is technically ineligible under the company's health plan, it is important to explain that if the health company requests this information after an accident or illness, the carrier may decline the claims. That employee who believed their child was covered now faces a very difficult financial dilemma.
Now the enrollment begins. During the enrollment session, if the employee attempts to enroll any dependents, the enroller sets in motion the employer's customized eligibility process. There are a couple ways to handle this:
- You may request that the employee provide supporting documentation on the spot.
- The enroller may update the information on the computer and then instruct the employee that they have until this date to turn in the proper information to the contact at the company.
It is up to the company and you, the broker, to decide how the dependent information is processed. There is no set way to conduct this type of enrollment. In the end, as long as the supporting documentation is turned and verified, the audit will be successful.
The more the company pays for an employee's major medical insurance, the more ineligible dependents you may find. Regardless of company size, this is a problem all companies face.
Now I know what you're thinking: If I reduce the premium for my account, I'm making less money. In today's turbulent economy, it's imperative that you make money, not lose money. But consider how you can use dependent auditing to solidify your current client base and increase it, as well.
Dependent auditing is an excellent way to add value to your existing client base. It will also open the door and give you a reason to call on an old opportunity. Think about that large client you tried to get one, two, or maybe even five years ago. This gives you the reason to call them back to show them how to save money at no cost to them, without changing the carrier or current plan design.
When combining this with a voluntary benefit enrollment, you're also adding dollars to your bottom line. Many voluntary carriers are offering higher broker compensation along with bonuses, while conducting the dependent audit and core enrollment for you -- at no cost!
I don't say this much but this is a win-win situation for everyone. You are ensuring that your client is in compliance, saving them money, while making sure that employees and their dependents have access to the major medical insurance they need in the event of an illness or accident. You are also increasing your commission revenue and quite possibly generating new clients.
Last but not least, do not forget that you are able to offer this solution to your client's at no cost. If you are not the one offering this to your clients, then who will?
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