Northwest on the Prowl for Unqualified Health Plan Dependents

March 28, 2005 ( - Northwest Airlines has kicked off an effort to force out unqualified employee dependents from its health plans, culling out 10% to 15% of such dependents.

Already, Northwest has removed 1,400 disqualified dependents since January, according to a Minneapolis Star Tribune report. Starting Monday, it began a “dependent audit” to weed out the rest. If the airline comes up close to the average, it could disqualify 3,700 dependents, according to a recent internal memo to employees, the newspaper said.. That’s similar to Ford Motor Company’s experience, where the automaker forced out about 60,000 from the 610,000 on its medical plans in the past five years.

The audit could save Northwest about $8 million a year, the memo said, out of the $400 million in Northwest’s medical and dental costs this year. Some $61 million of that is being paid by its workers and retirees.”Health care continues to be one of our most rapidly growing costs,” Tim Meginnes, Northwest’s vice president of employee benefits, said in the memo, according to the Star Tribune. “Covering ineligible dependents is expensive for you as a plan participant and for NWA.”

Budco, based in Highland Park, Michigan., is handling the Northwest audit. It’s an area of the consulting firm’s business that has doubled or tripled every year since 2003, according to Vice President Michael Watson.The process at Northwest is typical for Budco in which an initial random audit indicated problems. Then the company scheduled a two-month amnesty period, when employees could remove any relatives without penalty. By the end of the period on March 10, about 1,400 dependents had been cut, the company said.

Starting Monday, according to the paper, employees and retirees will have to provide documentation for every dependent. That could be marriage licenses, birth certificates or college enrollment forms – because young adults still in school are allowed to stay on their family plans. This audit period goes through June.

If employees are found to have ineligible dependents, they may have to repay the carrier for the medical costs of these dependents, and even lose their jobs, the newspaper said.

Ford Motor Co. began its dependents’ audits in January 2000, said spokeswoman Marcey Evans. After two amnesty periods in 2000 and 2001, the company instituted ongoing random audits at all its US operations.

Like big automakers, big airlines see saving money as a matter of survival. Northwest has lost $2.5 billion on its operations since early 2001. All its cost-cutting strategies so far have reduced its annual expenses by $1.7 billion, the newspaper report said.