University of Virginia

Dependent Eligibility Verification Initial Project Results

July, 2012

Table of Contents
I. Executive Summary .............................................................................................................................................................................................................. 2 II. Project Methodology ............................................................................................................................................................................................................ 5 III. Project Results..................................................................................................................................................................................................................... 6 A. Cost Avoidance / Employee Responses ...................................................................................................................................................................... 6 B. DEV Service Center Results .......................................................................................................................................................................................... 7 C. DEV Project Management Results ............................................................................................................................................................................... 8 V. Dependent Eligibility Verification Recommendations ..................................................................................................................................................... 9

I. Executive Summary
TOTALDEPENDENTPOPULATIONBREAKDOWN
IneligibleChild IneligibleSpouse IneligibleChild OverAge19

PROJECTSTATISTICS
Participants Description
Eligible IneligibleSpouse IneligibleChild
Eligible IneligibleSpouse IneligibleChild IneligibleChildOverAge19 TOTAL

Typicalproject demonstrates2.0 dependentsperemployee %Removal Benchmark

Count
1,370 31 34 25 1,460

%
94% 2% 2% 2% 100%

Employees 721 Dependents 1,460 Avgdep/employee:Preproject Avgdep/employee:Postproject DependentType # Spouse Child ChildOverAge19

2.0 1.9 #Removed

Eligible

IneligibleChildOverAge19

Totalineligibledependents=90

570 31 678 34 212 25

5% 5% 12% 6%

5% 3% 11% 10%

TOTAL 1,460 90

INELIGIBLEDEPENDENTBREAKDOWN:ByResponseType
Incomplete Ineligible (Response) Ineligible(Response) NoResponse No Response Incomplete

COSTAVOIDANCECALCULATION(ROI)
IneligibleReason
Ineligible(Response) NoResponse Incomplete TOTAL

Count
11 64 15 90

%
12% 71% 17% 100%

DependentType Spouse* Child* ChildOverAge19* TOTAL

Total Removed 31 34 25 90

$$$/ Dependent $3,700 $1,500 $1,500

CostAvoidance $114,700 $51,000 $37,500 $203,200

Themajorityofincompleteresponseswereduetomissing documentation.

EstimatedROI:10.1to1

INELIGIBLEDEPENDENTBREAKDOWN:ByResponseRemovalReason(NonResponsenotincluded)
IneligibleReason
Accesstoemployercoverage IneligibleIncomplete Accesstoemployercoverage Accessto employer coverage IneligibleIncomplete TOTAL(excludesNonResponse)

COMMENTS
Count
11 15 26

%
42% 58% 100%

Ineligible Incomplete

*SpouseandChildamountsarestandardBuckestimates

In October 2011, the University of Virginia engaged ACS HR Solutions (ACS) to conduct a Dependent Eligibility Verification (DEV) project on ten percent (10%) of the employee population taking part in the University of Virginia health care programs. The goal of the project was to validate the eligible status of all dependents enrolled in the various University of Virginia health care benefit programs. In order to accomplish this goal, the University of Virginia selected the Proof of Eligibility (POE) methodology. This methodology consists of the questionnaire responses and submitted documentation used to verify that enrolled dependents were in compliance with the eligibility guidelines set forth in the University of Virginia Summary Plan Description (SPD). The following table is a summary of the project results: DEV Project Statistics Summary
Statistics by Employee Initial Project Enrollment Removed from Audit Net Employees w /Dependents Employees w/ Ineligible Dependents Statistics by Dependent Net Dependents Reviewed* Eligible Dependents Eligible Dependents Benchmark Ineligible Dependents Ineligible Dependents Benchmark Ineligible Dependents Removed Cause (100%) Did not meet eligibility requirements No response Incomplete response Total Ineligible Dependents Removed Estimated Annual Cost / Dependent for Medical Benefits Total Estimated Cost Avoidance / Savings
* Excludes dependents removed due to natural attrition.

Total 732 (11) 721 65

1,460 1,370 90

% (0.02) 9.0%

SP/DP

Child

Adult Child

Employee ineligible dependents reported by category will result in the sum of the detail exceeding the total column, due to multiple dependents per employee within each category.

31
570 539 31

4.3%

34
678 644 34

4.7%

25
212 187 25

3.5%

93.8% 6.2%

94.6% 95.0% 5.4% 5.0% 0.0% 3.3% 2.2% 5.4%

95.0% 97.0% 5.0% 3.0% 0.0% 4.9% 0.1% 5.0%

88.2% 89.0% 11.8% 11.0% 5.2% 5.7% 0.9% 11.8%

11 64 15 90

0.8% 4.4% 1.0% 6.2%

0 19 12 31 $3,700

0 33 1 34 $1,500 $51,000

11 12 2 25 $1,500 $37,500

$203,200

$114,700

The project began with 732 employees representing 1,488 dependents. Due to natural attrition, 11 employees and 28 dependents were removed from the project. Therefore, ACS reviewed the dependents for 721 employees and identified 65 (approximately 9.0%) employees who were covering ineligible dependents. The net reviewed dependents totaled 1,460. This number is comprised of 570 spouses (SP/DP), 678 children under the age of 19 (Child), and 212 children over the age of 19 (Adult Child). The identified and removed dependents total 90 or 6.2% of the overall dependent population.

