Risk of Not Auditing
Often employers only hear about the huge financial windfalls to be gained by performing a dependent eligibility audit; however there are also significant risks associated with NOT performing such an audit.
Fully Insured – If you fully insure your plans, having an ineligible dependent incur a large claim can spell disaster. The Bottom Line is that this claim will not be covered by your insurance carrier, which leaves an interesting question: Who must pay the claim? With current court trends in favor of employees against their employers, the financial risk of ineligible dependents on your fully insured plans is significant.
Self Insured - Simply put, your stop loss reinsurance will only pay if the person having the claim is actually eligible. The financial risk of a denied claim can be just as large as that on a fully insured plan, as explained above.
Anyone who does not meet the definition of eligibility as a dependent to be covered, as defined by your summary plan document, is not eligible. This includes:
• Unmarried employees • Relatives • Friends • Domestic Partners • Ex-spouses (with no legal requirement to provide coverage) • Children who are not legitimate dependents such as step children and foster children • Children when ex-spouse has legal custody • Over-age children not enrolled in school.