Employers See Substantial Savings from Dependent Eligibility Audits

April 9, 2009 (PLANSPONSOR.com) - Mercer is seeing a dramatic rise in the number of inquiries and new business involving health plan dependent eligibility audits, with the number of Mercer-conducted audits more than doubling every year since 2006.

According to a Mercer news release, the immediate and long-term savings gained from these audits can be substantial. Mercer conservatively estimates that 3% to 8% percent of covered family members (spouses and dependents) cannot produce valid verification of eligibility during an audit, and $1,900 is the average annual cost of providing health coverage for one dependent, based on data from Mercer’s National Survey of Employer-Sponsored Health Plans.

Figure 1

Dependents Estimated Avg. Cost/ Annual

Ineligible % Dependent/year Savings

10,000 3% $1,900 $570,000

10,000 4% $1,900 $760,000

10,000 5% $1,900 $950,000

10,000 6% $1,900 $1,140,000

10,000 7% $1,900 $1,330,000

10,000 8% $1,900 $1,520,000

*Employers should consider their own cost per dependent when calculating their potential savings.

“Health plan dependent eligibility audits allow plan sponsors to identify ineligible dependents and then take action to ensure that only those dependents eligible for benefits are enrolled in a given plan. Particularly, with so many companies looking to cut costs any way they can, more and more are coming around to the fact that monitoring dependent coverage equates to sound financial management,” said Dan Priga, National Business Leader of Mercer’s Performance Audit Group, in the news release.