August 6, 2013

Dependent Eligibility Audit Produces A 10:1 Return on Investment Ratio

Business Situation:
Our client was referred to BMI by their employee benefits consultant regarding their needs for a dependent eligibility audit.  The purpose of the audit was to confirm that benefit dollars were only being spent on eligible participants while meeting the following objectives:

  • Identify all dependents currently enrolled who do not meet eligibility criteria.
  • Examine 100% of all eligibility records to identify covered employees with one or more dependents.
  • Communicate the purpose of the audit, deadlines, compliance requirements, etc. to all employees with one or more dependents.
  • Provide a dependent eligibility customer service department with toll-free phone lines and bilingual staff during normal business hours.
  • Securely collect and retain all verification documentation used to confirm eligibility.
  • Compare plan eligibility requirements with documentation submitted.
  • Report findings periodically and an executive level overview to analyze potential savings.

 Client Profile:

  • Small  industrial tool and parts distributor
  • 114 employees covering 253 total dependents

Audit Finding:
97% of the total participants completed the audit.  Of those, 19 dependents (7.51% of total) failed to satisfy the plan’s eligibility criteria.  Many of those who failed were spouses who were eligible for coverage through his or her employer.

Audit Benefits:

The client terminated coverage for 19 dependents (7.51 % of total).  Given that the employer’s average dependent costs the plan about $3,000 per year; our client obtained a minimum first year savings amount of  $57,000.  This amount translated to a return on investment ratio of 10:1 for the client while meeting all audit objectives.