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December 1, 2014

Investing in an Audit Produces Big Returns

Business Situation:
This group health plan sponsor wished to 1) conduct a dependent eligibility audit of all enrolled dependents and 2) a spousal surcharge audit verify whether or not working spouses are eligible to be covered under plans sponsored by their own employer.

Client Profile:
  • Chemical Products Distributer and Supplier
  • 1,182 employees covering 2,670 dependents

 Audit Finding:

In addition to requesting copies of documentation from all enrolled dependents to provide eligibility, enrolled spouses were asked to confirm and have their employers certify whether or not they were eligible for employer-sponsored coverage.

  • 183 dependents (6.85% of total) were flagged for removal of benefits either because of failing eligibility criteria or not responding to the audit.
  • 170 spouses (6.37 % of total) were determined to be eligible for other coverage through their employer.

Audit Benefits:

Coverage was terminated immediately for 183 ineligible dependents and a $100 monthly surcharge was added for each of the 170 enrolled spouses. 

 First Year Savings Calculations
Average annual cost per dependent:                                       $3,500
Annual savings for ineligible dependents removed:          $640,500
Total annual spousal surcharge for enrolled spouses:      $204,000
Return on investment:                                                                 4,497%