NEW ORLEANS — Small clerical errors can cost employers hundreds of thousands of dollars. But organizations can get that money back through routine maintenance of benefit records.
Unqualified insurance claims and dependents manage to slip through the cracks and receive coverage through employee health benefits, according to experts who spoke this week at the Benefits Forum & Expo.
“It’s the result of already very busy people being understaffed — they can’t get to everything at once, and mistakes happen,” Matthew Dubnansky, managing partner at TMDG, said Tuesday at the event, hosted by Employee Benefit News and Employee Benefit Adviser.
The financial planners said these coverage mistakes commonly occur with FSA plans, although both fully-insured and self-insured coverage are also susceptible. PlanSource conducted one of these audits for a public school system in the Rust Belt, for example, and discovered $800,000 in unnecessary claim spending. Three years later, it found an additional $500,000.
“It’s good compliance of HR hygiene,” said Michael Makatura, director of client solutions at PlanSource. “It can be a dramatic return of dollars, and it ensures your organization meets IRS guidelines.”
Cannon said it’s surprisingly easy for uncovered claims to go unnoticed — especially when employees are ignorant of benefit details, and HR employees are swimming in paperwork. But making efforts to open the lines of communication can help prevent unqualified dependents from receiving coverage. Based on the organization’s his company was hired to audit, Cannon estimates around 3% of dependents don’t qualify for coverage.
“I find this happens a lot when people get divorced,” said Curtis Cannon, managing partner at Axis Recovery. “You become responsible for your ex-spouse’s health coverage and think it’s covered because they were under your plan while you were married — but it’s not your employer’s responsibility to cover them anymore, it’s yours.”
Dubnansky, Cannon and Makatura said benefit audits should be conducted at least every three years to get the maximum return. They also recommend conducting it when they receive new staff, or when existing employees reach a major life event.
But despite the likelihood of receiving a significant return, the advisers said employers are hesitant to audit healthcare benefits for fear of alienating their employees. Using an outside agency can mitigate those negative feelings, but making audits part of company culture will normalize the process.
“Most of the reluctance surrounding audits is from putting employees through a lengthy process and damaging their relationship with upper management,” Dubnanksy said. “I’d have a third party conduct the audit. It needs to be done in spirit of amnesty.”
Cannon recommends supervisors choose their language carefully to prevent employees from feeling targeted by audits.
“Never use the word 'audit.' Use the word 'verification,'” Cannon said. “When the IRS sends us an audit we freak out. Communication is key here; we’re just being fair and responsible to all stake holders. The employees are included in that.”
