Eligibility and Compliance

A dependent verification audit is a process used by organizations to confirm that all dependents enrolled in a group benefit plan are eligible for coverage. Dependent verification audits require employees to provide documentation to validate the relationship between the employee and the dependent. This confirms the dependent is eligible for coverage based on the plan’s rules. Dependent verification audits are a best practice among employers and helps manage both regulatory compliance and rising health insurance costs. Dependent verification audits are predominantly used for health plan management, but can be applied to any group benefit plan that offers dependent coverage. 

There is no difference between these terms – they are used interchangeably. 

Employees often do not know or misunderstand the plan’s dependent eligibility rules and will unintentionally enroll ineligible dependents in the company health plan. Covering ineligible dependents costs both employers and employees significant dollars. Dependent verification protects the health plan from ineligible dependents, helping plan sponsors ensure their health plan is compliant and that benefit dollars are only being spent on participants who are eligible, keeping healthcare costs down for everyone. 

Most plan participants who enroll an ineligible dependent are unaware of what they are doing and don’t know or understand their plan’s dependent eligibility rules. It’s rare for plan participants to intentionally enroll an ineligible dependent. 

Eligibility for a group benefit plan will differ from plan to plan. However, the most common ineligible dependents on health benefit plans include: ex-spouses and ex-domestic partners, ex-step children, boyfriends and girlfriends, relatives that do not qualify as a dependent (such as parents or siblings) and personal staff (such as nannies or housekeepers). 

There are two main ways to do dependent verification:

1. A one-time, comprehensive dependent eligibility audit of enrolled dependents ensures that all dependents enrolled at the end of the audit are eligible.

2. Ongoing verification for new dependents confirms eligibility of new dependents at the point of enrollment, ensuring only eligible dependents can enroll in benefits coverage. Performing a comprehensive, one-time dependent eligibility audit followed by ongoing dependent verification is the best practice.

Documentation requirements will vary, but typically acceptable documentation is a legal document that validates the dependent’s relationship to the plan participant. For example, for a biological child, the child’s birth certificate, listing the child’s name and date of birth and listing the employee as the parent, is acceptable. 

Life event verification is a process used to confirm that a reported life event, such as marriage, birth or divorce, is valid and occurred on the specified date. Life event verification ensures that changes requested to an employee's benefits are accurate, compliant and efficiently processed. 

Employers need life event verification to ensure the accuracy and compliance of benefits changes, maintain control over their benefits program, reduce administrative burdens, increase employee satisfaction and prevent fraudulent claims. By verifying life events, employers can more efficiently manage costs and resources, streamline the process of updates and ensure that only eligible individuals receive benefits for a fair, cost-effective and well-managed benefits program.