Take advantage of opportunities to conduct self-audits of your employee benefits program.

The February edition of Compliance Priorities and Perspectives offers ten action steps to help you identify potential areas of benefits administration that your organization can subject to self-audit. Seek to correct compliance failures before they lead to penalties or legal damages and improve the wellbeing of your organization.

Maintaining your organizational wellbeing requires a broad view of all the factors that impact your ability to achieve business objectives. But from that broad view, looking from different angles can help identify where your organization's areas of opportunity — and exposure to risk — lie, especially when it comes to legislative compliance. That's where Priorities and Perspectives comes in. By helping you look at your compliance risks from a different angle, focusing in or zooming out, you'll gain a new frame of reference on your key priorities. To understand those priorities, employers can take advantage of opportunities to conduct self-audits. Check out the action steps below to help you identify potential areas of benefits administration that you can subject to self-audit and seek to correct compliance failures before they lead to penalties or legal damages.

  1. Find. Address. Fix. Conducting a self-audit of one or more of your employee benefit plans is an opportunity to find and address compliance issues before a governmental agency or a litigant draws an issue to your attention. Self-audits can take many forms, including a review of eligibility for benefits, an assessment of compliance with underlying processes (such as benefits or COBRA administration), and a determination of how well a plan meets legal requirements. When deciding to conduct an audit, your organization should determine the scope and purpose of the audit and the responsibilities for results. In addition, your organization should be committed to fixing problems or violations uncovered during the audit. Your organization may also wish to engage legal counsel for oversight or advice on how to address results and possibly to protect "attorney-client" privilege. What type of self-audit would benefit your compliance efforts in connection with your employee benefits offering?

  2. Request. Verify. Remove. A dependent eligibility audit may be undertaken to ensure that a plan is following plan terms with regard to eligibility and that the plan is not misusing plan assets by providing coverage to ineligible individuals. Most plans permit employees to cover their spouses and dependent children. Often, plans will permit employees to sign acknowledgments verifying that their children or spouses are eligible for coverage under plan terms when first enrolling. Plans may require employees to provide additional documentation, such as marriage certificates, birth certificates, or adoption papers. However, in order to require additional documentation as part of eligibility, such plans must include language in their SPDs addressing employees' obligations to provide documentation upon request. Typically, a dependent eligibility audit involves requesting documentation to establish that spouses and dependent children meet the relationship (and, as applicable, age) requirements for coverage. Thus, if your organization wishes to perform a dependent eligibility audit, it should first check the eligibility language for the applicable benefit (e.g., medical) to ensure that the plan language allows you to ask for documentation. Then, a timeline should be established to seek and receive documentation. Next, after verification, or failure to obtain verification, the plan should take appropriate action. For example, if an individual cannot or does not provide appropriate documentation, the plan should take action to terminate coverage. However, any termination of coverage should be conducted in a manner that complies with the rules related to rescissions under the Patient Protection and Affordable Care Act (ACA). How would a dependent eligibility audit reinforce your efforts to follow plan terms properly?

  3. Classify. Review. Reclassify? An area of concern related to employee benefits eligibility that arises from time to time is the correct classification of employees. Misclassification of employees as independent contractors or other non-employees can lead to two major issues. First, if an employee is misclassified as a non-employee rather than an employee, and was not offered benefits because of the misclassification, then that individual could sue the employer over a failure to offer coverage. Second, if an employee is misclassified as a non-employee and is not offered coverage, but should have been, then the employer may be responsible for an Employer Shared Responsibility payment under the ACA for failure to offer that individual affordable, minimum value coverage. If an employer misclassifies a high number of individuals as non-employees, then that could cause the employer to fall below the 95% threshold under the Employer Mandate and become liable for a 4980H(a) penalty ($2,000 (as indexed) x the number of full-time employees — 30). Thus, employers with individuals classified as independent contractors, particularly those with rehired retirees classified as independent contractors, and other non-employees, should take care to review whether those individuals are correctly classified as non-employees periodically. What would a self-audit show about your employee classifications?

  4. Understand. Assess. Process. A self-audit assessing compliance with underlying processes may include a review of claims processing, recordkeeping, and other systems affecting plan administration. When third-party administrators handle processes, it is important to understand and assess their processes. However, it is also important to understand how well your own organization is handling processes that may be associated with or lead up to action by a third-party. For example, most employers with health plans should have designated HIPAA Workforce Members who can address claims issues on behalf of employees. Such employers should ensure that employees' claims issues are handled in a manner that protects the confidentiality of those claims, and if an issue is presented in an electronic format, such as email, that the process also protects the integrity and availability of associated electronic protected health information (PHI). A HIPAA Workforce Member should also be able to document how he verified the identity of the individual seeking assistance, and if handling the claims issue results in a disclosure of PHI that must be documented, a process should be in place to create the documentation. Prudent employers will assess how their plans' processes coordinate with their third-party administrators and whether those processes meet any applicable legal requirements. Which of your internal benefits processes would benefit from a self-audit?

  5. Provide. Evaluate. Satisfy. A self-audit of compliance with the Mental Health Parity and Addiction Equity Act (MHPAEA) generally requires that group health plans and health insurance issuers offering group or individual health insurance coverage ensure that the financial requirements and treatment limitations on mental health or substance use disorder (MH/SUD) benefits they provide are no more restrictive than those on medical or surgical benefits. This is commonly referred to as providing MH/SUD benefits in parity with medical/surgical benefits. The Department of Labor (DOL) has primary enforcement authority with regard to MHPAEA over private sector employment-based group health plans, while the Department of Health and Human Services (HHS) has primary enforcement authority over nonfederal governmental plans, such as those sponsored by state and local government employers. MHPAEA compliance is a top priority for the DOL. To help employers determine if their group health plans are in compliance with MHPAEA, federal regulators have made a Self-Compliance Tool available. Interested employers can access the tool on the DOL's website. The goal of this Self-Compliance Tool is to help group health plans, plan sponsors and plan administrators determine whether a group health plan satisfies MHPAEA's requirements. How well does your plan meet the requirements of MHPAEA?

This is a preview of Priorities and Perspectives. For five more action steps to help you focus your employee benefits compliance efforts in 2020, contact your Gallagher representative or the subscribe button and receive the full version of Priorities and Perspectives featured in the Gallagher Better WorksSM newsletter monthly..

Subscribe today

Compliance is a series of actions, not a final destination. As a trusted advisor, Gallagher has developed this Priorities and Perspectives series to help you pursue a path through employee benefits compliance issues as part of an overall continuing compliance plan. Employers should carefully evaluate their health and welfare plans to determine if they are in compliance with both federal and state law. If you have any questions about one or more of the compliance destinations listed above, or would like additional information on how Gallagher constantly monitors laws and regulations impacting employee benefits in order to support employers in their compliance efforts, please contact your Gallagher representative.

The intent of this analysis is to provide you with general information. It does not necessarily fully address all your organization's specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues should be addressed by your organization's general counsel or an attorney who specializes in this practice area.