Eligibility audits: detection helps rein in costs; It's easy for companies to earmark benefits for people who are actually ineligible to receive them. Eligibility audits can be invaluable in preventing such leakage, but relatively few organizations are using them.

• Author: Watson, MaryAnne L.
• Position: Healthcare

You've seen it often: Elected officials stand in front of a battery of microphones talking about how they intend to pare excess costs from government entitlement programs by eliminating "waste, fraud and abuse." While they often make exaggerated claims about what can be accomplished in that regard (and seldom is there a lot of specificity), it is also frequently true that savings can be found--if you know where to look.

[ILLUSTRATION OMITTED]

Could that description apply to your organization as well? Could corporate "entitlement" dollars be going to people who are not entitled to receive them? Look no further than your health plan. According to a recent survey by The Kaiser Family Foundation/Health Research and Educational Trust, in 2004 employers paid, on average, about $4,000 in health insurance premiums for single employees. Family coverage cost, on average, almost $10,000 in premiums. So, the question becomes, is there a way to reduce health plan costs independent of cutting benefits?

Yes, there is, and it's called eligibility management. Two years ago, a survey by the National Business Group on Health indicated that only 17 percent of employers have taken a good look at their eligibility management processes in a formal audit process. That percentage is rising, as companies are finding that reviewing eligibility determination and monitoring procedures can yield significant savings. For example, audits at The Procter & Gamble Co., General Motors Corp. and Ford Motor Corp. yielded reductions in the number of ineligible employee dependents by as much as 15 percent.

Here's a quick way to gauge whether you may have a problem--and an opportunity to eliminate excess expenditures. See if you can answer these questions:

* Who performs enrollment and eligibility update functions for your health plan?

* Does your summary plan description clearly define dependents and support your validation process?

* How quickly are terminations of employment reported to the various vendors?

* When is dependent and other insurance data collected? At initial enrollment only? Or, annually at re-enrollment? Or, some other time during the year?

* What proof of dependency (documentation) is required? (See sidebar, Proving Dependent Status.)

If you're unsure--or that those who have direct oversight of your health plans can't really shed any light--it's time to roll up your sleeves and perhaps get some help with the process. This is not to suggest that you are being taken advantage of by dishonest employees. While there may be some of that at work, the potential abuse of eligibility is high, given the complexity of plan requirements, as well as understandable...