HomeMy WebLinkAbout0708-3 Health Benefits Trust Report (Final 10-24-08)Health Benefits Trust Report #07/08-3 October 2008 HEALTH BENEFITS TRUST- Third party administrative services review (includes follow-up of prior recommendations) Deschutes County, Oregon Audit committee: Jade Mayer, Chair Greg Quesnel James Kerfoot Jim Keller Dennis Luke Tom Anderson Scot Langton
Heath Benefits Trust Report #07/08-3 October 2008 {This page left blank}
Heath Benefits Trust Report #07/08-3 October 2008 TABLE OF CONTENTS: HIGHLIGHTS Page(s) 1. INTRODUCTION 1.1. Background on Audit …………..………………………………………...…… 1 1.2. Objectives and Scope ………………….……………………………..……… 1 2. BACKGROUND …………………………………………….………………...… 2-6 3. FOLLOW-UP on prior recommendations ………………………………... 6-10 4. FINDINGS 4.1. County Policy ……………………………………………………………. 10-14 4.2. Plan ….………………………………………………………………...….. 14-20 4.3. Third Party Administration ………………………………………………. 20-24 4.4. Pharmacy Benefits Administration (Prescriptions)………………….... 24-25 5. RESPONSES 5.1. County Administrator …………………………………………….……… 26-27 5.2. Deputy County Administrator ………………………………….……….. 27-28 5.3. Personnel Department ………………………………………………...……. 28 5.4. Health Benefits Coordinator ……………………………………………. 29-30 5.5. Finance Department………..……………………………………………. 30-32 5.6. EBMS (Third Party Administration-claims) ..……...……………….….. 33-35 5.7. NWPS (Pharmacy Benefits Administration -Prescriptions) …………. 35-36 6. APPENDICES 6.1. Appendix A1 – Audit methodology ……………………………..…….... 37-38 6.2. Appendix A2 – Survey of participants ……………………………...….. 39-49 6.3. Appendix A3 – Survey of providers ………………………….………… 49-51
Heath Benefits Trust Report #07/08-3 October 2008 HIGHLIGHTS Why this audit was performed: The last review was completed in 2004 and since then the Plan has changed third party administrators. The Plan would like to have these reviews every three to four years, if possible. In addition, there have been issues raised by participants in the recent year. What is recommended Follow-up of prior audit recommendations indicates some still need to be addressed. Recommendations include management review of insurance charges, the PPO, reserves and prescription claims. Participant eligibility needs to be confirmed each year. The Plan needs to monitor instructions provided to the TPA. HEALTH BENEFITS TRUST- Third party administrative services review (includes follow-up of prior recommendations) What was found Follow-up – Overall, there was good progress on a number of the recommendations but some work is still needed. Many of the recommendations directed to the prior third party administrator were resolved through the change in third party administrators. Audit – In response to one of the initial audit recommendations, the County developed a reserve policy. Reserves are currently beyond the level established by policy. Reserves are significantly higher than other self-insured local governments observed. Health insurance revenues are significantly in excess of expenditure levels contributing to continued buildup of reserves. The audit confirmed the third party administrator (TPA) is performing within their publicized and expected levels of performance in terms of financial and payment accuracy. Performance levels were higher than the prior TPA and with fewer systematic errors. Errors located during the audit and resolution of problems identified were handled professionally and resulted in the TPA re-processing some claims. There were some issues identified by participants and EBAC in the handling of some types of claims (alternative care). Weaknesses were noted in the structure of the plan for these benefits and in instructions provided to the TPA. Eligibility of participants seems to be taken too lightly by employees. A specific instance was discovered where a participant failed to notify the Plan of an ex-spouse. The County had some difficulty during renewal to get eligibility information to the third party administrator in a timely manner. The current preferred provider organization (PPO) does not provide a performance measure on turnaround time and anecdotal evidence indicates that some delays are occurring with them. There have also been problems in receiving the electronic communication from the PPO. The pharmacy benefits manager has not been providing the Plan with some available reports to assure prescription benefits are not being misused. One participant was identified with questionable claims. A review of participation in health care flexible spending accounts indicates low participation by employees. Deschutes County Internal Audit
Health Benefits Trust Report #07/08-3 October 2008 Page 1 of 51 1.1 BACKGROUND ON AUDIT 1. Introduction Audit Authority: The Deschutes County Audit Committee authorized the review of third party service to the Health Benefits Trust in the Internal Audit Program Work Plan for 07/08. The last review was completed in August 2004. Since then the County has moved the health benefits work to another third party administrator (EBMS). I received a significant amount of support from the third party administrator (EBMS) during the course of this audit. They were very responsive and professional. I also received a lot of support from the County’s health benefits coordinator (Ronda Connor) as well as the pharmacy benefits administrator. I would like to thank them all for their support provided during the course of this audit. 1.2 OBJECTIVES and SCOPE Objectives: 1. Evaluate third party services to the Plan. Specific objectives include: a. Administration of benefit payments by the third party administrator (TPA) EBMS; b. Administration of prescription benefits payments by the pharmacy benefits manager (PBM) NWPS.; and c. Surveying participants and providers on issues of performance. 2. Follow-up on prior audit recommendations (#03/04-6, issued 8/04) and follow-up report (#05/06-1, issued 9/05). Scope: The audit was performed for the calendar year 2007. Review procedures were performed for various periods based on the analyses and the availability of data. Underlying claims and eligibility data was received from the TPA and NWPS for the period January 1, 2007 through December 31, 2007. Much of the underlying information used during the audit is confidential under HIPAA. The findings provided do not include privileged or confidential information. Methodology: For Audit methodology, see APPENDIX AI
