Controlling Health-Care Costs

Wednesday, July 22, 2015

To address rising health-care costs, the City of Corpus Christi, Texas, conducted an audit of its health-care benefits plan in 2013. To the surprise of city officials, the dependent eligibility audit led to a savings of more than $1 million the first year.

Growing health-care costs have forced many municipalities to increase the amount of employees’ financial contributions to their health-care plans and/or to reduce benefits, and Corpus Christi was no exception. To avoid cutting benefits, however, the city looked for cost-saving measures that would allow it to maintain a competitive employer-sponsored health-care plan. Beginning in 2012, Corpus Christi hired a consulting company to conduct a dependent eligibility audit to ensure that all the dependents covered by the city’s plan were in fact eligible for benefits. The audit identified 369 ineligible dependents out of 3,367 dependents reviewed, leading to a savings of $1.104 million. Nationwide, such audits find an average 8% of dependents to be ineligible for benefits.

Before conducting the audit, Corpus Christi began a communications campaign to help employees understand its importance and to assure them that there would be no changes to the benefits of eligible dependents. The city was transparent with the audit, providing the option for employees to remove ineligible dependents, without penalty, and allowing them six months to prepare and make any necessary changes. Communication, both early on and throughout the process, helped build employee trust and was instrumental to the success of the project.

Dependent eligibility audits have emerged as a valuable tool for reducing health-care costs, but they can be time consuming and resource intensive if conducted internally by an organization’s human resource staff. Contracting with a third-party vendor to conduct an audit can often reduce the jurisdiction’s commitment of time and resources. Vendors also bring a level of experience and technology to the process. As health-care costs continue to increase, public-sector organizations are increasingly considering these audits as a tool for reducing costs while maintaining the plan’s benefit structure.

To learn more about Corpus Christi, click here.

Related Training:

Related Best Practices:

Related Publications: