6 Reasons to Complete a Dependent Eligibility Verification Audit

Many companies, regardless of size, work hard to provide top-tier healthcare benefits to their participants. Unfortunately, many come to the realization that a considerable chunk of its healthcare expenses stem from ineligible dependents. Despite the best intentions, the absence of a Dependent Eligibility Verification program can leave the organization vulnerable to financial strain, legal headaches, […]

The post <strong>6 Reasons to Complete a Dependent Eligibility Verification Audit</strong> appeared first on HR Daily Advisor.

Many companies, regardless of size, work hard to provide top-tier healthcare benefits to their participants. Unfortunately, many come to the realization that a considerable chunk of its healthcare expenses stem from ineligible dependents.

Despite the best intentions, the absence of a Dependent Eligibility Verification program can leave the organization vulnerable to financial strain, legal headaches, and administrative chaos.

What is Dependent Eligibility Verification (DEV)?

DEV is the process of verifying the relationship between participants and their dependents to confirm their eligibility for coverage according to your benefit plan’s rules. It involves requesting documentation or proof from participants to confirm that their dependents meet the plan’s requirements for coverage.

Reasons to Complete a DEV Audit:

 Financial Benefits

By conducting a DEV audit, employers can uncover significant discrepancies in coverage, leading to substantial financial savings. Based on nearly 20 years of experience, our team has found that the average annual incurred medical cost per dependent exceeds $6,860, and a DEV audit yields a 3% – 10% removal rate of ineligible dependents. For example, if you evaluate a plan with 1,000 dependents and identify 5% as ineligible, estimated savings can reach $343,000 or more. With healthcare costs steadily rising, every dollar saved through the removal of ineligible dependents directly contributes to overall cost containment strategies.

Fiduciary Obligations and ERISA Compliance

Employers have a legal and fiduciary responsibility to ensure that their benefits plans operate according to the terms in the plan documents, including enrollment and eligibility provisions, and adhere to the guidelines set forth by the Employee Retirement Income Security Act (ERISA). Conducting dependent eligibility verification audits helps minimize legal risks by limiting benefits only to those individuals who are actually eligible to receive them.

Improved Communication and Accountability

By engaging in DEV audits, employers empower participants to actively understand and verify who is eligible under a group health plan. This process not only enhances the integrity of the benefits program but increases participant accountability for their benefit elections.

Fewer Denied Insurance Claims

Ineligible dependents can inadvertently lead to denied insurance claims, creating unnecessary administrative burdens and financial strain for both employers and participants. Regular DEV maintenance programs minimize these concerns, allow employees and their dependents to identify when they need to secure other coverage, and streamline claims processing while improving overall efficiency.

Fewer Tax Issues

Incorrectly covering ineligible dependents can result in tax compliance issues and potential penalties from federal and state tax authorities. A verification program helps identify and rectify any discrepancies in tax reporting related to dependent coverage, thus minimizing exposure to tax-related liabilities and enabling compliance with regulatory requirements.

Sarbanes-Oxley Compliance

The Sarbanes-Oxley Act (SOX) imposes stringent financial reporting and internal control requirements on publicly traded companies. By verifying dependent eligibility, employers can enhance their financial controls and reduce the risk of fraud.

What Does a DEV Audit Look Like?

While DEV audits can be done in-house for smaller companies, most mid to large-size companies will engage with an external partner.

External partners have specialized service teams that handle the entire process end-to-end. They manage communications, sending verification requirements to participants, provide an easy-to-use web portal for uploading required information, review all documentation received from dependents, and typically offer support through live contact centers trained specifically for dependent verification process.  This service center is an extension of your HR department, freeing up their time for other business initiatives. External partners can also insulate the employer from unnecessary exposure to private employee data submitted to prove eligibility.

Once the audit is complete, employers typically receive a summary report that includes audit findings, dependent removal rate, and client-specific ROI data. Additionally, the reports may include best practices and guidelines for ongoing maintenance of dependents post-audit, such as programs to verify new hires and life events and re-verification projects that occur every 3-4 years.  The employer retains the discretion to decide which dependents to remove or retain based on plan rules.

While no DEV audit is the same, they all have the same impact: they are not just a cost-saving measure but a fundamental safeguard for the company’s bottom line and the well-being of its workforce.

Lexi Trampe is a Senior Operations Manager – Dependent Eligibility Verification Leader with Aptia, a new force in benefits administration services. Lexi has more than 14 years of experience managing the dependent verification audit process for companies of all sizes.

The post <strong>6 Reasons to Complete a Dependent Eligibility Verification Audit</strong> appeared first on HR Daily Advisor.