How ineligible dependents can cost businesses
Every company has its own system for defining dependents that qualify for healthcare coverage. Most often, people who are eligible are the spouses and children of employees also receiving insurance. Many companies also may extend their insurance to unmarried partners under the spouse umbrella.
Health insurance for dependents is a perk companies don't have to offer since it is an additional expense. The majority of employers, however, see this benefit as a strong recruitment and retention tool to keep themselves competitive within the job market. It may be easy for employers to fall into the trap of accidentally paying too much for dependents who are no longer eligible to receive coverage. Dependent eligibility audits allow employers to identify these errors and improve their ability to offer quality healthcare at affordable rates for everyone. Let's take a closer look at situations involving ineligible dependents that can cost companies additional money:
Children over the age of 26
For most organizations, the cut-off age for dependent kids is 26. That means once children reach this age, they must locate another source for healthcare coverage. According to CNN Money, the annual cost for insurance for people between 18 and 25 is $1,900. While companies are willing to take on this responsibility while children still qualify, paying for ineligible dependents could cause other candidates to miss out on the benefit. In addition, paying for too many unqualified participants could result in companies having to reduce their coverage plans and business contributions. Employees would then have to pay more to insure their children and spouses out of pocket instead of getting a deal through their employer.
"The definition of ineligible dependent is unique to every employer."
Spouses with alternative coverage
Employees can often claim their husbands and wives as spouses to make them eligible to receive healthcare coverage. When these people have another source of insurance, however, their ability to qualify may end, according to The New York Times.
Employees must be aware that their marriage status will affect who is covered under their employer's insurance. Many companies will not continue to extend health benefits to former spouses. Since these people are no longer a dependent of the employee, they will usually have to find another source of coverage. Some businesses will offer coverage to people they classify as "unremarried spouses" who cannot obtain insurance any other way. Unremarried spouses often have to provide documentation to prove their status, including their former marriage license and divorce decree, according to TriCare.
Although it may be rare, retired employees and their dependents may be asked to utilize Medicare as their primary insurance once they're no longer working for their employer, the Times also reported. Companies take this action to reduce their costs for current workers who are unable to use their Medicare benefits. This requirement completely depends on the organization and its healthcare insurance plan.
No two coverage plans are alike. Every employer has its own requirements and definitions of what an eligible dependent entails. It's crucial for workers to read their health insurance agreement thoroughly before agreeing to the perk or registering dependents. Companies should complete regular eligibility audits to determine which people are not qualified to receive insurance under their plan. This practice can help businesses reduce their healthcare costs while still ensuring the best coverage possible for employees.