Cost savings are critical for any business. That said, though, sometimes instead of having to take drastic cost-cutting measures to save money, which can negatively affect your employees, it just takes some internal review to ensure you’re spending money in the right places. One area where companies often find that they overspend is on employees’ dependents. This may not be because employees are intentionally adding dependents for coverage when they don’t qualify, but rather because they don’t understand who qualifies and who doesn’t or simply forget to remove dependents when circumstances change. With that said, a dependent verification audit can be an effective way to reduce cost. 

According to the Kaiser Family Foundation, the average cost per dependent is about $3,500 a year and companies that perform a dependent verification audit find an average of 4-6 percent of dependents are not qualified for coverage – that can mean a lot of savings. Using that information let’s look at an example: say you have 100 dependents being covered. You could potentially save yourself between $14,000 and $21,000 a year.  Now you may be thinking that you’ll have to pay a third party to run the audit and there goes your savings – but that’s not the case. Do some research and see what the fees are for a third party to conduct the audit for you – you’ll likely find the cost will still be worth it given how much you will be saving overall. If you want to do the work on your own you can, but make sure you keep in compliance with ERISA and other such laws. 

Either way you decide to move forward, here are some tips to follow to ensure success. 

Businessman looking out window considering something - dependent eligibility audit concept

1.    Make a plan 

Take the time to really think about the process, understand the requirements, outline all of the tasks that need to happen, who is responsible for each task, and how each task will be executed. Don’t forget to include the communication touch points with each step of your plan and get support from your Executives – they should have an active role in communication strategy that you build into the overall plan, especially with the initial roll out communications.

2.    Understand how your employee populations prefer to be communicated with 

It’s very important to understand your audience, so keep in mind that you may want to use different communication methods for different employee populations – like texts or emails for millennial populations but a traditional mailing or voicemail for baby boomers. Using methods of communications that work for best each of your employee populations will help to ensure that everyone is informed. 

3.    Communicate

The earlier you begin to communicate with your employees and get their buy-in the more successful you will be. Remember, you don’t want to make your employees feel like they are being cracked down on, so your messages should be positive and concise, emphasizing the benefits of a company-wide eligibility audit (i.e. lowering the cost of insurance increases or allowing for additional benefits to be offered) and offering assistance in understanding the requirements. Communications should be continuous and more urgent as deadlines approach, clearly outlining the required actions and due dates.

4.    Provide assistance 

Keep in mind that employees will have questions around the requirements and might need some hand-holding, so build in different ways to provide employees with answers to their questions whether it is call-in or drop-in hours, webinars, a dedicated web page, or other similar options. 

5.    Provide an amnesty period 

Give employees a chance to remove any dependents that don’t meet the qualifications without penalty. This will not only lessen the burden on you and your staff to review every single dependent, but it will also show employees that this process is not meant to punish them.

6.    Provide an opportunity for appeals 

Allow employees one last chance to respond and have their dependents reinstated. Remember, there are circumstances which may have come into play for employees which prevented them from responding to the deadlines of the audit so providing an appeals period allows them the opportunity to do so.

Overall, a dependent verification audit is a good way to ensure that your company is fulfilling its responsibility to cover employee’s dependents without overpaying for those who no longer qualify for coverage resulting in accidental waste. When conducting the audit, whether on your own or through a third party, keep your employee’s perspective in mind. Keep messaging positive, providing employees with transparency and sharing the benefits the audit can bring them. Make assistance available so that employees can reach out with any questions they have around the process, requirements, or eligibility. Give employees the chance to make changes without penalty during an amnesty period and have dependents reinstated during an appeals period. Beyond the steps you take to keep employees comfortable with the process, also make sure to consider any regional or industry compliance standards around benefits you need to take into account to make sure you’re staying away from unneeded risk. These practices will help the audit be a win-win for you and your employees. 

Published: Thursday, May 2, 2019