Health Care Costs for Ineligible Dependents

The brouhaha over contractors paying for health care costs of ineligible dependents has largely died down since last year. The largest category of ineligible dependents are those who have "aged" out of the company plan. Employees often forget to notify HR when there is a change is status for healthcare eligibility and historically, many contractors did not have procedures in place to validate dependent eligibility. See Health Care Benefits Paid to/for Ineligible Dependents for further information on this subject.

But just because its not in the news any longer, doesn't mean that the subject is being ignored. Contract Auditors continue to test contractor policies and procedures for ensuring the eligibility of dependents. The standard audit program for audits of all incurred costs, no matter the contractor size, included the following:

Health Care Costs. As part of the review of health care costs, verify the contractor included only health insurance premiums and claims for “eligible dependents”. Request the contractor to demonstrate its procedures for ensuring only costs related to eligible dependents have been included in the claimed costs. Based on the understanding of the contractor’s processes and overall risk, design procedures to test claimed costs are related to only eligible dependents. 

The focus of this audit procedure is the contractor and the contractors procedures for ensuring only costs for eligible dependents have been claimed. If contractors do not have such procedures in place or do have but they are deficient in some respect, the auditor could make any number of recommendations. We saw one case where, in 2013, the auditor demanded a contractor prove that a listing of dependents from 2006 were eligible for medical care. The contractor couldn't so the auditor questioned all of the dependent health care costs, whether eligible or not. That disagreement is still pending with the contracting officer.