Brokers and Consultants frequently ask whether some geographies or industries are “better” for dependent audits than others. Is transportation better than law offices? Do blue-collar industries have a higher amount of fraud than white-collar? Are there higher rates of ineligibility in the West Coast vs. Deep South?
The simple answer is that while industry and geography play a part in general dependent ineligibility trends, turnover, organizational culture, richness of benefits, and a decentralized workforce also play important roles in the rate of ineligible dependents being covered.
Ineligibility by Industry*
Ineligibility by Geography*
- Northeast: 4.9%
- Southeast: 6.7%
- East Coast: 5.3%
- Upper Midwest: 6.1%
- Midwest: 4.8%
- Southwest: 7.7%
- Northwest: 7.2%
- West Coast: 8.1%
- Gulf Coast: 6.7%
- Southern Border: 7.9%
- Northern Border: 5.0%
Businesses with low turnover tend to have lower rates of ineligibility. This may be attributed to employees having a better understanding of dependent eligibility rules and guidelines, but an argument also exists that the longer an employee works at a company the more “known” she/he becomes, and therefore less confident trying to exploit the availability of dependent coverage.
Businesses with an employee-centric culture have lower rates of ineligibility. Software and Hi-Tech companies for example, that invest in employee retention and development, tend to have extremely low rates of ineligibility. Family owned companies with flat organizational structures also tend to have lower rates of ineligibility, 4.1% versus the national average of 5.5%. The general trend is that employees who feel taken care of by their employers are less likely to defraud the employer with an ineligible dependent.
Richness of Benefits
Employers offering rich benefits tend to cover more dependents per employee on average, and tend to have higher than average rates of ineligibility. The public sector and union employees average ineligibility rates of 7.9% and 8.6%, respectively, well above the national average of 5.5%. Each of these groups traditionally offer benefits more rich than other industries. A feeling of entitlement may also play a part, particularly in long-tenured employees who feel “above the law.”
The biggest factor impacting the rate of ineligibility is decentralization of the workforce. Put simply, employees who work at a location away from a centralized HR office are more likely to be covering ineligible dependents. (Examples: Retail chains, restaurant chains, hotel chains, etc.)
For compliance and savings reasons, any organization offering dependent medical coverage should ensure that they are only covering those dependents that are truly eligible.
*DSI proprietary book of business data, calendar year 2017
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