Heath Benefits Trust Report #07/08-3 October 2008 Page 2 of 51 2. Background Brief history of self-insurance for health benefits Deschutes County, as plan sponsor, moved to a self-funded health insurance plan (the Plan) on August 1, 2000. The Plan provides medical, dental and vision benefits. Under Oregon law, the County needed to join with another entity to establish the self-funded plan. The County collaborated with some County Service Districts (CSD) (911 CSD and Extension/4-H CSD) as well as Central Oregon Intergovernmental Council (COIC) in establishing the Plan. The Plan has had a full time Health Benefits Coordinator (the Coordinator) since May 2003 to assist in many of the matters relating to the administration of the Plan. Prior to having the Coordinator, Willowbrook Insurance assisted the County in changing over to self-insurance and in managing the Plan. The Plan, from its inception, has utilized an outside third party administrator (TPA) for processing its claims. From inception to 12/31/05, Administrators West was the Plan’s TPA. As of 1/1/06, EBMS has been the Plan’s TPA. The TPAs have been involved in developing plan documents as well as assisting in obtaining stop loss insurance coverage. The Plan obtains insurance coverage to limit exposure to significant participant claims as well as claims in aggregate. The Plan’s Employee Benefits Advisory Committee (EBAC) has taken an active role in making recommendation regarding the Plan since its inception. The committee is composed of seventeen voting members. Voting members are comprised of County management, union representatives, County and service district representatives, COIC and a retiree representative. FINANCIAL BACKGROUND Health Benefits Trust (Fund 675) - actual operating results (GAAP basis)Fiscal YearEnding June 30,Operating revenuesOperatingExpensesOperating income (loss)Total Net Assets-Ending2001 5,212,377 4,550,481 661,896 728,716 2002 6,137,611 6,109,025 28,586 1,296,985 2003 6,864,059 7,041,092 (177,033) 1,148,356 2004 8,093,720 6,930,172 1,163,548 2,341,600 2005 9,367,682 7,605,667 1,762,015 3,762,630 2006 10,709,801 8,739,728 1,970,073 5,926,001 2007 12,520,229 9,119,439 3,400,790 9,769,065 2008 prelim. 14,214,670 10,752,745 3,461,925 13,782,700 Source: Comprehensive Annual Financial Reports
Heath Benefits Trust Report #07/08-3 October 2008 Page 3 of 51 Chart I – Composition of Health Insurance Premium Revenues (FY 06/07) The GAAP basis reflects accruals for accrued claims payable and is the basis presented in the County's Comprehensive Annual Financial Report (CAFR). HEALTH PLAN REVENUES Primarily the County and COIC fund the Plan. Retired employees utilize the Plan until Medicare is available and pay all or a portion of their premiums based on years of service. Most retirees are not eligible for dental coverage. Continuation coverage (COBRA) is also available to employees who separate from service before retirement. Those employees must pay the entire premium. The employee contribution is currently $35 per month. Departments for 2007/2008 were charged the balance of the composite premium of $1,152 per budgeted full time equivalent (FTE) employee. Health insurance premiums charged are determined during the budget process. Employee Co-Pay3%Part time employees - add'l1%County departments86%Retiree Health Insurance4%COIC6%
Heath Benefits Trust Report #07/08-3 October 2008 Page 4 of 51 Chart II – Health Insurance Premium Revenues Composition by Fiscal Year $0$1,000,000$2,000,000$3,000,000$4,000,000$5,000,000$6,000,000$7,000,000$8,000,000$9,000,000$10,000,000$11,000,000$12,000,000$13,000,00002/03 03/04 04/05 05/06 06/07Fiscal yearRevenuesCounty departmentsCOICRetiree Health InsuranceEmployee Co-PayPart time employees - add'l Health insurance premium revenues have grown 15% in each of the last three years. Over the last five years, insurance premium revenues have doubled. The Plan also has a growing investment earnings revenue line item, not shown above, that has grown as reserves have grown. In FY 06/07, interest revenue was $442,000.
Heath Benefits Trust Report #07/08-3 October 2008 Page 5 of 51 Chart III – Composition of Health Plan Expenditures (FY 06/07) HEALTH PLAN EXPENSES The composition of expenses is primarily for claims. Administrative costs as a percentage of total Plan expenses have recently been in the range of 7-8%. Information obtained and analyzed, for self-insured plans, indicates this percentage is less than the 12% seen by these other self-insured plans. PPO fee0%Other overhead0%Claims paid94%Salaries/Benefits1%TPA fee2%Insurance3%
Heath Benefits Trust Report #07/08-3 October 2008 Page 6 of 51 Chart IV – Health Plan Expenditure Composition by Fiscal Year $0$1,000,000$2,000,000$3,000,000$4,000,000$5,000,000$6,000,000$7,000,000$8,000,000$9,000,000$10,000,00002/03 03/04 04/05 05/06 06/07Fiscal yearExpendituresClaims paidInsuranceTPA feeOther overheadSalaries/BenefitsPPO fee Expenditures have grown 10% in each of the last three years. Over the last five years, expenditures have grown some 57%. 3. Follow-up on prior recommenda-tions A follow-up review was performed for the outstanding recommendations issued with the performance review of the Health Benefit Trust as covered in Internal Audit Report #03/04-6. The original audit report was issued August 6, 2004. A subsequent follow-up occurred in September 2005 (#05/06-1). The Plan changed third party administrators (TPA) to EBMS on January 1, 2006 and this appears to have addressed many of the findings directed towards the prior TPA. The follow-up was developed from interviews with Ronda Connor, Health Benefits Coordinator and observations since the original audit.
Heath Benefits Trust Report #07/08-3 October 2008 Page 7 of 51 3.1 Overview of progress Figure I & II – TPA and Plan implementation A total of 43 recommendations were accepted at the time the initial report was made. Figures I & II provide a breakdown of the status for recommendations included in the report by responsible party. The recommendations made to the prior third party administrator were further addressed through the change in third party administrators. Figure I - Third Party AdministratorImplemented100% Figure II - PLANImplemented65%Partially implemented22%Not implemented13% Since the prior follow-up (9/05); · The change in third party administration has addressed the four remaining recommendations previously not implemented. · The Plan implemented five more recommendations. Some of the outstanding recommendations are policy driven and should be addressed by County Management, the Employee Benefits Advisory Committee (EBAC) and the Board. The recommendations noted as not being implemented in the follow-up are in the following section. · In response to one of the recommendations, the Board adopted policy #P-2006-124 “Reserve policy for the Health benefits Trust (HBT) Fund”. . See additional audit work performed under County policy under section 4.1.
