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October 21, 2008
SAN FRANCISCO (MarketWatch) – As health-care costs continue to squeeze employers, some are taking a page from the Internal Revenue Service playbook.


Benefits consultants say a growing number of employers are considering a relatively new tactic for wringing potential savings out of the medical plans they offer: Auditing people claimed as dependents to make sure they meet the company’s eligibility requirements.


Employers are “concerned that there’s everything from misunderstanding of the rules to ambivalence to outright fraud,” said Mark Rucci, senior vice president for Gallagher Benefit Services Inc. in Princeton, N.J.


Fifty-five percent of 453 large employers surveyed by benefits consulting firm Watson Wyatt said they plan to conduct dependent audits this year, and 74% said they plan to do so next year. Those figures are up from 42% of big employers who checked dependent eligibility in 2007.


“It’s pretty much been an honor system for employees up until now, and the game’s changing,” said Greg Mansur, national leader of administrative performance reviews for Watson Wyatt in Los Angeles.


The rising interest in dependent audits comes at a time when the U.S. has a record high number of people without health insurance — 47 million, by the most recent count. Millions more have inadequate coverage compared with their income. In 2007, 60% of employers offered health benefits to at least some of their workers, down from 69% of firms that offered it in 2000, according to the Kaiser Family Foundation. Those that still offer rich benefits often attract more dependents, both eligible and ineligible, experts say.


Companies that audit discover 10% of the dependents on their health plan on average turn out to be ineligible, Mansur said. For Rucci’s clients, the average runs closer to 6% to 8%. Such findings can bring significant savings once the ineligible are taken off the rolls, they say.


Some workers find audits invasive, but many companies are motivated by the right reasons and need to clearly communicate them, said Tim Oshima, a benefits consultant for Sitzmann Morris & Lavis in Oakland, Calif.

“They want to be able to preserve their expenditures for those who are eligible,” he said. “They don’t want to cut back benefits for everyone because of a few free riders on the program.”

By Krsitan Gerencher, MarketWatch
June 25, 2008
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