Colonial Life & Accident Insurance Company, in partnership with the Government Finance Officers Association, released Monday a new research paper that shows employers they can save a significant amount of money on their benefits costs simply by checking if their employees’ dependents are eligible for coverage.

Up to 8 percent of the dependents enrolled in an employer’s medical plan are actually ineligible to receive benefits according to their plan’s own criteria, according to the study, “Controlling health-care costs with dependent eligibility audits.”

For employers, providing insurance benefits for dependents who are no longer eligible for coverage can be very expensive. Employers pay an average of $3,500 annually to provide coverage for a single dependenti. At this rate, employers can rack up big price tags in a hurry by funding dependents who aren’t qualified for coverage.

Ineligible dependents subject employers to increased legal exposure. There is heightened compliance risk associated with paying claims for ineligible dependents, which is prohibited by federal law. In addition, ineligible dependents assume they have coverage they actually don’t have, which can create unpleasant surprises when they eventually learn the truth.

The recent Colonial Life-GFOA study examined 17 local governments that conducted audits in 2013. These included cities, counties and school districts. The average number of ineligible dependents across all 17 governments was greater than 7 percent. The five largest jurisdictions reviewed (which ranged from 3,500 to 7,500 employees) would be able to save between $590,000 and $1.3 million annually by removing the ineligible dependents.

In 2013, the City of Corpus Christi, Texas, was surprised to find that 9 percent of dependents covered by its health plans were ineligible for coverage. Considering the national average-annual-price tag of roughly $3,500 per dependent, the dependent eligibility audit resulted in the City of Corpus Christi saving roughly $1.1 million in the first year.

The white paper is the latest in an ongoing series of research briefs produced by Colonial Life to help position the company as a thought leader in financial protection benefits, communication and enrollment.

About Colonial Life

Colonial Life & Accident Insurance Company is a market leader in providing financial protection benefits through the workplace, including disability, life, accident, dental, cancer, critical illness and hospital confinement indemnity insurance. The company’s benefit services and education, innovative enrollment technology and personal service support more than 80,000 businesses and organizations, representing more than 3 million of America’s workers and their families. For more information visit www.coloniallife.com or connect with the company at www.facebook.com/coloniallifebenefits, www.twitter.com/coloniallife and www.linkedin.com/company/colonial-life.

i $3,500 is an industry average that is based on research conducted by the Kaiser Family Foundation and Mercer’s 2014 National Survey of Employer-Sponsored Health Plans. The equation used for calculating an organization’s actual per dependent premium is as follows: HC Claims $ Per Year + RX Claim $ Per Year + Admin Fees / Total Number of Lives Covered by the Plan = Per Dependent Premium.