Eligibility

Eligibility is the set of rules that decide who can be on a health plan. For employees it usually turns on hours worked and job class; for dependents it turns on relationship and age. The plan document sets the rules, and the employer's payroll and HR systems are supposed to apply them the same way every time.

The Affordable Care Act made 30 hours a week the line for larger employers: an employer with 50 or more full-time-equivalent employees must offer coverage to anyone averaging 30 hours or face a penalty. Employers with variable-hour workers track eligibility through measurement periods, typically looking back 12 months to decide the next 12. Eligibility mistakes cut both ways. An employee kept on the plan after dropping to part-time can have a $200,000 claim denied by the stop-loss carrier because the person wasn't eligible. A dependent audit at a mid-size employer typically finds 3 to 8 percent of covered dependents don't qualify, which at $6,000 a year per dependent is real money. Carriers and stop-loss underwriters check eligibility on large claims, and they are looking for exactly these errors.

The takeaway: reconcile the enrollment file to payroll every month, not once a year. The claim that gets denied for ineligibility is never the small one.