Disenrolling Dependents Was Proper After Member Ignored Document Requests

Photo: Dan Macy

A plan participant’s disregard of health plan requests to verify dependent eligibility was a proper basis of a plan’s action to remove his dependents from coverage and garnish wages to recover about $23,000 in benefits overpayments, a federal court ruled in Muhammad v. Ford Motor Co., 2012 WL 95298 (E.D. Mich., Jan. 12, 2012).

The participant disregarded several document requests, he sent several inconsistent 2002 tax return versions (the first listed no dependents; the second and third listed dependents) and failed to voluntarily remove dependents from coverage when they lost eligibility, the court noted.

Note: Dependent coverage rules changed because of the 2010 health reform law, but this case shows that the need to audit dependents is as great as ever.

Dependent Eligibility Rules

Jaami Muhammad was employed by Ford Motor Co. and insured by the Ford-UAW Health Care Insurance Plan. Ford gave itself discretionary authority to determine eligibility. Children would become ineligible: (1) on the last day of the calendar year during which the child turned 25; (2) when the child got married; or (3) stopped living at the parents’ home (unless they were a full-time student). (Note: These limitations would be unacceptable today under the 2010 health reform law.)

In its plan document, Ford reserved the right to demand substantiation of dependent eligibility status. Ford also expected workers to voluntarily report when one of their dependent children became ineligible. And it reserved the right to garnish wages to recover benefits overpayments.

Over eight years, Ford repeatedly asked Muhammad for tax returns and proof of residency to substantiate his claimed dependents. He failed to satisfy the documentation requests.

As a result, Ford removed those dependents from coverage and garnished wages from Muhammad’s paychecks to recover overpaid benefits provided to the ex-dependents.

Ford contended none of Muhammad’s claims had merit because it acted reasonably in all its determinations. The court agreed.

The failure to furnish any documentation needed to substantiate the enrollment of the four dependents in 2000 and 2001 was in itself a sufficient basis to support an ineligibility and overpayment determination, the court said. The plan reserved the right to demand tax returns and proof of residency to verify dependent eligibility; it stated that participants who refuse to cooperate shall become ineligible. Further, Muhammad failed to voluntarily remove dependents who had become ineligible.

The 2003 exclusions of two more dependents were similarly fair, the court said. They also started with a non-response by Muhammad. But Muhammad’s appeal included inconsistent tax forms: one showing him as “Single” with no dependents, another showing him as “Single” with two dependents and a third showing him as “Married filing jointly” for a total of three dependents.

After inconsistent tax forms raised questions about his spouse status, the plan insisted on certified copies from the IRS. But Muhammad never sent any IRS-certified forms. Therefore, the court ruled that the plan’s decision to disenroll her was reasonable.

The court decided that plan policies were reasonably applied to the facts in the administrative record. It affirmed the plan’s determination and dismissed the case in Ford’s favor.