Dependent Verification Services is a six sigma service to deliver hard cost savings for corporate health care programs

1. A Ceridian best practices case study
How Ceridian’s dependent eligibility audit saved nearly $1 million
per year in health care benefits costs

2. How Ceridian’s dependent eligibility audit saved nearly $1 million
per year in health care benefits costs
Ceridian is not immune to the high cost of employee benefits. Like many
companies, Ceridian recognizes one of the best ways to differentiate itself as
an employer is to offer its employees high quality, comprehensive employee
benefits. For more than a decade, Ceridian has provided its employees with
some of the industry’s best medical, dental, vision, and life and disability
insurance plans. Offering state-of-the art benefits, however, can be expensive
— particularly during a time of significant cost increases in many benefits.
In an effort to control rising benefits costs, Ceridian uses a variety of best
“Ceridian’s research shows American practices to continue to offer its employees high-quality, cost-effective plans.
companies have ineligible dependent Several of these efforts have been chronicled in Ceridian’s best practices case
populations ranging from 5 percent to
studies, which describe in detail Ceridian’s efforts to continue to offer excellent
15 percent. These companies lose an
estimated $22 billion per year paying benefits while saving approximately $30 million in year-over-year benefits
for the health care of their employees’ costs1.
ineligible dependents, driving up health
care costs for everyone. We believe a This case study describes how Ceridian used a dependent eligibility audit to
dependent eligibility audit is one of the significantly reduce its annual cost of coverage for health care benefits.
best ways to drive fairness and equity into
the plans and reduce health care costs for
everyone.” The bottom line
In summary, Ceridian’s dependent eligibility audit of its medical, dental and
Kairus Tarapore, executive vice president, vision plans:
Human Resources, Ceridian
• Identified 342 ineligible dependents out of 6,664 total dependents covered
(approximately 5 percent of its employees’ dependent population).
• Identified an estimated $999,324 in annual benefits savings.
• Used a variety of best practices to administer the audit over approximately
six weeks.
The process
Ceridian uses the Six Sigma methodology to examine and improve all business
processes — including those of our clients — to gain a better understanding
of where efficiencies and cost savings can be realized.
Integral to the use of Six Sigma is the DMAIC framework: define, measure,
analyze, improve and control. As applied to Ceridian’s dependent eligibility
audit, the steps include the following:
Define Measure Analyze Improve Control
Define — Describe the issue a dependent eligibility audit can address.
Measure — Conduct a dependent eligibility audit.
Analyze — Review the audit’s results.
1
Detailed case studies describe Ceridian’s best practices managing its medical, 401(k), personal time off and related benefits.
For more information on Ceridian’s best practices case studies, visit our website at www.ceridian.com.
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3. Improve — If ineligible dependents are identified, remove them from
Ceridian’s benefits plans.
Control — Periodically check to make sure employees are not covering
ineligible dependents on their plans.
Issue Definition: Determining a Benefit Plan’s Eligible and Ineligible
Dependents
Define
In businesses that offer benefits plans, research indicates that approximately
80 percent of employees participate and over half of those participants
include dependents in their coverage. A 1,000-employee company that offers
a typical health plan can expect the following participation rates2:
• Employees who will participate in the plan: 810 (81 percent)
• Participants who will cover dependents: 446 (55 percent)
• Total dependents covered: 981 (2.2 dependents per participant with
dependent coverage)
• The average annual health plan cost per dependent: $3,0003
• The total health plan cost for dependents: $2,943,000 (981 dependents x
$3,000)
While it may seem that determining who is an eligible dependent under
a benefit plan is simple, in practice it can be more problematic. A benefit
plan’s summary plan document clearly defines what constitutes an eligible
dependent for the described plan. However, because there can be so many
different types of eligible dependents, each with its own detailed description,
the document requires careful employee review at the time of enrollment.
In cases where dependents were eligible under a prior employer’s plan or
an employee is required to cover a former spouse per a court document, the
employee may spend little or no time reviewing the requirements prior to
enrolling their dependents.
Similar to most benefit plan summary documents, Ceridian’s provides
detailed definitions of each dependent type. While the definitions are explicit,
some also can be lengthy. (To ensure this information is easily available to
employees, it is also maintained on Ceridian’s online knowledge base, which
employees can access at any time.) For example, Ceridian’s summary plan
document specifically details dependent types and dependent definitions.
Dependent types include:
• Spouse
• Same sex domestic partner
2
The Henry J. Kaiser Family Foundation, Employer Health Benefits 2009 Annual Survey (2009).
