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VGFOA Spring

Conference

Dependent Eligibility

Verification Audit

Presented by:

Bolton Partners, Inc.

May 4, 2016

• A Dependent Eligibility Verification Audit ensures all

individuals covered as dependents under the

Employer’s group health plan meet the eligibility

requirements under the plan

• Participants must verify that their dependents covered

under the Employer’s plan are eligible and they must

submit supporting documentation

What is a Dependent Eligibility

Verification Audit?

Bolton Partners, Inc. 2

• A rising number of plans nationwide have conducted dependent eligibility audits as a way to contain healthcare costs

• Audits typically find between 2-7% of dependents are ineligible

• Affordable Care Act Fees for PCORI and Reinsurance are based on member counts – you don’t want to pay for ineligible members

• Employer has a fiduciary responsibility to insure plan is operated for exclusive benefit of plan participants

• Legislative Auditors are pushing for this

Why Conduct a Dependent Audit?


Keys to a Successful Audit

Customization Communications

High Response Rate

Post Audit Strategy to

Preserve Savings


• Employer determines important audit details

– Eligibility rules

– Documentation required

– Amnesty

– Timing

– Consequences for ineligible dependents not removed during

amnesty

Customization


• Develop Effective Communications Strategy

– Pre-audit announcement

– Select media specific to employee population (print, web-based,

e-mail, etc)

– Call center response times

– Each communication with employee should be approved by

employer to ensure it reflects organization’s culture and benefits

strategy

Communication


• High response rate critical to successful audit

• Employee contact information key to obtaining good results

• Goal - 100% response rate

• Follow up via phone, e-mail and employer out reach (if preferred)

High Response Rate


• Continue to verify spouses and dependents for

new hires and newly eligible employees

• Provide health plan administrator with newly

collected information to ensure future savings

• Re-verify spouses every 2-3 years

• Children with documentation on file should be

exempt from future audits

Post Audit Strategy to Preserve

Savings


• All active employees and retirees covering dependents – Employees/retirees with individual coverage will not be audited

– Retirees usually limited to those age 65 and under

• All surviving spouses who receive health insurance

coverage

Who will be audited?


Three Phases to Audit

10

Phase 1 – Planning Period – Set audit parameters, collect data and develop communication materials

Phase 2 – Amnesty Period - Participants can remove ineligible dependents without consequences

Phase 3 – Verification Phase – All participants who have covered dependents will need to verify their dependents and submit supporting documentation


Phase 1 - Planning Phase

Determine participant groups to audit (e.g., Active

employees; pre-Medicare retirees)

Review eligibility definitions

Review data request

Establish audit timeline

Determine consequences if an ineligible dependent is not

dropped during amnesty

11 Bolton Partners, Inc.

Planning Phase (Cont.)

Draft communication materials (letters, FAQs, and eligibility

chart)

Determine what documentation will be required (tax returns,

birth certificates, bank statements, marriage license, adoption

certificates, etc.)

Develop personalized forms based on data file from the

employer group for all participants with dependents covered

under the plan


Phase 2 - Amnesty Phase (Typically 30 Days)

• 1

st Mailing – Letter to all participants with dependent coverage

• Announces audit and advises participants they can remove

ineligible dependents during amnesty phase without penalty

• This mailing also includes FAQs document and a chart outlining the

plan’s eligibility provisions


Amnesty Phase (Cont.)

• 1st

mailing can also include a personalized form

listing each participant’s covered dependents if elected

by the employer group

• Once Amnesty Period is over, Audit Firm (AF) provides

the employer a list of dependents to be removed as a

result of amnesty.


Phase 3 - Verification Phase (30 To 60 Days)

2nd

Mailing – to all remaining participants with

dependent coverage. Packet includes:

• Letter on employer letterhead describing audit and deadlines

• A personalized verification form listing covered dependents

• A FAQ’s sheet

• An eligibility/required documentation chart; and

• A return envelope postage paid

Participants can upload, mail or fax documentation to AF


Verification Phase – (30 To 60 Days- Cont.)

• AF reviews submitted documentation, enters data into its

Audit Tracking System and follows up with participants for missing information

• AF contacts all non-respondents two weeks prior to audit deadline

• Employer determines if follow up should be via phone or

e-mail

• Once verification phase is complete, AF provides the employer with a final report highlighting savings, a list of dependents to be removed and a list of non-respondents


SAMPLE AUDIT TIMELINE

17

Sample Audit Timeline

Week 1

• Implementation call/AF requests participant data

Week 2

• Data to AF/AF drafts communication materials

Week 3-4

• 1st mailing to participants

Week 4-8

• Amnesty period/remove dependents

Week 9-12

• Audit remaining dependents/2nd mailing

Week 13-14

• Follow-up

Week 15-16

• Final report and procedures for ongoing verification


How Do Employees/Retirees

Submit Their Documentation?

Documents must be submitted directly to AF with the completed verification form.

Documents should not be submitted to the employer.

Employees/retirees may submit their documents as follows: • By U.S. postal service using the provided envelope

with pre-paid postage

• By secure fax

• By uploading scanned documents to AF’s secure website


Privacy and Security

Fully HIPAA compliant

Administrative Safeguards • Authorized users with passwords for work computers

• Limited personnel to access documentation

Physical Safeguards • Authorized personnel with passes given access to office/ building

• Lock file cabinets holding PHI

• Shred documentation after audit

Technical Safeguards • Encrypted files of electronic copies of audit documentation

• Authorized access to DEA folders

• Designated fax only secure number

• Encrypted website for file uploads


AUDIT CASE STUDY #1

Large Virginia School System

• 218 individuals listed as dependents were found ineligible for coverage under the School System’s health plan

• Employees with dependents on plan – 4,722

• Dependents – 10,355

• First Year ROI - 23:1

• First Year Net Savings - $670,880


AUDIT CASE STUDY #2

21

Mid Sized Maryland School System

• 31 individuals listed as dependents were found ineligible for coverage under the School System’s health plan.

• Employees with dependents on plan – 507

• Dependents – 1,111

• First Year ROI - 14:1

• First Year Net Savings - $152,000


QUESTIONS?
