4 types of ineligible dependents costing employers money
Under the Affordable Care Act, companies with 50 or more full-time equivalent employees must offer their workers minimum essential coverage. According to the Kaiser Family Foundation, 45.7 percent of private sector establishments in the U.S. offered health care to employees in 2015. This perk makes up about 7.6 percent of a business’s annual operating budget, coming in at around $8,700 per employee, according to a Society for Human Resource Management study.
This benefit has its advantages. It often improves employee recruitment and retention rates, while making current workers feel valued and supported by their organization. Since health care coverage does come with a cost, however, company leaders want to make sure they’re not overspending.
“DEVAs can help employers cut healthcare costs.”
A dependent eligibility verification audit can help
To ensure their business is not spending more on health care than they should be, executives may call for a dependent eligibility verification audit (DEVA). These audits require employees to provide documentation to their employer and the organization completing the verification to prove enrolled dependents are eligible for coverage.
These four examples of ineligible dependents cause employer health care costs to rise unnecessarily:
1. Divorced spouses
According to the National Center for Family and Marriage Research, the divorce rate in 2015 was 16.9 divorces per 1,000 married women age 15 or older. When employees get divorced, they should remove their ex-spouses from coverage. Yet, it’s common for workers to either be unaware of this fact or neglect to share this information with benefits leaders and insurance companies. As a result, employers will continue to pay for ineligible dependents until they are discovered.
2. Children over the age of 26
The ACA included a number of requirements concerning dependent coverage, the most important being that children of employees were insured until they reached the age of 26. However, businesses may still be covering the cost of these dependents after they age out of coverage.
3. Nieces and nephews living with an employee
Workers may attempt to include family members in their employer-provided insurance who are not eligible dependents. In some cases, employees may attempt to pass nieces and nephews living in their household off as their children. Unless nieces and nephews have been adopted by the employee or places in their care under a court order, they cannot take advantage of company-provided health insurance.
4. Grandchildren not covered by a court order
Similar to nieces and nephews living with an employee, grandchildren are not eligible to be claimed as dependents on employer-offered coverage unless there are legal documents designating the employee as the primary caregiver.
These four types of illegitimate dependents are common discoveries during DEVAs. The organizations completing the assessments will often ask for paperwork such as marriage licenses, birth certificates and proof of adoption to verify the eligibility of those currently on an employee’s plan.
While some cases of ineligible dependents result from misunderstanding the company health care rules, some employees knowingly enroll dependents who should not receive coverage. Regardless of the employee’s intent when enrolling an ineligible dependent, DEVAs will help identify and remove such dependents to help employers better regulate their budget and reduce overspending.
To learn more about DEVAs, read Secova’s e-book here.