It is not uncommon that we see employee benefit bills and rosters with individuals who do not appear to be eligible for coverage. Although the addition or non-deletion of people may be innocent it can produce some unpleasant results and possible employer liability.
Individuals who are W-2 employees of a firm are usually eligible to enroll in the benefits provided at work. There can be limitations on collective bargaining employees, part time and seasonal employees and individuals who work on a 1099 basis. Minimum hours can be set from 30 hours per week down to 24 hours, but everyone who meets the pre-set minimum hours’ requirement must be offered coverage.
What we see all too often is individuals who are no longer employees, and not eligible for continuation beyond what they have already used up, still on the bill. There are also many situations where business owners who are not active employees are on the coverage. Add in former spouses and children over age 26 and there are lots of compliance issues in play.
So what is the problem? If we pay the premiums the insurance companies will pay the bills, right?
Well, not necessarily. There are guidelines with each employer contract that defines who is eligible for coverage. Yes, there are many situations where the insurance company is not aware of changes and they pay bills as if everyone is legitimate.
The problem comes when there is a significant claim and the insurance company has the right to do an audit. If an individual is not eligible for coverage the insurance company has the right to return premiums and reverse any claims paid out.
The nightmare is not only that the patient is now responsible for these expenses, but once the claims are reprocessed the carrier discount goes away. The $100,000 claim which was negotiated down to $5000 by the insurance company is reprocessed to the $100,000 starting point. Even if the patient can negotiate some type of reduction on the claim it is not likely that it will come down to the $5000 level.
Now that individual coverage is readily available, why take the risk of not being compliant? It is much easier to discuss removing individuals from plans when the time comes than it is to defend not having managed the plan properly. At a minimum, owners face the possibility of hard feelings from employees and former employees when the appropriate actions are taken to keep everyone compliant. The bigger risk is that employees or former employees will lash out with lawsuits when they feel that they were not informed of their options and now are responsible for medical bills that could have been avoided.
Please call us at CDA Inc. for a compliance review. It could be time well spent.