School Solutions                                             Page 44

Curbing Health Care Costs

Through Eligibility Audits   




 Richard Flaherty


Educational institutions nationwide are feeling budgetary pressure from costs they can’t directly control — including employee health care.

To help address this issue, AASA has named my company, HMS, as its recommended provider of dependent eligibility audits for K-12 schools nationwide. HMS has conducted -successful dependent eligibility audits for health care for more than 400 school districts.

Dependent eligibility audits are proven to help school systems manage the costs of their employee health care plans without requiring them to renegotiate contracts or cut existing benefits.

The Challenge
On average, between 4 to 8 percent of dependents who are enrolled in employer-sponsored health care plans are not eligible for coverage. The costs used to cover these ineligible dependents could fund teacher salaries, textbooks or activities supporting students.

Few strategies offer a greater immediate and substantial opportunity to reduce costs than the dependent eligibility audit.

These audits produce results. For each ineligible dependent identified and removed, school districts can save an average of $3,500 per year. The return on investment averages an astounding 800 percent. Consider the situation that HMS found when it audited the Non-Monroe County Municipal School District Program in western New York in 2010.

The Non-Monroe County Municipal School District Program is a consortium of 38 school districts and other entities. The consortium provides a cost-effective alternative to deliver a quality health insurance to more than 8,500 employees and retirees.

The consortium, which annually experienced about $100 million in claim expenses, used a broker to find a vendor to conduct a dependent eligibility audit.

When the consortium weighed potential bids, it considered experience, price, ROI, a respectful approach to the process and the recommendation from AASA, HMS was the organization’s vendor of choice.

We collaborated with the consortium to get the maximum result in the following ways:

  • HMS worked with each school district to determine the definition of an eligible dependent based on the summary plan documents.
  • The consortium ensured each district understood what to expect before the review process started.
  • HMS sent out 38,000 clearly written communications during the school year, when employees were able to receive both internal and external communications. The consortium received a 98.9 percent response rate to the review, higher than industry averages.

Employees and retirees were asked to submit the proper documents to verify their dependent’s eligibility and were given several options for document submission (postage-paid return envelopes, toll-free fax or HMS’s online portal available 24/7). Fifty-nine percent of the 8,529 employees and retirees enrolled in the health plan responded through the online portal.

Significant Results
HMS audited a total of 18,677 dependents enrolled in the health plan. Ultimately, 7.6 percent (or 1,427) of the dependents were removed from the consortium’s plan because they did not meet the eligibility guidelines or because employees or retirees did not provide appropriate documentation to verify eligibility. These results represent $3,567,500 in cost-avoidance savings for the consortium and a 2,497 percent return on investment.

This dependent audit resulted in immediate savings. The findings also will slightly reduce the following year’s rate increase, directly benefiting employees.

“It was the right thing to do,” said Rick Amundson, superintendent in Lyons, N.Y., a Rochester suburb, and a member of the consortium’s board of directors. “It’s paid for itself and actually exceeded my expectations.”

Richard Flaherty is vice president of sales and marketing for HMS in Jeffersonville, Ind. E-mail:

*Please note: Richard Flaherty no longer works at HMS. Related questions/comments can be directed to Jonathan Heath, national sales director for HMS at

A full list of the firms that make up AASA's School Solutions Center is available at


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