A Michigan company has developed a way to audit ineligible dependents out of healthcare plans, saving millions for its large employer clients. But smaller companies may also benefit from the concept.
They say that every cloud has a silver lining.
A Michigan company has found that silver, actually more like gold, in the endless overcast of company healthcare costs.
The company, Budco, Inc. of Highland Park, Michigan, does it by conducting audits that help employers find, and root out, employee dependents who are not, or are no longer, eligible for health care coverage, yet who are still on the company’s healthcare rolls.
Companies have such ineligibles in abundance, says Michael Watson, a Budco senior vice president. They may be divorced ex-spouses who’ve refused COBRA coverage or let it expire, minors past college age, even employees who’ve passed from health care to, shall we say, seasonal care.
“We found a lot of anomalies in the data,” says Watson, describing his company’s first client audit. “For example, they had people who were very old-in fact, over 100 years old. There were people who weren’t even alive but were still on the rolls.”
An Average of 15 Percent Ineligible
Budco has since audited the dependents of over a million employees, mostly at Fortune 100 corporations, and found an average of 15 percent of dependents listed were ineligible, for a total savings to their clients thus far of some $400 million. In fact, says Budco, they have yet to find a company that doesn’t have ineligibles on its healthcare register.
Got 800 Workers? Save a Half Half-Million Dollars.
Most companies pay a monthly charge per-person covered to healthcare carriers, so even smaller firms can realize a savings. Per a calculation by the publication, Employee Compensation, a part of BLR’s Employee Compensation in [Your State] program, a company of 800 workers, with an average of 1.5 dependents each, paying $350 a month per covered individual, can save over a half-million dollars a year.
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For more information on the Employee Compensation in [Your State] program, visit www.BLR.com. (You can try it free for 30 days!)
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Further financial benefits come via FASB accounting rules, which decree that certain monies be put aside to cover future costs of all plan participants. When the number of participants is reduced, those funds can be put back into the business, or taken as profits. The cost of the audit must be weighed against any potential gains, of course.
An Amnesty and an Opportunity
Budco asks its clients to start the audit process with an amnesty period in which employees can voluntarily disclose ineligible dependents without penalty, packaged with the message that a thorough audit is coming. Then, once the audit starts, employees may need to submit documentation that their dependents are, indeed, eligible.
The presence of ineligible dependents is often innocent.
“Over the years, companies haven’t done a good job of communicating who is eligible and who is not,” says Watson. “Some 20 years ago, the cost of healthcare wasn’t what it was is today, so this wasn’t a real high priority.”
For this reason, part of the Budco program is creating understandable communications on exactly what the eligibility rules entail.
Employees are urged to see the audit as an opportunity for all to reduce their contributions to healthcare costs, as well as the company’s. This is a message most employees can seemingly embrace.
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Are you overpaying your workers? Find out in your state’s edition of BLR’s Employee Compensation in [Your State]. Separate editions for 43 states plus D.C. Try it free for 30 days. Visit www.BLR.com.
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“If you’re participating in the cost,” says Watson, “you want to make sure somebody down the hall isn’t taking advantage of the situation. This is about trying to make sure that the right people, who are eligible and entitled, get the best benefits possible.”
For information about Budco, Inc., e-mail marketing@budco.com.