Late last month, employees of Meriter Hospital in Madison received letters informing them they were about to undergo a new level of scrutiny.
The workers were given four weeks to prove — through marriage licenses, birth certificates and tax returns — that their spouses and children truly qualify for health insurance benefits.
"It is important to understand that this is not an optional process," the letter read. "Non-response will result in the termination of insurance coverage for your dependents."
Such efforts, called "dependent eligibility audits," have been around for at least a decade but are becoming more common at large companies as a way to cut health care costs. CDW, a national information technology company with offices in Fitchburg, and Aurora Health Care, which serves eastern Wisconsin, are among area companies that recently audited their employees in this way. Neither would discuss the topic.
While some companies report big savings, others say the audits turned up few problems.
For the companies involved, there are risks, experts say. Employers must weigh the likely savings against the potential of undermining worker morale, said Chip Hunter, an associate professor of management and human resources at UW-Madison.
"In most workplaces, there's a presumption of trust between management and employees, that you're partners," Hunter said. "Now the company is saying, 'Oh, by the way, is that person you bring to the Christmas party every year really your spouse?' It puts the company in a difficult position, because that's a tough question to ask."
Meriter Hospital found that out. Its union is pushing back in hopes of killing the entire effort.
Meriter agreed to at least temporarily suspend the audit for union-represented employees while the two sides bargain over the issue, according to SEIU Healthcare Wisconsin, which represents nurses and support and service staff at the hospital.
A Monday deadline for returning documents no longer applies to union-represented employees.
Industry experts say companies can save a lot. On average, 5 percent to 9 percent of enrolled dependents at an audited company are found to be ineligible for coverage, said Michael Smith, CEO of ConSova, a suburban Denver company that conducts audits and is handling Meriter Hospital's.
Each person booted from a company's insurance rolls typically saves the company $3,000 to $5,000 a year, he said. Those who get kicked off include children too old for coverage, ex-spouses, foster children, friends and grandparents.
While the practice may sound harsh to some, others view it simply as sound management — and ultimately beneficial to employees.
"We need to be good stewards of all of our resources, and part of that is keeping our insurance costs as low as possible for our employees," said Mary Reinke, a spokeswoman for Meriter Hospital.
The hospital has about 3,500 employees. Of those, 1,900 are part of the audit because each has at least one dependent enrolled on his or her insurance plan, Reinke said. Together, the 1,900 employees have 4,400 dependents being insured, she said.
If ConSova's past experience holds true, between 220 and 400 of those dependents will lose coverage.
Audit officials acknowledge the process can be a hassle for employees.
"Obviously, there were folks who felt it was a rather intrusive process because of the data we were requiring," said Kerry Brunner, vice president for benefits at Ministry Health Care, a network of hospitals and clinics in central and northern Wisconsin and eastern Minnesota.
The company audited its insurance rolls three years ago and found about 7 percent of 6,300 dependents were ineligible, resulting in more than 400 people being dropped and an annual savings of about $1.3 million, Brunner said. "I think it was well worth the effort," he said.
Producing the necessary documentation can be especially cumbersome in Wisconsin, where only state-issued copies of vital records are legally valid for identification purposes. (Making your own photocopies doesn't cut it.)
A certified copy of a Wisconsin birth certificate, for example, costs $20 through the state Vital Records office. Meriter employees will have the option of getting their vital records back from ConSova, Reinke said.
Still, nurses at Meriter "are overwhelmingly opposed" to the audit, according to a union statement.
"Our concerns include lack of a valid justification for mistrusting our nurses and support staff, privacy violations, the cost and inconvenience of obtaining documents, and conflicting information from ConSova regarding the safety and security of the information that was being demanded," the union said.
Reinke declined to comment on the union's allegations, saying only that the hospital's undertaking "is common business practice across the country."
Smith backs her up. Of the Fortune 500 companies, "almost all" have done audits, he said.