Not a Member? Get access to HR news and resources that you can trust.
HR professionals can play a key role in creating business efficiency—starting with their own department.
Is your employee handbook ready for the New Year? With SHRM’s Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Get the HR education you need without travel expenses or time out of the office.
We don't just visit a city, we take it over. Join us in NOLA -- June 18 - 21, 2017.
Unprecedented economic challenges and increasing health care costs are prompting a dramatic rise in the number of health plan dependent eligibility audits, which are designed to verify the eligibility of dependents covered by an employer’s health plan. Since 2006, the number of audits conducted by Mercer, an HR consultancy, has more than doubled every year, with more growth expected in 2009, according to the firm.
The immediate and long-term savings gained from these audits can be substantial. Mercer estimates conservatively that 3 percent to 8 percent of covered family members (spouses and dependents) cannot produce valid verification of eligibility during an audit. This can translate into significant costs for employers, with $1,900 being the average annual cost of providing health coverage for one dependent, according to an estimate based on data from Mercer’s 2008
National Survey of Employer-Sponsored Health Plans. The chart below shows that the cost savings from conducting an audit can be significant, depending on an employer’s circumstances.
Dependents in Plan
Estimated Ineligible Percentage
Average Cost per Dependent/Year*
*Employers should consider their cost per dependent when calculating potential savings.Source: Mercer
“Particularly, with so many companies looking to cut costs any way they can, more and more are coming around to the fact that monitoring dependent coverage equates to sound financial management,” says Dan Priga, national business leader of Mercer's performance audit group.
Plan sponsors have a fiduciary duty to administer their health plan in the interest of eligible participants and their eligible dependents, known as the exclusive benefit rule, Priga explains. “So, in addition to spending money on nonqualified participants, they risk running afoul of federal requirements as well as the Internal Revenue Code. Such negative outcomes can be avoided by the careful management of dependent eligibility,” he adds.
Because there can be employee relations challenges with an eligibility audit, it's important to educate employees about rules surrounding eligible dependents and cost of care—including the cost that ineligible dependents can add to the overall plan, which is borne by those employees who play by the rules.
Stephen Miller is an online editor/manager for SHRM.
Health Plan Eligibility Audits: Verifying Who Is Covered,
SHRM Online Benefits Discipline, March 2009
Dependent Audits: A Way to Lower Health Plan Costs,
HR Magazine, February 2009
Health Care: Tips for Auditing Dependent Eligibility,
SHRM Online Benefits Discipline, February 2008
• Sign up for SHRM’s free
Compensation & Benefits e-newsletter
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
HR Education in a City Near You
SHRM’s HR Vendor Directory contains over 3,200 companies