Ineligible Dependents are broken down by dependent type below. There were 31 spouses representing 5.4% of total spouses enrolled that were identified as being ineligible. 34 dependent children or 5.0% of the total enrolled dependent children were found to be ineligible. Finally, 25 adult children (age 19+) representing 11.8% of the total enrolled adult-children were identified as ineligible. Based on the ineligible percentages, the results of the project are comparable to the estimated post-Health Care Reform (HCR) environment in each category. ACS identified 11 (12%) dependents that were ineligible based on their response. The remaining 79 (88%) of the ineligible dependents were deemed ineligible due to incomplete responses or no response. Generally, 50% - 75% of the ineligible dependents are confirmed through the employee response. ACS standard statistic is higher than the results for the University of Virginia verification, which based 12% of the ineligible dependents on response. Our experience has indicated that the no response category is generally comprised of people carrying ineligible dependents. Employees often realize a dependent is not eligible when attempting to accurately respond to the qualifying questions or provide sufficient documentation. While no definitive assessments can be made regarding the true cause for these dependents ineligible status, it is assumed they are ineligible and the employee simply chose not to respond. These are often unintentional non-compliant situations, but nonetheless, ineligible dependents requiring termination of coverage. Additionally, these lower than normal results suggest that employees are not reporting qualified family status changes resulting in on-going enrollment of ineligible dependents. Additional employee education, accompanied by reminders that are more frequent, may assist to minimize future enrolled ineligible dependents as well as increase the timely reporting of qualifying events. Finally, it is estimated that the identification and removal of the 90 dependents represents a future cost avoidance value of $203,200. For the purposes of this report, the total value of the estimated cost avoidance is calculated as a first year medical cost estimate only. Depending on the type of dependent removed, the actual cost avoidance realization may be credited to multiple years. It is this conservative approach that compensates for the unpredictable future of claim experience and lends credibility to reported financial value. The true value of this cost-containment strategy will be realized in future years and may be confirmed on an actuarial basis when evaluating the actual claim experience. In order to maximize this positive financial impact to the health care plan bottom line, a maintenance strategy is essential.

II. Project Methodology

Milestone Implementation Provide Eligibility Data to ACS Mailings Announcement Postcard Initial POE Packet Reminder POE (Second Full Packet) Outreach to Non-Responders POE Response Incomplete Postmark Date "No Response" Default Removal Letter Coverage Termination Final list of Terminated Dependents Recommended Coverage Termination Date Appeals Period Appeals period begins

Date

Responsibility University of Virginia

Commentary

12/28/11

1/12/12 1/24/12 2/15/12 2/24/12 3/9/12 3/19/12 3/29/12

ACS ACS ACS ACS ACS ACS ACS

5/3/12 4/30/12

ACS ACS

3/19/12

ACS The appeal period was to end on May 18, 2012 but at the request of the University of Virginia it was extended for 30 days to June 17, 2012.

Appeals period ends Project Completion Final Appeals Processing

6/17/12

ACS

7/4/12

ACS

III. Project Results

A. Cost Avoidance / Employee Responses
At the conclusion of the Appeals phase, a total of 95.6% of the University of Virginia participants responded to the verification request, which assures the University of Virginia that all but 4.4% of the decisions made for this project were based on employee provided response and/or documentation. This result is less than the typical ACS response rate of 99.1%. The ineligible dependents are categorized by three types of response: incomplete response; no response; and responded. It cannot be confirmed why University of Virginia employees did not respond for 64 dependents; however, it is likely that the non-respondents were covering dependents that did not qualify for benefits. The table below provides further detail regarding employee responses.
Estimated Cost Avoidance / Savings = $203,200 SP/DP Ineligible Dependents - Total Amount $114,700 Child Amount $51,000 Adult Child Amount $37,500 Total 90 Amount $203,200

31
0 0 0.00% 12 19

34
0 0 0.00%

25
11 11 44.00%

Ineligible Dependents - Total Based on Response Dependent has access to employer sponsored coverage % of ineligible dependents Incomplete Response No Response

$0 $0

$0 $0

$16,500 $16,500

11 11 12.22%

$16,500 $16,500

$44,400 $70,300

1 33

$1,500 $49,500

2 12

$3,000 $18,000

15 64

$48,900 $137,800

Dependent has access to employer sponsored coverage. This removal reason represents the majority of the responding ineligible dependents. The ages of these dependent children range from 20 to 23 years old. Incomplete Responses. The 15 Incomplete responses were caused by the submission of insufficient information and documentation by the employee. The majority of the incomplete responses were for spouses were missing tax returns, marriage certificates, or proof of joint ownership documents. For the children the majority of incomplete reasons were due to missing birth certificates. Non-Responses. The performance in the response category, as previously mentioned, is less than a typical DEV project. Most often, non-compliant participants choose not to respond.

