Steven Wisneski RHU, LHIC

January 2017

Protect your company and your employees from costly mistakes.

With all of the changes in the Health Insurance marketplace it is easy to get confused, make mistakes and overlook important circumstances and changes. These situations can be very subtle and seem harmless, but can result in significant expense and even criminal charges.

Protecting your company and your employees from these common mistakes will benefit everyone and potentially reduce your corporate overhead and increase your bottom line.  A simple audit of your employee benefit plans by a qualified professional can reveal errors that can easily be remedied and if corrected would result in immediate premium savings to the employer and avoid employees being turned over to collections for erroneously paid claims.

Research has validated that (on average) between 10% and 15% of dependents insured under an employer’s group health plan are ineligible to participate in the health plan (1).  There are a number of fundamental reasons for this including aging into Medicare, graduating from college and finding a job that offers benefits, divorce, and others.  These and other circumstances could render a dependent ineligible and occur throughout the year.  It is easy to understand how notifying the employer of the change could easily be overlooked (sometimes for years).

Additionally, with the ever increasing cost of health insurance and the increased complexity of obtaining it, fraudulent enrollment has increased dramatically.  One West Michigan community recently had felony health care fraud charges brought against its Police Chief who failed to remove his wife from the city health plan, even though they divorced a few years ago.  Aside from being responsible for the significant cost of paid claims, both he and his ex-wife are subject to as much as four years in jail.

It is not uncommon in West Michigan for the cost to insure a dependent to be more than $400 per month ($5,000 per year).  Take the number of employees you have, double it, and that gives you a good idea how many dependents you are insuring.  Now take 10% of that number, multiply it by $5,000 and that is the potential overpayment of premium you are paying annually.  Correcting that situation will send those dollars directly to your bottom line.

Many employers don’t want to experience the effect on employee morale that might result from removing dependents from a health plan.  The wise employer will have their agent properly place the dependents in the insurance market, often at a much lower cost.  It is not uncommon for dependents to even get a better level of benefits than the employer’s plan offers, as in the case of Medicare.  Imagine the boost to morale when the word gets out among the workforce that the employer is looking out for their family’s interests.  Moreover, there is no additional cost to the employer for going through this process.

Additionally, health insurance companies no longer “coordinate benefits”.  Many years ago it was not uncommon for dependents to be insured under both parents’ employer’s health plans.  The “Birthday Rule” applied and whichever parent was born earlier in the year was primary for the dependents.  This meant that if dad was born in January and mom was born in June, dad’s plan paid first and then mom’s plan paid the balance.  Those days are gone.  So, paying for dependents to be on two different plans is clearly a waste of premium.  The second plan will not pay claims.

Insurance companies insure thousands (if not tens of thousands) of group health plans.  They rely on employers to correctly enroll or remove participants according to the plan contract and benefit laws.  They do not have the time to audit enrollment for every company.  They will gladly accept your premium payments and they do NOT refund premiums. 

Insurance companies will audit large claims and suspicious claims.  They also audit to make sure claims are not work related or due to an auto accident.  When they recognize an improper claim they have a variety of methods to remediate the circumstances.    Frequently, errors are administrative in nature and can be resolved with an e-mail or phone call.  Larger claims will often result in the insurance company withholding the amount paid from future payments to the healthcare professional who provided the services.  This results in the healthcare professional taking on the burden of collecting tens of thousands of dollars from the dependent or their family, often with catastrophic consequences.  (debt collection services, ruined credit ratings, occasional liens on assets, etc).

In the case of blatant claims fraud (as with the Police Chief) matters are turned over to the insurance company’s legal department, who will then begin criminal proceedings.  When it is clear that the employer had clear knowledge of the fraud, the employer can be held criminally liable as well and the entire group contract can be cancelled immediately.

Again, a simple audit of your employee benefit plans by a qualified professional can reveal errors that can easily be remedied and if corrected would result in immediate premium savings to the employer and avoid employees being turned over to collections for erroneously paid claims or even criminal prosecution.

Steven Wisneski is a Licensed Agent, a Registered Health Underwriter, a Licensed Health Insurance Counselor, and is a recognized Subject Matter Expert by the Michigan Insurance Commissioner.  He is President and owner of Independent Benefit Auditing, LLC.  His business conducts benefit plan audits for employers throughout Michigan and provides policies and concise reporting to ensure best practices.