Heath Benefits Trust Report #07/08-3 October 2008 Page 8 of 51 3.2 Recommendations not yet implemented The following information highlights recommendations not fully implemented. It is recommended these items be brought forward to the appropriate party in the County for additional consideration and resolution. 1. The Health Benefits Coordinator should be the primary person responsible for the administration of the Plan, which would include developing assumptions (under the oversight of the Personnel Services Manager, EBAC and the Board) for the preparation of the Plan budget. Finance should work with the Coordinator in preparing the budget. Benefits Coordinator comment: The Coordinator and EBAC are informed of the assumptions being used in the draft budget and have not been further involved in the process. 2. The Plan should continue to monitor the effectiveness of its preferred provider organizations (PPO) network to make sure the benefits are maximized. Benefits Coordinator comment: The Plan is currently in the process of addressing whether their PPO should be changed. Part of that process will include looking at cost, savings, and inclusion of providers being used by members. This might provide more timely turnaround and data flow required for proper claim payment. 3. The Plan should consider changing its year-end (currently July 31) to coincide with the County’s fiscal year end of June 30. The reinsurance quotes, which are critical to development of the Plan budget, should be easier to coordinate if the Plan’s year-end was earlier and coincided with the County’s budget process. In addition reporting of the Plan activity would be consistent between Plan records provided by the TPA and County records. Benefits Coordinator comment: This has not been addressed by EBAC. 4. The Plan should request participants make annual representation as to the status of their dependents. During these annual representations, the Plan routinely request updated coordination of benefit information from spouses. The Plan should require copies of marriage certificates, birth certificates, divorce decrees, social security cards, and tax records to support eligibility status.
Heath Benefits Trust Report #07/08-3 October 2008 Page 9 of 51 Benefits Coordinator comment: The Plan is not currently doing this since there has been no decision to do annual representations by EBAC. The last update request sent to participants was done around August 2007. One was not scheduled for August 2008. The renewal committee was supportive of the idea of doing this annually. Auditor comment: See additional findings in the report indicating continued need to obtain annual representations from employees and holding them accountable when they do not make accurate representations. 5. The Coordinator should reconcile check and cash receipts to deposits to monthly fees and someone other than the Coordinator (such as the Personnel Services Manager) should review it. Benefits Coordinator comment: Since moving the receipting to a staff person in Personnel, the Coordinator has not picked up this reconciliation process. 6. The Plan should update its employer participation agreements with participating County Service Districts and COIC. Benefits Coordinator comment: This process is currently underway for implementation in the 08/09 contracts. Auditor It is further recommended the Coordinator develop a process to manage all contracts on an annual basis. Contracts that may require annual review include those noted above, as well as the TPA and PBM (Pharmacy Benefit Manager). 7. It is recommended that the Plan consider updating its TPA contract to include appropriate performance measures. These measures should at least include a claim turnaround time, financial accuracy and payment accuracy. The TPA should provide information on its turnaround time throughout the year as well as its backlog of claims. Benefits Coordinator comment: This is not in the current contract. However, the current TPA has internal processes to monitor their performance levels and these were part of their representations during the RFP process.
Heath Benefits Trust Report #07/08-3 October 2008 Page 10 of 51 8. It is recommended the Plan (in coordination with the TPA) consider another pharmacy benefits manager who will work to provide coordination of benefits for prescriptions. Benefits Coordinator comment: This may be available in the future, but the current pharmacy benefit manager cannot provide this service. 4. Findings These findings are intended to assist management in evaluating the performance of the third party services to the Plan. These recommendations and findings do not replace efforts to design an effective system of internal control. Audit findings result from incidents of non-compliance with stated procedures and/or departures from prudent operation. The findings are, by nature, subjective. The audit disclosed certain policies, procedures and practices that could be improved. The audit was neither designed nor intended to be a detailed study of every relevant system, procedure or transaction. Accordingly, the opportunities for improvement presented in the report may not be all-inclusive of areas where improvement may be needed. The focus of the review was on aspects of providing payment services for health benefits under the County’s Plan. Extent of work on Internal Controls The audit included procedures to assess the internal controls in place with the TPA and the pharmacy benefits administrator. A risk assessment indicated the nature and types of risks of operating the Plan and the controls that should be in place. A significant deficiency is defined as an internal control deficiency that could adversely affect the entity’s ability to initiate, record, process, and report financial data consistent with the assertions of management in the financial statements. The findings noted were not considered significant deficiencies. 4.1 COUNTY POLICY The Board adopted policy #P-2006-124 “Reserve policy for the Health Benefits Trust (HBT) Fund” in March 2006. The audit during the follow-up addressed a general review of reserve funding to see if the reserves were being handled as indicated in the policy.
