By Kathryn Watson | Watchdog.org Virginia Bureau
ALEXANDRIA — The national health-care plan will probably gobble up all of the money the University of Virginia hoped to save as auditors review its health-care plan.
Virginia’s largest publicly funded university is losing hundreds of thousands of dollars each year by paying for ineligible dependents, according to estimates from an ongoing audit.
But UVA won’t be rewarded for weeding out the projected $1.8 million wasted annually (90 percent by the university, 10 percent by employees) on ineligible dependents. Many of the dependents are either divorced spouses or children who have “outgrown” the age-26 limit for staying on the university plan.
Instead, the university has to divert its savings — or misguided expenditures, depending on how one looks at it — to foot the roughly $7 million bill for the Affordable Care Act’s new employer penalties, said Susan Carkeek, vice president and chief human resources officer at UVA.
“We’re expecting fairly significant cost implications from the Affordable Care Act that pass on new penalties and charges, fees to employers — probably in the order of $7 million a year,” Carkeek told Watchdog.org. “So this will help us offset future cost increases.”
UVA officials are looking at increases in co-pays and deductibles, as well as helping employees and dependents fight chronic health problems by promoting a healthy lifestyle.
Increasing health-care costs — such as those in the Affordable Care Act — are forcing institutions such as UVA to take a closer look at how they spend their money. Thus the dependent eligibility audit.
Aetna, the university’s health provider, is contracting with the private company, Xerox HR Solutions, for the $120,000 audit.
If the 6 percent rate of ineligible dependents, based on a pilot audit run last year, holds true, the university can expect to knock about 850 ineligible people from its plan for a total savings of roughly $1.8 million.
As Carkeek told Charlottesville’s Daily Progress, which reported the original story, “It’s a pretty high return on investment.”
Of the state’s 15 four-year universities, UVA — one of the largest employers in the state — is the only one with its own health plan, which covers 14,000 employees and 28,000 people for about $135 million annually. The university-employee cost split is roughly 70-30, Carceek said. State taxpayers fund 30 percent of that 70 percent figure —around $28 million.
After last year’s pilot audit, UVA officials decided the potential benefits far outweighed the cost.
“Our health plan folks had been recommending it, but it’s a lot of work and it’s an investment of time, and you have to be prepared to take that on administratively if you’re going to do it,” Carkeek said.
In 2009, the Commonwealth of Virginia ran a dependent eligibility audit for the first time in more than a decade, resulting in 1,927 ineligible dependents getting kicked from the list out of roughly 51,500 total dependents audited.
“The commonwealth had estimated savings of $6.3 million,” Anne Waring, communications director for Virginia’s Department of Human Resource Management, said in an email.
A decade ago, dependent-eligibility checking was a nascent concept, but recession-inspired belt-tightening and rising health care costs are changing that.
Employer demand for scrutinizing dependents’ eligibility has grown dramatically — particularly in the public sector, said Greg Fischer, vice president of employer solutions at HMS, a dependent eligibility-checking company that started in 2004 and has since run dependent eligibility audits for states such as Minnesota, Colorado, Kentucky, Iowa and Maine. California’s CalPERS, the nation’s largest public pension and health benefits fund, is its newest client.
“We’ve definitely seen a growth on the government side,” Fischer told Watchdog.org.
On average, employers — whatever their size — can expect to find roughly 8 percent of their rolls ineligible, saving $3,000 per ineligible person struck from their plan, Fischer said.
In UVA’s sample audit, dependent ineligibility was about 6 percent.
Carkeek said university leaders will decide how to better monitor dependent eligibility after the audit is finished, later this year.
“We’ll wait to see what the audit produces, and then that will signal to us what changes we need to make,” she said.
Email Kathryn at [email protected]