Case shows how far you can go to prove dependent eligibility

An increasing number of firms are taking extra steps to make sure all the dependents on their health plans are actually eligible.

And there’s a good reason for it: Research shows companies that conduct dependent eligibility audits see an immediate 3% to 10% drop in dependent care expenses.

But what happens if employees don’t cooperate with with you? A recent court verdict offered some key insight into just how far employers can go when this happens.

In Muhammad v. Ford Motor Co., a worker sued his employer, claiming it had wrongly determined his dependents were ineligible and charged him for their coverage because of it.

The company defended its actions for the following reasons: The employee had been asked repeatedly to provide proof his dependents met the eligibility requirements under the firm’s plan.

When the employee failed to do so, the company dis-enrolled his dependents and garnished his wages to get back overpayments that had been made, according to its policy. The company’s plan stated that it had the authority to:

• determine eligibility
• demand proof of status, and
• garnish wages to recover overpayment of benefits.

The court agreed and ruled that its policies were reasonably applied based on the employee’s actions – and the case was dismissed.

This cases shows that employers can do whatever it takes to determine a dependent’s eligibility.

However, a company’s methods must be clearly spelled out in plan documents and notices – and must also be evenly applied and reasonable.

Employment law experts suggest that companies work with their providers to update their plan language in a manner that allows them to require proof of dependent eligibility and clearly spells out what will happen if employees fail to do so.