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Dear Workforce Why Are Companies Taking an Interest in Health Audits

Dear We May Be Overpaying:

Eligibility audits are designed to spot inadequate procedures—and lack of enforcement—that contribute to overpayment of health claims. Although employees often resist the idea, most audits provide an amnesty period during which ineligible dependents can be removed with no penalties.


Correcting eligibility requires plan sponsors to develop an employee documentation process. This concept is not new, but it does result in decreasing claims exposure.

Specialty audit firms can be helpful in performing eligibility reviews since they have the necessary staff to handle the administrative requirements of the process. These requirements include developing and sending initial notification letters to all employees with dependent coverage; collecting documentation; answering calls from employees wanting clarification or information; and providing updated eligibility information to other plan vendors.

Eligibility audits should be considered, for example, if a health plan:


  • Does not require certified dependent documentation.
  • Recently changed administrative service providers.
  • Has recently experienced a merger or acquisition.
  • Has a high turnover rate or collects enrollment information from multiple sources.
  • Does not receive monthly adds/drops from the plan administrator.

Eligibility audits can also help plan sponsors answer such questions as:

  • Are system updates timely?
  • Are overpayments identified and recoveries pursued following retroactive changes?
  • Is there exposure to high-dollar claims for dependents not qualifying for stop-loss coverage?

It’s easy to see why employers are looking at eligibility audits as a way to combat rising benefit costs, but they cannot be the only arrow in the quiver. There is no substitute for a well-thought-out health benefits plan aligned with an employer’s objectives that is diligently administered.

SOURCE: MaryAnne Watson and Don Cardone, the Segal Co., Phoenix, November 28, 2007

LEARN MORE: You can learn how companies are using dependent audits.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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