Heath Benefits Trust Report #07/08-3 October 2008 Page 11 of 51 Chart V – Claim benefits vs. ending net assets by FY Health benefit trust reserves exceed levels set by policy. The County’s current policy is to increase reserves “… until they are estimated to equal the estimated cost of total claims paid for one year.” (P-2006-124). At the time this report was prepared, the FY 07/08 claims were $9.7 million (on a budget basis). By the end of fiscal year 07/08, the reserve is projected to end the year at nearly $14.9 million (on a budget basis). The reserve grew by $4.1 million during FY07/08 during a period where the one year actual was already met. Based upon the policy, reserve levels as of June 2008 are $5.2 million over the levels anticipated by policy. Claim benefits paid vs. Ending net assets$0$2,000,000$4,000,000$6,000,000$8,000,000$10,000,000$12,000,000$14,000,000$16,000,00020012002200320042005200620072008 Prelim.Fiscal year ending June 30,Claims PaidEnding net assets Source: Comprehensive Annual Financial Reports (GAAP basis) The last actuary hired to review Plan reserves identified a process for “necessary reserves” based upon incurred but unpaid claims. Using that approach, the necessary reserve would be approximately $1.8 million as of May 2008. This estimated reserve is up from the approximately $1 million in December 2004. In the same timeframe, the Plan has grown reserves from $3.4 million to $14.9 million. In addition to
Heath Benefits Trust Report #07/08-3 October 2008 Page 12 of 51 Chart VI – Revenues vs. expenditures by covered employee by fiscal year covering necessary reserves, the reserve fund has around 16 months of future claims. Revenue per covered employee has grown on average during the last five years at a rate of 19% whereas expenditures per covered employee have grown on average at 9%.The current spread between revenues and expenditures creates an imbalance that will continue to push reserves higher unless something changes. The current policy indicates, “In the event HBT ‘reserves’ are expected to be equal or greater than estimated total claims paid for one year, departmental charges may be reduced…”. Revenue and expenditure per covered employee$0$2,000$4,000$6,000$8,000$10,000$12,000$14,000$16,0002002200320042005200620072008 Prelim.Fiscal year ending June 30,$ per eeAverage revenue per eeAverage expenditures per ee Source: Comprehensive Annual Financial Reports (GAAP basis) The adopted FY 08/09 budget cuts back on insurance premium charge growth to 4.3% (equal to the County’s cost of living adjustment). However, since revenues exceed costs by 37% as of FY 07/08, it is very likely reserves will continue to grow. Assuming all FY 08/09 budgeted revenues are reasonably stated (this includes the 4.3% increase) and expenditures per FTE increase at a rate of 15% (much higher than past experience), the reserve could grow conservatively an additional $2 million in FY 08/09.
Heath Benefits Trust Report #07/08-3 October 2008 Page 13 of 51 Table I - Comparison of Washington Local Government Self-Insured Health Plans (16 Plans self insured for medical+)(Size 500 -1499 EE's) to Deschutes County /COIC for Weeks of Reserves and Revenues and Expenses per employees There are a number of practices that have contributed to growth in reserves. Some of these practices were implemented by design to build up the reserve when the self-insurance plan was started. These contributing practices include: i. Premiums are charged on budgeted employee (FTE) levels and are not adjusted to department actuals. Departments not filling positions (or employees refusing coverage) are charged premiums when the Plan will not incur any costs. ii. Premium rates are increased based on management estimates, but the increase has not been based on actual expense growth. iii. Premiums from departments have exceeded the preliminary budget figures. This created over $1 million growth in the reserve in FY 07/08. This is primarily due to additional covered employees added during the year. Table I provides information as to how other self-insured local governments have been reserving for IBNR and contingency. IBNR (Incurred but not reported claims) reflects the liability for unreported claims. Contingency provides additional funding for unforeseeable claim experience. Incurred but not reported (IBNR)Contingency FundsTOTALAvailable Funds16 - WA Local Gov't 2007 (Average) 7.6 14.8 22.4 10,520$ 9,529$ 16 - WA Local Gov't 2008 Budget (Average) 6.4 10.9 17.3 11,084$ 11,098$ Deschutes County / COIC - 6/07 7.6 48.1 55.7 14,211$ 10,351$ Deschutes County / COIC - 6/08 prelim 7.0 59.7 66.7 16,033$ 11,675$ Weeks of ReservesPlanRevenues per EmployeeExpenses per Employee Sources: Washington Office of Financial Management – Local Government Self-Insurance Program Financial reports (selected) Deschutes County Comprehensive Annual Financial Reports (GAAP basis), EBMS information on IBNR, and internal HBT information. * Weeks of reserves determined by assets divided by average weekly total expenses (not claim expenses, which would be less). As noted in the table, the average of the sixteen similarly sized Washington plans indicates they are reserving some 17-22 weeks in reserves. This is in comparison to Deschutes County/COIC Plan having some 67 weeks of total expenses for reserves by June 2008. It is interesting to note that expenses by covered employee are relatively similar. Deschutes/COIC Plan, however, has significantly higher overall revenues per covered employee (some 37% over expenses) which, as indicated before, contributes to the build-up of reserves. The Plan has established reserves in excess of policy and which appear to be in excess of levels used by
Heath Benefits Trust Report #07/08-3 October 2008 Page 14 of 51 other local government self-insured plans. The current insurance charges are in excess of anticipated expenses and if unchanged will continue to foster increased reserve levels. Health benefit reserves are being built-up during a time when the County’s departments are being asked to cut back spending. As indicated above, the current premium levels are too high, which tie up resources that could be utilized by departments. Current taxpayers, departments, retirees, and employees are paying for future costs. Another aspect to this discussion is that insurance costs related to building up the reserve that are not supported actuarially are likely to be treated as unallowable costs under Federal guidelines (OMB A-87) that control some costs allowable to be charged to federal programs. It is recommended the County review its approach and practices for budgeting the Health Benefits Plan to better match anticipated revenues to anticipated expenditures. The Plan should challenge what reserve levels should be sufficient by reviewing the current policy and practices. This review may lead to the lowering of health insurance premium charges and developing an approach to reduce some of the build-up in Plan reserves. If reserve levels were to be reduced, it would be preferable for the approach to be based on reasonable accounting practices and reflect how the reserves were originally built. 4.2 PLAN Participants fail to correctly update Plan on changes in a timely manner. During review of eligibility and the recent renewal information received in 2007, it was apparent that many participants do not take seriously their health care elections. Some of the information provided in error included: dropping spouses, dropping dependents, and leaving off information on coordination of insurance. Some of the information provided included valid changes that may not have been noted if a renewal had not been done including dropping dependents. The Health Benefits Coordinator spent a lot of time proofing the data to make sure employees did not make erroneous changes. In one case, a spouse had been dropped and it was determined that the drop should have been effective with a 2006 divorce. During the intervening time, the ex-spouse and associated dependents had been utilizing County health benefits. The Plan needs sufficient and timely information to assure appropriate eligibility for benefits. It is a typical practice to have participant information validated each year. As noted in the follow-up of prior recommendations, it was suggested that the Plan perform annual renewals and collect sufficient
