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Fraud in the Workplace? Evidence from a Dependent Verification Program

Author

Listed:
  • Michael Geruso

    (University of Texas at Austin)

  • Harvey S. Rosen

    (Princeton University)

Abstract

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.

Suggested Citation

  • Michael Geruso & Harvey S. Rosen, 2013. "Fraud in the Workplace? Evidence from a Dependent Verification Program," Working Papers 1449, Princeton University, Department of Economics, Center for Economic Policy Studies..
  • Handle: RePEc:pri:cepsud:232rosen.pdf
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    References listed on IDEAS

    as
    1. David M. Cutler & Richard J. Zeckhauser, 1998. "Adverse Selection in Health Insurance," NBER Chapters, in: Frontiers in Health Policy Research, Volume 1, pages 1-32, National Bureau of Economic Research, Inc.
    2. Altman, Daniel & Cutler, David M & Zeckhauser, Richard J, 1998. "Adverse Selection and Adverse Retention," American Economic Review, American Economic Association, vol. 88(2), pages 122-126, May.
    3. Hotz, V. Joseph & Scholz, John Karl, 2008. "Can Administrative Data on Child Support Be Used to Improve the EITC? Evidence From Wisconsin," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(2), pages 189-203, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    health insurance; dependents; benefits; costs; verification; health care;

    JEL classification:

    • D19 - Microeconomics - - Household Behavior - - - Other
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I00 - Health, Education, and Welfare - - General - - - General
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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