B. DEV Service Center Results

Throughout the project, ACS provided a centralized service center to support the University of Virginia employees and the benefits team. The service center was active on January 12, 2012, and will remain open through July 4, 2012. As of the issuance of this report, the DEV service team has supported the following results:
DEV Service Center Description Total Inbound and Outbound calls Unique University of Virginia employees served Service Level Agreements (SLA) Phone Average Speed to Answer Abandoned Calls Documents Turn Around Time Processing Accuracy Other SLAs Adherence to Timeline Customer Service Survey Results Overall Satisfaction Customer Service Representative Knowledge Courtesy of the Customer Service Representatives Ease of the Process Documents Processed Documents processed POE 748 Appeal 158 Guarantee < 30 seconds < 4% Guarantee 7 days 99% Guarantee 100% Result 23 seconds 2.52% Result 2.29 days 100% Result 100% Result 97.6% 98.8% 98.8% 95.1% Total 906 Amount 521 327 Calls vs. Employee Ratio: 0.72 : 1 45.4% of total population served

The call volume for the University of Virginia project is considered average. Typically, the call to participant ratio is 0.75:1 vs. the 0.72:1 as noted in the statistics above. A typical DEV project generally touches 60% of the participant population, while the University of Virginia results are lower than this amount by approximately 14.6 percent (14.6%).

C. DEV Project Management Results

In addition to the services provided directly to the University of Virginia employees, a dedicated project manager was engaged to service members of the University of Virginia DEV team. This support was completed through the integration with the many ACS team members on behalf of the requesting party. In most cases, responses to requests for information and other support items were provided within the same business day. Overall, the interaction between the ACS and University of Virginia teams was both positive and successful. This cohesive working relationship ultimately contributed to the achievements attained throughout the DEV project.

V. Dependent Eligibility Verification Recommendations

The outcome of this Dependent Eligibility Verification project varied from typical projects in that the percentage of ineligible dependents is approximately comparable to that of projects of similar size and scope. As mentioned several times throughout this report, clarification and education will be important components of a strategy that will allow the University of Virginia to protect the assets of the Plan. Communication and education. Integrate dependent eligibility information and reminders in the overall University of Virginia communication strategy. The feedback received from employees throughout the project suggest that they either do not understand the guidelines or simply need more assistance, through reminders, to make timely enrollment modifications based on life changes. Remaining Initial DEV Population. The initial verification project reviewed only 10% of the population. It is recommended that the remaining 90% of the employee population be reviewed. The University of Virginia may elect to perform this project after open enrollment in order to minimize confusion amongst the employees. If this project begins after open enrollment, the remaining 90% should be included in the initial phase of the Maintenance project. DEV Maintenance. In order to protect this investment and prevent future enrollment of ineligible dependents, a plan for managing and monitoring dependent qualification is recommended to begin early 2013. The first step is to verify new dependent enrollees and re-enrolled dependents that have joined the University of Virginia plan since the date the data was provided for this initial project. This may be accomplished through a disruption analysis performed immediately following annual enrollment. The second step is to verify all new and re-enrollee dependents on a go-forward basis. Options for verifying these dependents vary from monthly or even quarterly. The right option will be determined by the frequency and volume of dependent modifications. The final step is to review a percentage of the on-going population on a quarterly basis to ensure the sentinel effect. It is important to keep in mind that monitoring takes place on only those dependent relationship situations that are subject to change. For example, re-verification if a dependent age 19 or older has access to employer sponsored coverage; re-verification of a birth certificate is not. Other considerations for the University of Virginia: Annual re-verification of 20% 25% of the dynamic dependent relationships allows for a complete population review every four to five years. Claims Audit. Engaging ACS in a claims audit would allow us the ability to calculate the actual cost avoidance value. Performing a Claims Audit would mitigate the University of Virginias risk while complying with regulatory guidelines and satisfying fiduciary obligations.

ACS again expresses its appreciation for the opportunity to provide dependent eligibility verification services to the University of Virginia. We welcome the opportunity to continue to assist the University of Virginia in the development and implementation of a DEV strategy that will prove valuable in the overall management of its health care plan.

10