Heath Benefits Trust Report #07/08-3 October 2008 Page 15 of 51 documentation on divorces, marriages, births in order to assess eligibility. In the absence of timely and appropriate changes to coverage, the Plan will end up paying more in benefits to those who do not belong to the plan. In the absence of timely notification, the County cannot make appropriate elections available to those coming off the Plan, if applicable. For the participant who had failed to notify the Plan about their divorce, some $10 thousand in claims were overpaid by the Plan. The third party administrator will attempt to recover the monies paid out on those claims. This will result in the providers having to re-bill/collect from the prior participant. It is recommended the Plan perform annual renewals for eligibility. In addition, it should be made very clear to participants what could happen if they fail to timely notify the Plan. It is also recommended for Plan documents to have clearer language on the employee’s responsibility to make timely and proper representation on dependent coverage. The Plan should also identify what can occur if participants fail to properly notify the Plan on changes in their covered dependents. {The health benefits coordinator did not perform an annual renewal this year but is hopeful that this recommendation will be accepted and annual renewals will commence. The Plan, in the FY 08/09 Plan document, included language to cover situations of intentional misrepresentation.} Documentation of Plan decisions not easy to find In reviewing claims, it became apparent that directions from the County to the TPA were not always clearly documented and retained in a centralized location. Various staff have had an impact on operation of the Plan. The processing for certain types of claims was changed during the course of the year and it was difficult to assess when the direction had been given, what date was it effective, and when it was supposed to be carried out by the third party administrator. Observations include: · The Plan wanted to remove the preferred provider organization (PPO) pricing for massage benefits and the third party administrator turned off the PPO pricing for all alternative care benefits. · The Plan wanted to remove deductibles and copays under the accident benefit during the associated accident period to correct an interpretation error after changing TPA’s. · The Plan makes decisions to treat certain non-PPO providers as though they belonged to the Plan’s
Heath Benefits Trust Report #07/08-3 October 2008 Page 16 of 51 PPO. During the course of the audit, it was not possible to determine all of the providers had been treated this way. · The Plan is not documenting participants who live outside of the PPO area and who are not penalized for using providers outside of the PPO. It is imperative that the Plan effectively communicates and monitors the direction it gives to the third party administrator. In the absence of clear direction, the third party administrator does not know how to administer the Plan. The Plan must be consistent and thorough with all directions provided. The total cost to the plan was not assessed. Some of the PPO discounts available were not taken with some of the alternative care benefits (colonoscopy and EBT) and had to be re-processed to obtain discounts available to the Plan. This effort was not performed for chiropractic providers who are in the PPO. It is recommended the Plan maintain a log of all policy and directions provided to the third party administrators. They should do this always in writing and these directions should be supervised. The Plan should document all those instances where there are exceptions made outside of the Plan document and why. It is recommended that directions that change benefits be incorporated into the Plan document. {Part of this might be addressed by EBMS now maintaining a spreadsheet of providers and when they come in and out of the network to be able to know who was treated as a preferred provider.} Some of Plan’s benefits under alternative care are difficult to administer It was noted that colonoscopies in particular had varying outcomes in how they were handled from a claim-processing standpoint, which ultimately affected the cost to the participant. Handling is reliant on the coding of the hospital and physicians. Procedures with medical coding were handled under the Plan’s medical benefits and those that were preventive in nature were handled under the alternative care benefit. Participants having the procedure could go into these procedures thinking they were preventive and if anything medically necessary occurred, the procedure was handled under a different benefit. If benefits exceed certain amounts, the participants were left with much more significant bills under the alternative
Heath Benefits Trust Report #07/08-3 October 2008 Page 17 of 51 care benefit. It seems in the best interest of the Plan and participants to have benefits that can be treated under one level of benefit so they can understand what those benefits will be. In the absence of simplifying the benefit structure, their service providers will determine benefits even though the participant had planned to have the benefit paid out of a different benefit. It is recommended that the Plan be mindful when adding changes to the alternative care benefit and coordinate rollout of new benefits with the third party administrator. {The Plan for 08/09 has simplified the handling of colonoscopies and EBT’s by removing them from the alternative care benefit and treating as a medical procedure not subject to the deductible. This should provide a greater and more understandable benefit to participants. } Alternative care benefit structure needs to be periodically reviewed The County has an alternative care benefit that has proved more difficult for the TPA to administer due to some of the unique provisions. The alternative care benefit is also limited to $1,500. One alternative care benefit is for routine colonoscopies. Since diagnosis codes drive the administration of claim payment, procedures entered into by the participant as a routine diagnostic procedure (albeit preventive) become medical procedures. This then moves the benefit under the medical provisions of the plan. In some circumstances, where there are multiple providers of service, it was noted part of the procedure was billed under the alternative care benefit and another part under a medical benefit. The Plan should strive to have benefits that can be consistently applied and for which participants’ can anticipate how the coverage will be applied. In some cases, it is more beneficial for the procedures to be handled as medical expenses since those are generally covered at 80% after a $500 deductible. The alternative care benefit can cover up to $1,500 of this benefit but amounts in excess of this amount are solely the responsibility of the participant. Routine colonoscopy costs can range from $2 - $5 thousand. As the cost goes higher, the benefit is greater under the medically handled procedure. In addition, the amounts paid by participants under the alternative care benefit are not counted as part of the employees out of pocket which can drive other benefits.
