They’re ineligible for your health plan, but you’re still paying
July 15, 2009 by Bill MeltzerPosted in: COBRA, Health care, Pay and benefits, Special Report - Benefits
There’s a good chance your company is carrying people who shouldn’t even be on your health plan.
It’s estimated that two-thirds of employers spend an extra 5% to 15% by carrying ineligible people on their health plan rolls.
The problem usually springs up when your insurance company continues to charge you for enrollees who are no longer eligible for coverage but were never removed from the list of enrollees.
The issue often goes undetected until you initiate the steps needed to find and fix it. Insurance companies have no incentive to do anything about it. It’s not costing them money, after all. It’s costing you.
The usual suspects
There are four main groups of people who often manage to fly under the radar and remain covered under your plan even when they’re ineligible:
- ex-employees
- current employees who’ve changed from full- to part-time status
- divorced employees’ ex-spouses, and
- older dependent children.
Each category has its own set of challenges to fix, but that can be done with relatively little pain.
Track ex-worker coverage
Without knowing it, your company may still be paying for doctor’s visits made by ex-employees.
This doesn’t mean former employees who accept COBRA, paying 102% of the premium each month to keep their coverage and offset your administrative costs.
Rather, the concern here is to spot freeloaders, whose insurance cards were never canceled, while your firm continues to foot the bill. This problem happens more often than you may think.
Some firms generously offer to carry certain ex-employees for a certain period of time and then forget to cancel their coverage. But more often, it’s a clerical error by the insurer that goes undetected.
Be certain there’s someone at your company who tracks when people’s coverage period ends: both on the active rolls and on COBRA.
Ask Payroll about part-timers
Depending on the eligibility rules in the plan documents of your health policy, an employee who scales back on his or her hours may become ineligible for coverage under your health plan.
If that’s the case, ask Payroll to run periodic reports on the enrollment status of the folks whose hours have recently dropped. Remember: COBRA applies. But you needn’t pay for part-timers’ ongoing coverage.
Employees slow to report divorce
It’s an unpleasant fact of modern life: half of marriages end in divorce. Unfortunately, there’s often a spill-over effect on an employer’s health plan after a divorce. Employees often fail to notify their employer about an impending divorce.
As a result, after the divorce, the firm continues to pay for coverage for the ex-spouse. There are two tactics that can help minimize this problem.
- The “empathetic” approach: Pledge complete confidentiality.
- The “hardball” tactic: Add a spousal surcharge to employees’ monthly contributions, which greatly increases the odds of prompt reporting of a divorce.
Are you obligated to offer COBRA if a divorce is reported to you well after the fact? If you learn of the qualifying event within 60 days after the divorce date, you must send a COBRA notice. Beyond that, it’s not your firm’s responsibility to offer COBRA if the employee doesn’t report it.
Tags: COBRA, health costs
July 16th, 2009 at 11:37 am
One of the advantages in having a small company. This kind of negligence seldom happens. Each time a billing comes from Group Carrier we go over it in detail before paying. Also with 20 employees in each division (which calculates to about 45 dependents on the average per billing) it is easy to know who is who etc.
July 16th, 2009 at 12:12 pm
I have 162 employees to keep track of. To make it easier I keep a spreadspread where I highlight in red someone who termed, switch to pt or cancells the insurance and once the change has been done by the insurance company and then I highlight in blue. Once I get the new invoice I delete the person from the invoice. I copy each month so if there is a problem I can always go back to see what I did and what month the change happened. it is pretty easy to keep track of it this way.
July 16th, 2009 at 1:58 pm
One advantage to having a Benefits Analyst (employee of the HR dept). She knows EVERY employee, EVERY dependant, and she is on top of every move. I am confident that we do not pay one dime that is not legitimate. You can’t get that with a TPA! (we have 1100+ benefit-eligible employees)
July 16th, 2009 at 2:28 pm
I’m with Al, I work for a smaller company of about 160, but with 3 locations. Since we fired our TPA about 4 years ago, I have gone through each benefit billing statement with a fine tooth comb and now have every confidence that all members have the correct coverage. I monitor this every month. Working with a smaller company also gives me the opportunity to converse and communicate with all the employees and allows for an excellent relationship. I typically know of most changes in status with them.
July 21st, 2009 at 8:21 am
Does anyone have a policy that you are willing to share regarding court-ordered covered benefits for spouses during divorce proceedings? Last year the judge ordered our employee to keep her spouse on her healthcare plan until the divorce was final. It was a bitter divorce, and took more than a year. We are a small company under 100. We were the losers, as we pay 100% of the premium and deductible.
July 21st, 2009 at 10:38 am
HEY JUDY WHAT STATE IS YOUR BUSINESS? ALSO WHAT DOES YOUR GROUP POLICY READ FROM UNDERWRITER REGARDING DIVORCE ETC. ALSO IF JUDGE ORDERED EMPLOYEE TO KEEP SPOUSE ON HEALTHCARE PLAN THAT DOES NOT PREVENT YOU FROM CHARGING SPOUSE RATHER THAN COMPANY PAYING. THE JUDGE IS JUST INTERESTED IN HAVING MEDICAL COVERAGE NOT WHO IS PAYING FOR IT ETC. IT MAY SOUND CRUEL AND UNFAIR TO EMPLOYEE TO PAY HOWEVER BUSINESS MUST DRAW A LINE BETWEEN PERSONAL PROBLEMS VS RUNNING UP MEDICAL PREMIUMS ON SOMETHING THEY HAVE NO CONTROL OF ETC.(I.E. LENGTHY DIVORCE SETTLEMENT) I AM IN CALIFORNIA AND CAN GET AWAY WITH HAVING EMPLOYEE PAY PREMIUM. MAYBE YOU CAN SPLIT COST OF PREMIUM TO EASE PAIN FOR EMPLOYEE. HOPE THIS HELPS.
July 21st, 2009 at 7:35 pm
Response to Judy: We are a self insured employer for our medical and we offer NO coverage for an ex-spouse. When I checked with our HR Consultants they informed me that if we would receive such a support order we can refuse to provide due to our policy. What happens then is the employee/spouse, if court ordered, has to find his/her own policy to cover the ex-spouse to fulfil the court order. I’d check into it further. Hope this helps.