It is widely acknowledged that employers do, from time to time, put friends or (ineligible) family members, former employees or others on the group medical plan. While this may be a noble act, it carries the decided risk of complete destruction of your group medical plan, to say nothing of potential litigation from other affected employees, the insurer, the state insurance department, even the individual you sought to help. Should the insurer discover an ineligible enrollee who is in the midst of treatment, the payments cease immediately and you and/or the individual are now subject to pursuit by the insurer for amounts paid. There is actually little of record in the way of litigation by insurers against employers to recover payments. That will, however, almost certainly change as carriers improve their detection, and is only one of several potentially disastrous consequences. The word insurance companies use for it is FRAUD.

Since this practice most commonly occurs where people are having difficulty finding insurance due to existing medical conditions, the potential for catastrophic claims that will adversely affect your group is huge. In many cases it goes undiscovered and claims get paid without dispute. When the amounts are large enough, however, insurer suspicion may be very much in play.

Insurers do not, as a general rule, monitor eligibility on a continuous basis. They do, however, periodically select small group medical plans for eligibility audits. One of the large carriers recently selected out 739 small groups and found 37% of them with ineligibles.

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