Heath Benefits Trust Report #07/08-3 October 2008 Page 18 of 51 The inclusion of this benefit to the alternative care benefit seemed like a good idea in the beginning; however, Plan participants have had issues with claims sometimes being treated as a medical benefit versus the alternative care benefit. Administration of the Plan has not included specific review on a wholesale basis the administration of this particular benefit. The Plan cannot control or change how providers choose to code claims for these benefits. The Plan has attempted to improve overall wellness type benefits to participants, and this is one indication that the implementation must be carefully considered with respect to how to roll out this benefit within the Plan. It is recommended the Plan consider addressing how each of the alternative care benefit is to be administered and discuss in advance with the administrator before implementing. In the case of colonoscopy’s it is clear there is some needed change to simplify the claim handling. {The FY 08/09 Plan remedied this situation for heart scans(EBT) and colonoscopies by making these additional covered benefits not subject to the deductible and covered at 80% for preferred providers. This should go a long way towards simplifying administration.} Participation in flexible spending account could be improved. The County offers to employees the option of using a flexible health spending account (referred to as Manley) to take pretax dollars to pay for allowable health care costs. County employee participation is approximately 20% of employees. Employees participating save on employment taxes as well as state and federal taxes. An employee in a 15% Federal bracket may save at a rate of nearly 30% on dollars shifted to this account. The County saves on the employment taxes but also pays a $5.50 administration fee per month per participant. Participation in the flexible health savings account is a win-win for employee and County. There is a potential downside for employees in that they must estimate their health care costs at the beginning of the plan year and these costs will be deducted from paychecks regardless of the actual expenses incurred. Employees must also submit their costs to the administrator of the Plan (Manley) for reimbursement. The risk is somewhat mitigated by the Plan allowing employees to use two additional months of health care costs from the subsequent year if needed and the overall savings in taxes on the elected monies.
Heath Benefits Trust Report #07/08-3 October 2008 Page 19 of 51 There are some potential downsides to the employer since the employer must allow expenses to be reimbursed prior to monies being deducted from employees’ wages. The employer also bears the cost of administration, which offsets some of the benefits. A rough analysis of participant costs on submitted claims indicated there may have been up to $900 thousand of claims that could have been passed through these accounts. There were some 700 participants not using accounts. Utilizing flexible spending accounts for these additional costs could have yielded significant savings to employees of an estimated $290 thousand. County savings for these additional costs net of additional administrative overhead costs for the larger number of accounts is estimated at $24 thousand. It is recommended the County spend more time trying to inform the employees of the benefits of participating in the flexible health spending account. {It was noted in discussions with Personnel department that they make efforts each year to highlight the benefits to employees of contributing. They determined for FY 07/08 the County benefited by $16 thousand. } Timely notification of participant termination to administrators needs to be improved. A review of participants who terminated coverage identified a number of participants who had prescription claims paid outside of coverage. There appears to have been some delay in notification by the County that, while it did not affect medical claims as much, did impact prescription claims since they are processed electronically. It is important that the administrators (health and prescription) are notified in a timely manner of all changes to participant eligibility. This is particularly relevant for the prescription benefit for which there is little recourse to recover services already provided. From discussion with the health benefits coordinator, some of this delay was the health benefits coordinator’s delay in notifying the prescription provider and EBMS of the changes. This occurred due to a significant spike in number of change forms received during the renewal period where there was a required mandatory re-submittal of all dependent information.
Heath Benefits Trust Report #07/08-3 October 2008 Page 20 of 51 Four participants received $2,300 in prescription benefits after their stated termination date. These could not be reversed since there is no method for recovery of prescription claims. There was also $3,200 of claims processed by EBMS outside of the proper termination dates. EBMS will look into recovering claim monies paid by requesting refunds for amounts from providers. It is recommended the Health benefits coordinator establish a process so these notifications can occur in a timely manner to Third Party Administrator and Pharmacy Benefits Administrator. 4.3 THIRD PARTY ADMINISTRATION Figure III – TPA Performance measurements for 2007 Claims processing improved under current TPA The following comparison of measures on financial accuracy, payment accuracy and claim turnaround time for our prior and current TPA is based on the sample of claims reviewed. TPA Provider categorySamplesizeFinancial AccuracyPayment AccuracyDays TurnoverCurrent TPA* Medical/Dental/Vision 184 99.4% 97.8% 8Alternative care 80 96.5% 93.8% 11Total sample 264 99.1% 96.6% 9Prior TPA Total sample 184 98.7% 93.5% 11Industry target>99.5% > 97% <14Current TPA performance guarantee* 99% 95%85% in 14 calendar days* if performance level is not met there is a 3% penalty on medical and dental administrative fees The current sampling methodology used a sample population of claims designed to yield a 95% confidence and a 5% precision for medical/dental/vision claims and 90% confidence and a 10% precision for alternative care claims. Two populations were used to give more direct observations on alternative
Heath Benefits Trust Report #07/08-3 October 2008 Page 21 of 51 care claims. Utilizing all of 2007 claims data, claim turnaround time was on average 7 days. On average for 2007, from date of service, it took 39 days for a claim to be received. As noted below, PPO processing and provider processing also contribute to overall turnaround of claims and are more difficult to control. Sixty-five percent of participants responding to the survey (>250) indicated they had experienced a problem with processing a claim (See APPENDIX A-2). Many of these experienced more than one problem. It is not clear how many of these could be transition related issues or continuing problems. There was not an indication within the audit sample of this pervasive of an issue with incorrect claims. The greatest problem cited in the survey was denial of claims. For the claim sample, some 6.4% had some form of initial denial before payment. Most of these denials occurred with electronic claim processing. For the 2007 claims reviewed, there is some evidence that more of these denials occurred in claims initiated in 2006 than 2007. The processing indicates most of these were ultimately completed in early 2007. This may indicate that denial rates have been going down. The Plan made some changes during the audit period to improve claims processing. The Plan had observed some initial issues with a new EBMS service where claims received additional screenings on nature and type of bundled services. The Plan turned off this service, since it was too early to subject claims to this level of scrutiny without a greater understanding of the service. The Plan also noticed that EBMS was requiring much more from participants on accidents and potential accident claims than what they thought was reasonable. The Plan asked EBMS to reduce the level of procedures on certain accident types. Overall, the TPA reports they are meeting or exceeding the performance measures they established in proposing to the County. The sampled testing confirms the current administrator is doing a better job with accuracy and turnaround than our prior administrator. The errors identified, in general, were not large dollar or systematic errors. Preferred provider organization (PPO) turnaround may be affecting overall processing times The survey indicated an average rating (2.5 out of 5) for timeliness of claim processing which was the lowest rating given to the surveyed service areas (See APPENDIX A-2). As noted in the prior finding, the TPA’s claim processing turnaround for the sample and as determined by the TPA is within acceptable
