Audit of eligible dependents expected to net significant savings

Verification report estimates health cost reduction of $2.3 million annually

By Jay Dedrick

Results of the University of Colorado's verification of eligibility for employee dependents indicate CU could save as much as $2.3 million annually for having undertaken the audit.

Early this year, health plan participants with enrolled dependents were asked to provide documentation verifying that dependents meet requirements. Nearly 92 percent of employees and retirees responded, with the process followed by 1,194 dependents being discontinued from coverage. Because 261 dependents were added during the 2010-11 open enrollment period, the net reduction is 933 dependents.

Administrators did not assume or find fraud in the process, but wanted to educate the university's nearly 9,000 plan participants on requirements for qualification as a dependent. The audit was one of many results of the university looking for cost-cutting measures during a sluggish economy.

"This type of project can be hard on everyone," said Mark Stanker, assistant vice president of Payroll & Benefit Services. "Despite the challenges, we are satisfied with the results and the positive effect it will have on containing future benefit rate increases."

Based on an average annual medical plan utilization of $2,500, the university could see $2.3 million in savings annually.

"Periodic audits are a standard business practice, and we had never done that," said E. Jill Pollock, senior associate vice president and chief human resources officer. With the university's health benefits cost at $135 million annually, "It's prudent to ensure that we're providing health benefits appropriately."

The total cost of the audit was $180,032; should CU medical plan expenses drop by the expected $2.3 million, the return on investment would be 13 to 1.

In the future, the university expects only to carry out partial audits of dependents every three to five years.

"With the changes made to our ongoing dependent verification procedures, I do not expect the need for another full eligibility audit in the future," Stanker said.

The report on the Dependent Eligibility Verification project is available here.