3
Based on Ceridian’s Health & Welfare book of business.
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4. • Child by birth
• Adopted child
• Step child
• Disabled dependent over age 26
Understanding what constitutes an eligible dependent under a company’s
benefit plan can vary by company. Therefore, almost every company’s benefit
plan includes coverage of a small percentage of ineligible dependents at
significant expense. On average, approximately 8 percent of the dependents
covered under most company’s benefits plans are ineligible dependents. Using
“In most instances, U.S. businesses provide the example of a 1,000-employee company with a typical health care plan:
employees with some form of health care coverage
that includes coverage for dependents. Even • The plan covers 78 ineligible dependents.
the most basic plans can include coverage of
several dependent types. One of the best ways to • The total cost of these ineligible dependents is $234,000 (78 dependents x
determine your plan and its participants meet all
$3,000 per dependent).
ERISA obligations is by periodically conducting a
dependent eligibility audit to ensure your plans are
administered in accordance with the terms of the Ceridian’s research shows American companies lose an estimated $22 billion
plan documents.” per year paying for the health care of their employees’ ineligible dependents4.
Almost any company that offers its employees a typical health care coverage
Jennifer Bichsel, vice president, plan would benefit from conducting a dependent eligibility audit. Over the last
U.S. Benefits, Ceridian three years, an increasing number of companies have performed or planned to
perform some form of dependent eligibility audit.
Figure 1 – Annual Dependent Audit Survey of 453 Large Employers5
80%
60%
61%
55%
40%
42%
20%
0%
2007 2008 2009
Figure 1 illustrates the increase in the number of companies conducting
dependent eligibility audits, recognizing the audits as one of the most
immediate, reliable, legitimate and cost-effective ways to reduce total health
care costs.
4
Ceridian’s $22 billion estimate is based on a formula that relies on data from governmental, public and private sources
(the private sources are primarily derived from Ceridian’s book of business).
5
Towers Watson, “Companies Remain Confident in Future of Health Benefits, Watson Wyatt/National Business Group on Health
Survey Finds — March 2009” (March 12, 2009).
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5. Conducting a Dependent Eligibility Audit
Measure Ceridian used its Dependent Verification Services to manage its dependent
eligibility audit, in large part, because they have experience, knowledge of
best practices, and a variable pricing structure. Some of the reasons Ceridian
Dependent Verification Services was chosen to conduct Ceridian’s audit
included:
• Proven Track Record. With regard to dependent eligibility audits, Ceridian
knows what does and does not work. Over the past 12 months, Ceridian has
performed more than 16,000 audits and collectively saved clients millions of
dollars.
• Immediate Savings. In as few as 90 days, Ceridian’s Dependent Verification
Services can significantly reduce a company’s health care costs.
• Expertise. Ceridian has the KnowHow to remove ineligible dependents from
health plans without jeopardizing the legal compliance of the plans.
• Real-time Progress Reporting. Ceridian’s technology enables clients to
view real-time audit results online (and the estimated savings).
• Ease of Employee Access to Important Information. Employees and staff
can access their accounts 24/7 and communicate with Ceridian via phone,
Web, paper, fax and email. Ceridian also uses document imaging for all
inbound fax and mail, simplifying document processing and review.
• Personalized Assistance. Ceridian’s call center experts make it easy for
employees to get answers to their questions.
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6. Ceridian’s dependent eligibility audit took approximately eight weeks to
complete (including a two-week grace period). The audit began August 30,
2010, and ended around the end of October. The summary of the audit process
is described in Table 1.
Table 1. Ceridian’s Dependent Eligibility Audit Process
Date Communication(s) Description/Purpose
Annual Ceridian Announced in its Annual While proof of documentation was not required,
Enrollment Enrollment Guide that all employees participants with dependents covered under the plan
for 2010 with dependents in medical, dental were required to review the eligibility requirements
(Fall 2009) and vision were required to certify and certify their dependents met the eligibility
their eligibility. requirements. If they were ineligible, they should
have been removed from coverage. Participants were
also informed that Ceridian would be conducting an
audit in 2010.
Week 1 Emailed announcements to employees The document provided all plan participants with
(August 30) describing the dependent eligibility detailed dependent types, definitions and what
process with a link to an enrollment the audit required to confirm eligibility (copy of
site. The email included the Ceridian a marriage certificate, birth certificate, notarized
Verification Services — Dependent affidavit, etc.). The process stated a clear end date:
Types, Dependent Definitions and September 30. Employees were provided with a
Eligibility Documentation. toll-free customer support number for follow-up
questions.
