Posts Tagged ‘group health insurance’

Teach Employees About Dependent Coverage – It Can Save You Money

Maybe it’s time for HR to have a sitdown with employees to discuss who is or is not a “dependent” eligible for enrollment in group health insurance.

The Wall St. Journal reported Monday that more employers are having audits performed on their health insurance plans “in order to weed out ineligible beneficiaries.” Employers have a clear economic incentive to do so. According to Aon Hewitt, employers in 2011 will pay an estimated $7,612 in health care premiums on average per employee — a 7.8 percent increase over 2010. Meanwhile, dependent coverage costs employers an average of $2,1000 annually, according to HR consulting firm Mercer.

Some employees cheat and knowingly enroll nondependents, but sometimes its just an honest error, like forgetting to remove chidren who graduate from college or are too old to be covered under the parents’ plan (under health care reform, that now means children who are age 27 or greater).

So why not use these audits as a learning opportunity to teach employees about what the term “dependent” means? For that, consult Section 152 of the Internal Revenue Code, which contains the definition.

The bottom line: A dependent is a child or “qualifying” relative (sibling, in-law, step relative) who receives over half of their support from the taxpayer, or a nonspouse who lives in the taxpayer’s home for the taxable year (that’s a way to get coverage for domestic partners).

There are some definitional tweaks having to with multiple support agreements and child custody arrangements.

But there you have it. You’ve got to include it in the summary plan description, but why not discuss the topic openly with employees during an open enrollment session rather than make them wade through the SPD?

Have a Happy Thanksgiving. Look for more blogging later in the week.