A Dependent Eligibility Audit is a good first step, but it’s only one step.
In 2004, WestLake Financial Group, Inc. conducted its first DEV (dependent eligibility verification) audit. Once again, ahead of the curve, we faced opposition from both the employer and the employee. Questions were asked; why should we conduct a dependent eligibility audit? What results can we expect? How will our associates react?
The consistent results amazed and alarmed us. There were a large percentage of ineligible dependents in every group. We exposed this phenomenon and removed the truly ineligibles. We coined these ineligible dependents “low handing fruit” because they were, well – ineligible and easy to find. Once removed, the savings was virtually immediate. Recalling that illegal dependents are not eligible for COBRA benefits post audit, there is no trailing claims liability.
Clients were pleased.
Yet we maintain that the removal of ineligible dependents is only the first step in an overall audit savings strategy. We take the process a few critical steps further.
Once the ineligible dependents are removed (and spouses, if a spousal alternative coverage incentive is offered) there is, by definition, a smaller overall group census. In some cases we see reductions as great as 5 to 10% of the gross population. With this new information in hand we rationalized that there were specific losses attributed to these ineligible dependents and newly waived spouses. In the case of the ineligible dependents their losses will never reoccur. Their medical conditions should no longer be a factor in predicting the future health of the group. Spouses who are no longer covered (while they could be a future claim if they rejoin the plan) are nonrecurring losses also. We are able to purge ongoing diagnosis from the future loss, renewal and medical trend scenarios.
We are then able, through data analysis, to know exactly the losses attributable to the newly non covered. We are also able to market a smaller and healthier population to the competitive carriers. Of course, the incumbent usually capitulates in this exercise after the competition has spoken.
We argue that the medical insurance renewal is future facing and should be actuarially reconsidered and re-underwritten. Many medical carriers (and reinsurance carriers) use midpoint underwriting assuming present risks to be future liabilities. To validate and cement our position we take this new loss information and smaller census to market.
The results are surprising, even in larger self-funded groups.
This multi-pronged approach, which we call Bene-Fit, commencing with the DEV audit itself, provides a far greater ROI than simply conducting a one-time audit. Further, it changes the outlook of future renewal negotiations.
Please call WestLake Financial Group, Inc. for more information on this important program.