Employers Are Pushing Ineligible Dependents Out of Plans

Are your marriage certificate and your kids' birth certificates handy? You may need them to continue health coverage for your family or if you start a new job.

Call it a sign of the times: A growing number of area employers, including the Commonwealth of Virginia, Johns Hopkins University and the Navy Federal Credit Union, are cracking down on workers who enroll ex-spouses, over-age children, grandchildren and others not entitled to coverage under their health plan. It's a cost-control strategy that Ford, AT&T and other Fortune 500 companies have used for years.

"Employers are seeing costs go up 10.5 percent yearly. Changing plan design and contribution strategies can only go so far," said Michelle Futhey, executive vice president with Aon Consulting's health and benefits practice.

"Contribution strategies," for anyone not familiar with the term, means shifting health plan costs to employees.

Dependent eligibility audits, where employers demand that workers and retirees show documents proving that their claimed dependents qualify for health benefits, are quickly becoming the norm, said Jeri Stepman, a senior adviser at Watson Wyatt, an Arlington-based benefits consultancy. More than 60 percent of large U.S. companies conducted such audits this year, compared with fewer than half in 2007, according to the firm's survey of 489 employers. Even more companies are expected to conduct such audits next year.

Many state and local agencies also are auditing dependents, although the federal government is not. Federal health plan participants are only required to show proof when they add a dependent to their policy, according to an Office of Personnel Management spokesman.

Employee nutritional counseling, diabetes management, gym discounts and other trendy wellness initiatives might show results over many years. But for guaranteed savings, nothing beats weeding out people an employer never intended to cover, said David Chojnacki, vice president of Budco Health Service Solutions, which has conducted dependent audits for more than two dozen Fortune 500 companies.

Chojnacki said his firm, based in Highland Park, Mich., conducted an audit of 650,000 dependents at AT&T in 2006, turning up 50,000 ineligibles. Removing them from the insurance rolls, he said, saved the company $100 million a year. AT&T spokesman Walt Sharp would not comment on that claim but confirmed that the company had "taken steps to audit eligibility and to install controls to validate dependent eligibility on an ongoing basis."

A recent audit of 14,000 dependents and spouses on Johns Hopkins' health plan turned up 454 ineligibles, said Heidi Conway, the university's senior director of benefits. Culling them saved the university an estimated $2 million a year.

"It's part of our fiduciary responsibility to control health plan costs," Conway said.

The Washington Post began auditing dependents in its health plan several years ago.

Unions generally go along with the audits and in some instances work with management to get reluctant employees and retirees to go along. "We used to hear complaints," said Martha Flagge of the Communications Workers of America, which represents workers in companies that do audits. "But once we explain that they help keep health care affordable, employees understand."