Week 2 Mailed the Dependent Audit Requests Similar to the email distributed in week 1, these
(September 6) to employees’ homes, which also communications described the process, explained
included the dependent definitions how to log on to the website, defined dependent
and the Certificate of Dependent types and provided a certificate that needed to be
Eligibility. signed and returned with the appropriate proof of
eligibility. Employees were reminded they must
complete the process by September 30.
Week 3 and Depending upon the status of the The notice provided a status update to the employee.
ongoing verification, the employee received
(September 13 a Documents Verified notice or a
and ongoing) Pending Determination notice.
Week 4 Emailed First Reminder notice. Employees were given a first reminder to prove
dependent eligibility by September 30.
Week 5 Emailed Final Reminder notice. Employees received a final reminder to prove
dependent eligibility.
Weeks 6-8 Depending upon the status of the Dependents of employees who did not respond
employee’s verification, the employee to the audit or were unable to provide the proper
received an Eligibility Not Verified documentation were removed from coverage.
notice or a No Response to Dependent
Audit notice.
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7. Figure 2 provides an overview of the audit timeline Ceridian used to conduct
its dependent eligibility audit. While the initial employee notices described
a September 30 response deadline, a grace period extended the length of
the eligibility audit to more than six weeks. Ceridian wanted to make sure it
provided employees ample opportunity to respond to the request, and to
make sure all their questions were answered. Employees could send their
questions via an email address, or call a toll-free customer support line.
Figure 2 – Ceridian’s Dependent Eligibility Audit Timeline
Amnesty/
Declaration Implementation Veri cation Initial reminder Final reminder Beginning of silent Audit end, report
During Annual period start letter sent letter sent letter sent grace period out to client
Enrollment
2010 Annual Enrollment Guide
For full- and part-time benefits-eligible employees based in the U.S. for Ceridian, Comdata and Stored Value Solutions
Table of Contents
NOVEMBER 2009
S M T W T F S
2010 Benefits Annual
Enrollment
2010 Benefit Highlights 1
1 2 3 4 5 6 7
What’s Changing for 2010 2
8 9 10 11 12 13 14
Dependent Verification 3 15 16 17 18 19 20 21 It’s annual enrollment time again — your once a year
Pre-Tax Reimbursement 22 23 24 25 26 27 28 opportunity to review the Ceridian benefits available to you,
Accounts 4 29 30
decide which ones are right for you and your family, and enroll
New Vision Provider 5 in benefits from November 9 through November 20, 2009.
Life Insurance and AD&D 6
Disability 7
Make Informed Choices
Medical Plan Details
8
9
2010 Ceridian Benefits Highlights
How to Enroll 12 Healthcare costs continue to rise and remain one of the key issues facing the country and
corporate America. At Ceridian, we review our plans every year to ensure that we continue to
provide competitive health and benefit programs that meet the needs of our employees and
Special Features remain cost e ective.
Available Online:
In 2010, even though healthcare costs continue to rise, we will not be increasing our monthly
• Use the medical cost premiums for our core Blue Card PPO plans. To help mitigate some of the cost increases, we
estimator will be making changes to our plan design by increasing our copays/ deductibles and out-of-
• Compare plans in an pocket maximums. As you prepare for Annual Enrollment, please review the information in this
easy-to-read format Guide which will update you on each of our benefit programs and summarizes the changes for
2010.
• View your Personalized
Benefit Worksheet We are also excited to implement the following new Health and Wellness opportunities for 2010:
• Use the Flexible Spending • 100% coverage for Preventive Care
Account calculator • Full-integrated Disease Management program partnering with Blue Cross and Blue Shield
and Life Works.
• 24-Hour Nurseline
• Incentive Program for participating in a Life Health Assessment
On-line Confirmation • Incentive Program for participating in a program with one of our Health Coaches
Statements:
We are looking forward to this partnership and additional health and wellness o erings for all
30-day 60-day ~15-day
Employees will not receive a employees in the future. This is an opportunity to create a culture that emphasizes prevention
mailed copy of confirmation and shared responsibility between you and Ceridian to manage health and health care costs.
of 2010 Benefit Elections.
A printer friendly version
will be available as soon as New for 2010: Dependent Verification
you complete your on-line If you have dependents in a Ceridian medical, dental or vision plan, you will be required to
Veri cation Period Silent Grace Period
enrollment. certify their eligibility during Annual Enrollment.
