Dependent eligibility is a subcomponent of the overall eligibility process within a health plan. Because dependents are generally not plan sponsor employees, obtaining key demographic and other applicable information to support their eligibility status is an important part of the enrollment process.
Whenever possible, the plan administrator should obtain supporting documentation before adding a dependent to the plan. This will provide an audit trail to support a dependent’s eligibility status in case it needs to be reviewed later. Since a dependent’s eligibility status is secondary to that of the employee, you must have appropriate processes and controls in place to ensure that the plan administrator removes them in an accurate and timely manner when a dependent is no longer eligible to participate. Because a plan sponsor will not be aware of certain terminating events unless the employee reports them (e.g., divorce, change in disability status, death), plan administrators should periodically evaluate the dependent status of those currently enrolled in the plan.
These evaluations can take several forms:
- A full audit recertifies the eligibility status of all dependents currently enrolled in the health plan, regardless of the information the plan sponsor has on file for that dependent. This audit requires an employee to submit certain documentation that the plan sponsor determines necessary to verify the dependent’s current eligibility status.
- A targeted audit follows the same process as a full audit, but is limited to a specific group of dependents.
- An affidavit evaluation requires an employee to reaffirm, under penalty of perjury, the eligibility status of their dependents. In this case, the employee doesn’t need to submit any information.
In each case, an employee must comply with the process requirements within a specific time frame. If the employee fails to submit the requested dependent information, fails to submit it within the given time frame, or indicates the dependent is no longer eligible to participate in the plan, that dependent is removed from the eligibility roles.
External consultants who perform these evaluations report that on average 3-9% of all enrolled dependents are not eligible because the participant does not meet the health plan requirements. Therefore, depending on the size and complexity of the plan, coupled with the eligibility controls that are in place, you should consider conducting a dependent evaluation every 3 to 5 years.