AUDIT -- it's a five letter word that is merely a nuisance to some - and terrifying to others. Of course, unless you are a business owner, or an accountant, it's probably not something you lose a lot of sleep over.
Until now.
As a sign of the very-expensive-health-costs times, your employer may decide to do an audit of its own -- an audit of the dependents on your health insurance. Why? Because health costs have become a major expense to employers, and they are looking to rein in those costs as much as possible.
Here's what happens: you get a letter from your employer telling you they are doing a dependent audit. Specifically they are looking to see if you have claimed anyone on your health insurance who shouldn't be there. People like:
- a child who is over the age of 18 and out of school
- a partner you aren't legally married to (although in some states partners do share benefits)
- an ex-spouse
- anyone who is not legally entitled to be there according to your policy. Examples might be a policy that specifically states that if a spouse has coverage through his or her employer, your employer will not cover them. Or a policy that will not cover a certain type of dependent like a step-child or a niece or nephew who live with you
According to the New York Times, 69% of large employers plan to conduct one of these dependent audits during the next year. Their anticipated savings? Thousands of dollars to millions of dollars. Certainly worth their cost to run such an audit.
The article also explains that most employees who have an errant dependent on their insurance don't realize that the dependent isn't supposed to be there.
What can happen if you have someone on your policy who shouldn't be there? A couple of things:
1. You'll learn that the person is being pulled off your policy -- meaning -- that person will no longer have coverage until coverage is obtained somewhere else.
2. In some cases, you will become responsible for any medical bills that resulted from appointments, tests, hospitalizations and treatment that took place while that person was presumably covered.
What should you do to prepare for a dependent audit?
- First, double check your policy. Who should, and should not, be considered a dependent is clearly spelled out.
- Second, try to figure out what your next steps should be in case an audit is performed, and you are found with a non-dependent listed on your policy. Next steps will include finding a new coverage plan for that person - either through his or her employer or an individual policy.
- Once you get the dependent audit letter, reply immediately. Don't put it off. If you don't meet your employer's deadline for the reply, you may create bigger problems for yourself.
And if you are worried about having to cough up the money to pay for medical bills that your employer has picked up before now? Come clean. Check in with your employer before you get backed against the wall. According to the Time's article, those employees who fess up on their own are less likely to have to pay those earlier bills.
These audits are fair, reasonable and understandable. The cost of health insurance is a very expensive benefit extended by an employer. It may be part of the employment agreement that they will pay for health insurance for bona fide dependents, but it's unfair to expect them to pay for people who are excluded from the list.
As for those over-18 dependents who are no longer in school and aren't covered? Healthcare reform will take care of them eventually -- but for most families, coverage won't be available until January 1, 2011.
• Learn more about mandated benefits, including who may be considered a dependent, from Dr. Michael Bihari, the About.com Guide to Health Insurance.
• See what Gregory Boop, the About.com Guide to Business Insurance, has to say about dependent audits.
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