Heath Benefits Trust Report #07/08-3 October 2008 Page 22 of 51 ranges. One issue affecting the Plan’s overall turnaround of claims and accuracy has been the impact of processing by the current PPO. The PPO has been unable to quantify their own turnaround of claims since they do not track when the claim was received. A selection of claims where there is some internal information of when the PPO claims were received and sent to the PPO indicates the turnaround for initial discounting of claims is averaging some 28 days over 2007. This was determined by taking a judgmental sample of claims remitted to the PPO by the TPA and then calculating how long it took to receive them back. The observed turnover times, during the summer months, appear to have been averaging much longer. The third party administrator used to fax claims over when received, but the PPO now requires them to be mailed. The PPO should have a method to track how long claims are with them and the associated turnaround time. This is a vital measure of their performance. There is tangential information that some of the issues with turnaround and with lost information stem from communication processes with the PPO. PPO communication processes are electronic and the third party administrator has indicated they do not always receive all of the supporting documentation with the claims received from the PPO. The TPA and County have made numerous inquiries of the PPO. The PPO has not been able to successfully address issues with communication with the current TPA, and the overall slow processing time, and the PPO will not allow our TPA to internally process claims using the PPO’s payment schedules. It is recommended the PPO be required to provide some measure of their turnaround time. It is recommended the County consider other preferred provider organizations that can provide better coordination of services through to the TPA. This will need to be carefully weighted with the ability to maintain or improve providers being used by participants. {The Plan is currently looking at whether a different PPO could provide better service.} Participants do not get full value of preferred provider organization (PPO) and administrative tools When participants’ claims exceed stated plan benefits, the third party administrator no longer presents on the explanation of benefits (EOB) statement the PPO discounting or associated uniform and customary
Heath Benefits Trust Report #07/08-3 October 2008 Page 23 of 51 rates (UCR). The benefit statements (EOB) only report the claim as exceeding plan benefits. As a self-insured provider, we can have greater flexibility in providing benefits to our participants. Providing information on UCR and applying PPO discounts helps to keep health care costs down for our participants. Since the PPO does not show these amounts for these types of claims, it is unclear how much participants could benefit. In discussions with the third party administrator, they have started to discuss the possibility of providing this information depending on the type of contract with the PPO. It is recommended the Plan work with the administrator and PPO to provide information on the benefits statement regarding PPO pricing on claims exceeding benefits when the opportunity exists. In addition, the PPO should report on the benefits statement uniform and customary pricing on claims when they exceed benefit levels. Benefit reports provided could be more accurate. EBMS provides a monthly “Executive Summary” providing an analysis of benefits paid. EBMS has not provided nor has the County reconciled information between the reports and the activity on account. The reconciliation with the prior administrator indicated numerous refund checks received by the administrator had gone undeposited. An attempt was made to reconcile the information for a month and it was problematic with numerous differences relating to the success of uploaded prescription activity. Some of the differences also related to overpayments requested by EBMS. EBMS was able to provide a report of the overpayments receivable but it is not a normal report we receive. EBMS does appear to have a sufficient system but the reporting on the Executive summary includes a manual check line item that duplicates the presented information for prescriptions paid and inflates the total checks line item. This appears to be an error within the report. It is recommended the Plan be provided with sufficient information to reconcile between check registers and benefit reports. The Plan should be informed to what extent claim refunds have been requested and received.
Heath Benefits Trust Report #07/08-3 October 2008 Page 24 of 51 It is important the County understand the reports being received and the pieces that go into their preparation. It was clear from discussion with EBMS they have not had many ask for this level of detail or reconciliation. It is recommended for EBMS to provide the County a detailed reconciliation between check registers issued, deposits received and their benefits reports on a periodic basis. On a monthly basis, they should provide the report detailing overpayments receivable. It is recommended the Executive summary report be fixed to show the appropriate amount of claims paid on that report. The Plan should use the overpayments receivable report to monitor the receipt of claim refunds. 4.4 PHARMACY BENEFIT MANAGER Additional review of prescription charges for abuse is warranted. During review of prescription charges, one participant was identified as having utilized prescription benefits to fill a type of medication three to six times a month for a controlled substance. The participant coordinated the filing of these prescriptions by using multiple doctors and pharmacies. There were 49 prescriptions in 2007 filled for this participant for this particular medication. The filled prescriptions in 2007 provided a supply sufficient for 1320 days (3.6 years). The review did not identify any similar circumstance among other participants. The County immediately notified law enforcement to investigate. Prescription benefits for the plan are supposed to be limited to a 30-day supply for prescription filled in a pharmacy. A one-year supply of this medication based on average cost is $3,800. The cost to the Plan for the prescriptions was nearly $13,800. This would indicate excess prescription cost approached $10,000 dollars. In addition to obtaining multiple prescriptions, the participant greatly expanded their use of medical office visits. This cost the Plan thousands of dollars in excess of what was necessary. The pharmacy benefit manager had not reviewed medication usage for these issues and they had expressly overridden controls to allow multiple strengths of this drug for the participant. The prior third party administrator did not ask the PBM to run reports on inappropriate usage. The County, at the time of
Heath Benefits Trust Report #07/08-3 October 2008 Page 25 of 51 this report, still could not assess medical necessity and was working to assure that only the correct amount of medication was paid for by the Plan. It is recommended the Plan ask for a quarterly drug usage review by the pharmacy benefit manager to look for abuse of controlled substances and use of multiple pharmacies and/or doctors. It is recommended the County develop a process to handle recovery and mitigation of claims when there is a question as to their medical necessity. If the usage is not necessary, it is recommended the Plan make a claim against the participant for the excess prescriptions as well as the excess claims for medical office visits.
