Working spouse provisions affect employees whose spouse is also employed and eligible for employer-sponsored insurance (ESI).  Depending on how the provision is designed, the employer either transfers a portion of the premium cost to the employee (known as a “spousal surcharge”) or reduces or eliminates costs by requiring the spouse to take their own ESI (known as “spousal carve-out”).  There are pros and cons to both options.

With the surcharge, employees have the ability to keep spouses on their company’s plan instead of enrolling the spouse in ESI. This is a valuable benefit if the spouse’s plan is expensive and/or provides meager coverage. However, employees may view the spousal surcharge as a penalty.

The spousal carve-out requires the spouse to enroll in ESI.  Most carve-out provisions allow spouses to be covered on the employer’s plan if they first enroll in their own ESI. In that case, the ESI will be primary payer for claim purposes.  However, employees may be frustrated by being forced to pay two premiums.

A less common provision is to simply exclude from coverage any spouse that is eligible for ESI. This option provides the greatest savings for the employer, but gives no coverage option for the spouse.

For any working spouse provision to be effective, the employer needs current and accurate data. A dependent eligibility verification audit (DEVA) can identify spouses eligible for ESI while ensuring that employees are complying with plan eligibility rules.

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A more complete answer must be based on the employer’s formal and informal policies and practices, as well as written plan documentation and employee communications. The plan should be administered fairly and consistently with respect to all participants. The best approach is to consider these types of issues with legal counsel before conducting a DEVA.

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• Four weeks for planning – includes project kick-off meeting, review of plan eligibility policies, and provisions and creation of employee communications
• Approximately nine weeks for collecting employee documents—includes a publicized initial response period and an unpublicized grace period for late responders
• Approximately one week for project wrap up and final reporting

These periods can be adjusted if desired.

The timeline for ongoing periodic audits of newly added dependents is understandably shorter because most of the project planning will have been completed during the initial DEVA. Additionally, some clients choose to include a post-project appeals period, according to the particular specifications of the health plan Summary Plan Description.

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Claim audits retrospectively look at claims the administrator has already paid to identify potential processing errors and the resulting overpayments. Once overpayments are identified, the plan, the auditor, and the carrier can work together to recoup the funds and make sure future payments are accurate.

Unfortunately, it’s common for Third Party Administrator (TPA) contracts or Administrative Services Only (ASO) agreements to contain provisions that limit a plan’s ability to evaluate the Administrator’s performance, and to identify and recover overpayments.

Since their dollars are at risk, self-funded plans should understand the restrictions on their right to review claims and pursue recoveries within their ASO agreements. Once plans understand their ASO agreements, they can negotiate with their Administrator to expand their auditing and recovery rights to include more frequent, ongoing reviews; larger samples; and more ability to recover. However, in order to negotiate successfully, plans should keep the following information in mind:

• Administrators are often sensitive to the word “audit,” so plans should refer to their evaluations as “reviews.”
• Legislative and policy initiatives may be needed to address these restrictions, so plans may have to work to get these initiatives in place before negotiations can begin.
• Plans must be persistent—and, in many cases, insistent—that their Administrators allow them to take a more active role in both the claim payment review and overpayment recovery processes.

With proper negotiation, Administrators will typically agree to expand performance reviews and develop modified ASO Agreements.

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Many employers believe they can generate even more savings by managing the dependent verification process internally, but they often find they don’t have the internal resources to do it effectively.  As such, they outsource ongoing DEVAs to confirm eligibility of dependents added by new hires or as a result of a life event.  These ongoing DEVAs can be monthly, quarterly, or semiannually—as needed.

A particularly valuable aspect of ongoing audits is spousal eligibility verification. With divorce rates approaching 50%, an employer may be providing healthcare coverage to ineligible spouses and stepchildren. Similarly, if the employer has special coordination of benefits features like a “working spouse” provision (where the employer restricts coverage for employees’ spouses who are eligible for benefits through their own employers), regular verification is necessary to ensure current and accurate data.

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The article, “For El Camino Hospital, Dependent Eligibility Audits Result in Notable Savings in Health Care Spending,” details the results of a dependent eligibility verification audit (DEVA) that HMS recently conducted on behalf of a large hospital to illustrate how effective DEVAs can be for achieving cost savings.

Click here to read the full article.

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Every state has a “long-form” birth certificate that contains the details surrounding the birth, such as:

• The child’s information (name, sex, birth weight and length),
• The child’s parents’ information,
• The signature of the doctor who assisted in the birth of the child, and
• A signature of at least one of the child’s parents.

Most states also have some type of “short-form” birth certificate that contains only the child’s name, sex, and date/place of birth. Both types are valid records of the child’s birth, but clearly, they do not provide the same amount of information. Each state determines which birth record it provides to parents. If the state routinely issues the short-form certificate, the parent must make a special request and submit payment to obtain the long-form certificate.

At one time, short-form birth records were sufficient to obtain a passport from the federal government, so employees are often surprised that short-form birth records are not acceptable proof of eligibility. For purposes of dependent eligibility verification, employees must submit a birth document that proves their relationship with the dependent child. If the short-form record does not list the parents’ names, the employee will need to order the long-form certificate from the state where the child was born to provide proof of the relationship. Birth certificates can be ordered online, and expedited delivery is often available if necessary.

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Plan communications might also specify that the employer will conduct routine dependent eligibility audits to confirm eligibility, and should alert employees that dependents may be removed from coverage if the employees fail to provide the requested information.  Informing employees of these requirements and procedures upfront can help minimize employee abrasion during the audit process and maximize results.

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While this case predates healthcare reform and the facts are a bit unusual, the opinion is still instructive for any health plan sponsor.  Benefit plans should define the plan sponsor’s rights and authority in clear and detailed terms.  If you’re not sure if your benefit plan supports your authority to take a particular action, consult your legal counsel for best results.

To read more about the case, click here.

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Before the dependent eligibility verification process begins, the employer should ensure that the definitions are clear and specific in all plan communications, including summary plan descriptions, enrollment materials, etc.  Any informal policies should also be incorporated into written plan communications when appropriate.

Human Resources departments play a critical role in disseminating eligibility information to employees, so it is recommended that your HR staff receive regular training and updates. The more complicated the rules are for your plan, the greater the need is for a consistent message, repeated often.

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