Fraud in your company’s health plan

As if employers needed it, here’s one more reason for anyone worried about Obamacare to worry a bit more:

University researchers have produced a study concluding that the popularity of dependent verification programs “may well diminish” thanks to the dependent coverage provisions of the Patient Protection and Affordable Care Act.

How so?

Well, as we all know, the health care reforms render all children up to age 26 eligible in employer health plans. It’s a hugely popular part of the law, for obvious reasons.

As it turns out, DV programs are best at flushing out employees who like to fudge their kids’ ages or add, say, a niece or nephew to their health plan at work.

If you haven’t heard of these programs, they’re simply a way for companies to audit who’s enrolled in their health care plans and have helped curb the runaway costs of health coverage.

To enroll in their company’s plans with a DV in place, workers are asked to submit copies of their marriage licenses, children’s birth certificates and redacted tax returns.

While no one has tried to empirically validate their worth until now, there’s no doubt DV programs have been popular.

Of the 507 large firms surveyed by the management consulting firm Towers Watson, 55 percent had a dependent verification program in place in 2008. That figure reached 69 percent by 2010.

There was plenty of good reason for that kind of growth. Goodyear Tire & Rubber, for example, was able to trim 13 percent of its 70,000 dependents because they were found to be ineligible in its 2005 audit, saving the company 6 percent on costs.

In their paper, economists Michael Geruso at the University of Texas at Austin and Harvey S. Rosen at Princeton University relied on the HR experts at an unnamed private employer with 6,000 employees to help determine just how well its DV program was working.

They found that dependents were 2.7 percentage points less likely to be re-enrolled in the year that a DV was introduced, a fairly good indication that this fraction of the population was fraudulently enrolled in past years.

These “disenrollment effects,” the economists wrote, were especially large for same-sex partners and, you guessed it, older children.

The DV program they studied saved about $46 per enrolled employee, a considerable fraction of which came from removing older children.

So, what are we to intuit here?

Just what the research by Geroso and Rosen found: With the eligibility age for children now 26, the future cost savings potential of DV programs is substantially limited and the popularity of these programs is doubtlessly headed south.

Our takeaway on all this? PPACA could well mean more fraud in the workplace.

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