Implementation Period
Ceridian is responsible for ensuring that the dependents covered under our plans meet and
are in compliance with our eligibility requirements. Instead of asking everyone to provide
documentary proof of eligibility, we are asking for everyone with dependents covered by
one of Ceridian’s plans to complete a declaration certifying that your dependents meet
the requirements. Although we are not asking you to provide proof at this time, we will be
conducting random audits throughout the year and may ask for supporting documentation
at that time.
If you have dependents in Ceridian’s plans and you do not certify their eligibility during
Annual Enrollment, their coverage will be dropped as of 12/31/09 and they will not have
coverage for 2010. You will not be able to reinstitute your dependent(s) until 2011, unless
you have a Life Status Event.
Please turn to page 3 for more details.
Results of the Dependent Eligibility Audit
In terms of the DMAIC process, both analyze and improve are an intrinsic part
Analyze of conducting a dependent eligibility audit. At the end of Ceridian’s process,
the summary metrics included the following (out of a total of 6,266 eligible
employees and retirees):
• Employees and retirees participating in Ceridian’s health care plan: 5,396
(86 percent)
• Plan participants with dependents covered under the plan: 2,924 (54
percent)
• Number of actual dependents covered under the plan: 6,664 (2.28 per
participant with dependent coverage)
• Number of ineligible dependents the audit surfaced: 342 (5 percent of total
dependents)
• Ceridian’s annual health plan cost per dependent: $2,922
• Annualized saving by removing ineligible dependents from Ceridian’s health
care plan: $999,324
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8. The improve part of the process involved removing the ineligible dependents
Improve from benefit plan coverage. In the case of Ceridian’s audit results, the
improvement resulted in a savings of almost 1 million dollars per year.
After the dependent eligibility audit was completed, Ceridian’s review of the
process resulted in important lessons learned that would help when conducting
future audits.
Required Documentation: The audit identified several employees whose
dependents were clearly eligible for coverage, but who — because the
documentation required to support their eligibility was narrowly defined —
needed to prove their eligibility using different means. For instance, the audit
process identified several employees who were married but filed their taxes
separately, and others who could not produce a marriage certificate (both were
part of the documentation requirement). For these rare exceptions, Ceridian
allowed other forms of verification (e.g., a joint mortgage or renter’s agreement).
In addition, future audits may not require the proof of both a marriage certificate
and a tax document.
Call Center Support: Ceridian uses a Benefits Service Center that employees can
call with questions regarding their benefits. For the dependent eligibility audit,
Ceridian used a separate call center with representatives dedicated to answering
questions only about the audit. In some instances employees with questions
about the audit first contacted the Benefits Service Center. Unfortunately, Benefits
Service Center representatives had not been prepared to adequately answer
those questions. For future audits, Ceridian believes a best practice would be to
provide the Benefits Service Center representatives with written scripts to help
them field and/or refer questions to those best suited to answer dependent
eligibility questions.
Control — Follow-up and Review
Control The DMAIC process requires a periodic follow-up and review of Ceridian’s
dependent eligibility audit. As part of Ceridian’s ongoing control effort, every new
hire must prove the eligibility of their dependents by reviewing the appropriate
dependent types and definitions and declaring their eligibility. In addition,
during the next few benefits annual enrollment periods, Ceridian will require
all employees to attest to the eligibility of their dependents in order to declare
them eligible for health care. It’s also important to stay current with health care
legislation and regulations that are evolving. Ceridian will make certain its plan
continues to meet all legal and regulatory requirements while using best practices
to ensure all of its employees’ dependents are eligible for plan coverage.
Ceridian is a human resource (HR) services company with significant KnowHow in
all areas of human resource management. Ceridian constantly uses its knowledge
of best practices, process improvement methodologies and industry benchmarks
to examine its employee programs. Ceridian’s recent dependent eligibility audit
is just one of the company’s efforts to better manage overall HR costs so we can
continue to provide all employees with an excellent benefits package.
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9. This document contains information that is proprietary and/or confidential to Ceridian
Corporation and is intended solely for the use of our customers and prospects in
evaluating Ceridian solutions. Any other use or distribution is prohibited.
This document is not to be duplicated or distributed in printed or electronic format
without the prior written consent of Ceridian Corporation.
© 2011 Ceridian Corporation. All rights reserved.
Ceridian | 3311 East Old Shakopee Road Minneapolis, Minnesota 55425 | 800-729-7655 | www.ceridian.com
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