Who Steals Healthcare Insurance?

What happens when a firm starts a “dependent verification” program designed to make sure that its employees are carrying only legitimate dependents on their health insurance? The economists Michael Geruso and Harvey Rosen ask that question in a new working paper called “Fraud in the Workplace? Evidence from a Dependent Verification Program” (abstract; PDF). A few key sections are bolded below:

In recent years many employers, both in the private and public sectors, have implemented dependent verification (DV) programs, which aim to reduce employee benefits costs by ensuring that ineligible persons are not enrolled in their health plan as dependents. However, little is known about their efficacy. In this paper, we evaluate a DV program using a panel of health plan enrollment data from a large, single-site employer who implemented it several years ago. We find that relative to all other years, dependents were 2.7 percentage points less likely to be reenrolled in the year that DV was introduced, indicating that this fraction of dependents was ineligibly enrolled prior to the program’s introduction. These disenrollment effects were especially large for same-sex partners and older children. We show that the program did not induce employees to leave the employer’s plan and (say) put themselves and their dependents on the spouse’s plan. We also show that disenrollment occurred because dependents were actually ineligible, not because of compliance costs that might be associated with providing documentation. The DV program saved about $46 per enrolled employee. A considerable fraction of these cost savings came from removing older children who didn’t meet additional criteria. Therefore, the dependent coverage provision of the Affordable Care Act of 2010, which essentially renders all children up to age 26 eligible in all employer health plans, will substantially limit the future cost saving potential of such programs. Hence, as the state governments and private employers that have implemented DV programs adapt to the new regulatory environment, the popularity of dependent verification programs may well diminish.

The next time you’re counting up all the reasons why employer-based healthcare insurance is a bad idea, you can include this one, too.

Seminymous Coward

$46 per employee and all you have to do is kick people off health insurance? It even disproportionately affects same-sex couples without having to explicitly discriminate. It's like an evil CEO stereotype's dream.

Chad Morgan

Add up reasons why employer based HC is a bad idea? Seriously? And you think the government offered solution is better? Data please....

Better idea - get government out of HC, at least enough so that I can have a HC center on every streetcorner (like gas stations) - or maybe just to the level my cats have in their choices of vets - e.g. remove red tape, intrusion, oversight and senseless policies that are detrimental to easy access to HC. You know, like those "certificate of need" processes and legislation (like my state has, which prevents competition)...

And lastly promote systems that discourage using "insurance" as a payment plan...the two are vastly different. We should treat them as such.

But, alas, the cause is lost I fear - Stephan, what next? Government run roofing care? Oh yeah Fannie has that - Government clothing care, then?

I challenge that the same set of economic considerations apply to HC just like any other human endeavor, need or desire...so why would you beat up on employer HC plans and not argue full tilt for government run everything? The logic would seemingly apply to food, clothing, shelter and even entertainment...right?

Your comment is utterly disappointing for fan like me...


Enter your name...

He didn't say that he favored government-run healthcare, only that there were problems with employers controlling health insurance.

Matt Lurton

The problem is not just with children & same sex partners. Same sex partners can be covered legitimately by plans if set up that way. We have had many CUI 1002 O4plans that employees have left ex-spouses covered for years after their divorce. Also many times these individuals have duplicate coverage at their own jobs. Why cover all these people who are not eligible and thus have fraudulent insurance coverage? A good, fair plan will take care of employees and their true dependents without bankrupting the company. For non-dependents it is just as wrong as stealing company office supplies & equipment. If the plan at your job does not cover you and your dependents like you need then get out and find an employer who does.


CalPERS, the California Public Employee Retirement System, recently sent a letter to its 1.6 million members declaring amnesty for removing dependents that are no longer eligible for dependent coverage.


i cant imagine many people forgoing health insurance


Pardon me for thinking, but would not the same sort of ineligible dependents on a policy be just as likely to happen with non employer-based health insurance coverage?


The Dependent Verification programs also target divorced parents to make sure that minor children are not covered under two plans...