Employers getting more strict on health-care eligibility

By Steve Twedt
Pittsburgh Post-Gazette
March 25, 2009

Facing a difficult economy and running short of ways to reduce health-care costs, employers are becoming more aggressive about checking the eligibility of their workers’ dependents.

A Watson Wyatt survey of 489 employers this month for the National Business Group on Health found that audit reviews are the fastest growing change that companies are making to their health-care programs, well ahead of health risk appraisals or improving case management.

During an eligibility audit, employees are asked to document that family members on their health plans are eligible for coverage. They may be required to produce marriage certificates, proof of college enrollment or tax forms. Ex-spouses are not eligible. Nor are sickly uncles who live with the family. Stepchildren may not be eligible either, depending on the plan.

The appeal of eligibility audits is that they almost guarantee hard-dollar savings — with estimates of ineligible dependents typically in the 5 to 12 percent range — and they often can pay for themselves within a year.

“We have completed dependent eligibility audits for over 50 employers and we have yet to have a case where the employer did not receive a return on investment of over 300 percent within one year. Many times it is well over 1,000 percent,” said Michael Browning of Chapman Kelly, Inc., consultants in Jeffersonville, Ind.

Pittsburgh-based Daniel Priga, a principal with Mercer consulting, said the firm “conservatively” estimates a $1,900 savings per year for every ineligible dependent taken off the books. Such a return “is hard to find in today’s environment.”

http://www.post-gazette.com/pg/09084/957986-28.stm

Doing eligibility audits of dependents covered by employer-sponsored plans is yet one more example wherein our current dysfunctional system of financing health care actually promotes administrative waste. A rational system uses administrative services efficiently to pay for the health care that patients need. In the United States, much of the administrative cost of health care financing is due to efforts to avoid paying for health care.

Only in the United States do we consider that taking health insurance away from individuals to be a “return on investment.”