- The Washington Times - Saturday, January 19, 2008

U.S. companies struggling to keep up with galloping health care costs are poring over their lists of insured workers and checking to make sure the dependents that employees list on their health care enrollment forms are eligible to receive benefits.

The vast majority of employers do not require proof of eligibility for their enrolled dependents. Often, all an employee needs to do is put names on a form.

Today, more businesses are conducting “employer health insurance audits,” which ask employees to provide personal documents, such as a marriage certificate, to ensure that all the dependents in their health care plan are entitled to coverage.

“We saw employers start to do audits about two years ago, and we expect more and more to start,” said Dan Priga, director of the national audit group at Mercer, an employer health insurance company in New York. “It is a good business practice so that employers can continue to provide health benefits to those [who] are eligible for them.”

Mercer worked with 12 companies on health insurance audits in 2007 and expects that number to double this year, Mr. Priga said.

Companies try to avoid damaging company morale by granting amnesty periods for employees before conducting an audit, consultants said.

“In most cases we don’t see a penalty,” Mr. Priga said, “but we’ve heard about companies terminating workers from health plans or requiring repayment when they find ineligible dependents through the audit process.”

Audits usually uncover ex-spouses or children listed as dependents who are ineligible under plan rules. Because enrollment is done annually, mid-year divorces or children dropping out of school are often not reported to the employer.

“During our audits, most often we see people saying, ‘We didn’t know,’ rather than intended fraud,” Mr. Priga said.

Business health insurance costs have increased by about 7 percent a year over the past several years, or twice the rate of inflation, according to the Kaiser Family Foundation, a health care research organization in Menlo Park, Calif.

“All employers who are trying to manage health care costs will do audits soon,” said Helen Darling, president of the National Business Group on Health, a Fortune 500 health care consulting firm in Washington. “It is classic low-hanging fruit for savings, and good management practice.”

Employers and consultants contend that the purpose of an audit is not to lower the cost of health care but to ensure that a company’s work force is able to maintain coverage. Still, between 3 percent and 12 percent of enrolled dependents do not qualify for health benefits, consultants estimate, and the audits can save companies big money.

This year, General Motors Co. decided to conduct a companywide audit for the first time. For every dependent found ineligible through the audit, GM saves $1,000 in health care costs, which totaled $5 billion last year for the company’s 1 million employees, according to GM spokeswoman Michelle Bunker.

“We are not out to drop people from coverage, but hopefully these audits can save some money on our health care bill,” she said.

Ford Motor Co. has removed 80,000 ineligible dependents from its health insurance rolls since 2000, said Marcey Evans, a company spokeswoman.

“Health care costs have been skyrocketing. We are looking for ways to offset those costs, and the savings through the audits has been significant,” she said.

John Fazio, a principal with workplace consulting firm Towers Perrin in Stamford, Conn., said employers must find new ways to trim health care costs other than shifting the expense to workers through higher co-payments and deductibles.

“Shifting costs only can go so far before it’s unreasonable,” he said. “A lot of employers have exhausted that option. Taking someone off a health plan through an audit may not save money, but when a company is covering ineligible grandchildren with diabetes, that can cost plans a lot of money.”

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