Here’s one often-overlooked area where you may be able find some health cost savings.
Start by asking this question: Are you paying to insure people who shouldn’t even be on your health plan?
It’s estimated that most employers needlessly spend an extra 5% to 15% by carrying ineligible people.
Insurers have no incentive to fix
The problem 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 rolls.
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 beneath the radar screen and remain covered under your plan even when they’re no longer eligible:
- 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 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 “hard ball” tactic: Add a spousal surcharge to employees’ monthly contributions, which greatly increases the odds of prompt reporting of a divorce.