Heath Benefits Trust Report #07/08-3 October 2008 Page 26 of 51 5. Responses 5.1. County Administrator
Heath Benefits Trust Report #07/08-3 October 2008 Page 27 of 51 {Auditor’s response to above comments} I value your agreement with my analysis indicating that premium rates are too high. The analysis performed highlighted the difference between actual revenues and expenses per employee. My statement that “Departments not filling positions are charged premiums when the Plan will not incur any costs” was meant to highlight that utilization is dependent on having actual employees who are using the benefits. I think the driver for health care costs is utilization by employees and not by budgeted positions. You indicate costs are incurred “regardless of the number of covered employees and dependents.” I think that reflects how the current County’s budget allocates premium charges on FTE (filled and unfilled) and not how actual costs are driven. I think charges to departments would more closely reflect benefits provided if premiums were charged based on the actual employees using the Plan. I think the FTE allocation method has some merits over others, as you indicate, but what our allocation methodology further lacks is any reflection to actual FTE’s. Adjusting billed charges to actual is a prescribed practice under guidelines published for federal grant accounting (OMB A-87). 5.2. Deputy County Administrator Date: October 15, 2008 To: David Givans, Internal Auditor From: Erik Kropp, Deputy County Administrator Re: Written Comments on Health Benefits Trust Audit Thank you for completing the Health Benefits Trust Audit. The audit details several internal control issues and brings up pertinent policy issues. Below are my comments.
Heath Benefits Trust Report #07/08-3 October 2008 Page 28 of 51 Recommendation Response Notes 4.1 – Reserve levels Concur Charge to departments should be lowered each year until reserves are within policy. Then, County should revisit the policy. This should start with the 09-10 budget. 4.2 – Participants updating changes Concur 4.2 – Documentation of Plan decisions Defer to Benefits Coordinator 4.2 – Coordinate new benefits with TPA better Defer to Benefits Coordinator 4.2 – Alternative care administration Defer to Benefits Coordinator 4.2 – Flexible spending account Concur 4.2 – Notification of participant termination Concur 4.3 – PPO turnaround time Defer to Benefits Coordinator 4.3 – PPO pricing Defer to Benefits Coordinator 4.3 – EBMS benefit reports Defer to Benefits Coordinator 4.4 – Quarterly drug use review Concur 4.4 – Claim against excess prescriptions Concur 5.3. Personnel Department {From discussion with Debbie Legg, Personnel Services Manager – 10/22/08} 4.2 Participants fail to correctly update Plan … It is not clear there has been direction provided on annual renewals. Personnel would like there to be a decision as to whether annual renewals will be performed and to what extent documentation will be asked for in support of changes (such as marriage certificates, birth certificates, divorce decrees, tax returns, etc…). Participation in flexible spending … The County is able to benefit from providing these services to employees. The current benefit to the County for the 2007/2008 Plan year was around $16 thousand. The Personnel Department on an annual basis encourages employee participation.
Heath Benefits Trust Report #07/08-3 October 2008 Page 29 of 51 5.4. Health Benefits Coordinator
Heath Benefits Trust Report #07/08-3 October 2008 Page 30 of 51 5.5. Finance Department DESCHUTES COUNTY Finance Department MEMORANDUM DATE: October 21, 2008 TO: Dave Givans County Internal Auditor FROM: Marty Wynne Finance Director and Treasurer
Heath Benefits Trust Report #07/08-3 October 2008 Page 31 of 51 RE: HBT Audit – “Third Party Administrative Services Review” The following are comments regarding your draft of the subject audit. Section 4.1 “Health Benefit Trust Reserves Exceed Levels Set by Policy The policy states that “reserves shall continue to increase until they are estimated to equal the estimated cost of total claims paid for one year.” At the time this policy was written, reserves were millions of dollars below the amount of one year’s claims, and it was understood that the policy would be reviewed when the one year level was achieved. It does not state that reserves shall never exceed one year’s claims. In the policy it clearly states that if reserve levels are expected to be equal to or greater than estimated total claims for one year, “departmental charges MAY be reduced accordingly. From the beginning of this plan, departmental charges were calculated to balance the budget with the understanding that the cumulative charges to departments would achieve a balanced budget that included one year’s claims per the aggregate stop-loss quote. The above statement in the policy “may be reduced accordingly” was intended to mean that the cumulative departmental charges could be less than the amount needed to balance to the full stop-loss amount. It was never discussed or agreed to that the charges would be established so that reserves would not be higher than one year’s claims. Perhaps the policy language should be modified. It was recommended that “to the extent reserves are returned to departments, part of this should be based upon the unfilled budgeted positions charged to specific appropriations.” This seems to imply that those departments with relatively more unfilled positions than other departments have been charged unfairly. As far as I know, there is no data to support his conclusion. If we were to do this, we would be looking at only half of the equation. This recommendation does not take into account how much is paid out in claims for a given department versus internal charges to a given department. Additional Comments (1) It would seem that the internal auditor’s interpretation of the “participant survey” information would be an important part of this audit, but no comments were included in the findings. (2) As I mentioned to you, at a GFOA class I recently attended it was strongly recommended that a self-insured plan such as ours could benefit greatly if we were to hire a “healthcare consulting firm” to review all aspects of our HBT plan and its administration. It was stated in the strongest terms
Heath Benefits Trust Report #07/08-3 October 2008 Page 32 of 51 that they did not think it is not a good idea to use a third party administrator as a consultant regarding some of the important aspects of a self-insured plan. The speakers at this class stated that third party administrators, even the best of them, do not have the perspective of professional healthcare consultants, whose job it is to review best practices of a variety of organizations with self-insured programs. Thank you for the opportunity to respond to the subject audit. {Auditor response to above comments} As you indicated under our current policy, reserves can exceed the one year paid claims and they may or may not be reduced. My discussion in the report strives to clarify the policy and direction of this since reserves have grown well beyond one year claims over a fairly short time frame. I believe it is time for the processes we use to budget and fund HBT to change so as to better align underlying costs with charges to departments and other revenue sources. I also did some research of other local government self insured health plans that indicates a much lower level of necessary reserves. You commented on my specific approach to returning reserves from an earlier draft of this report. As I explained in this final report, if reserves are determined to be in excess and the County seeks a mechanism to adjust the reserve levels, I am suggesting the proper course of action is to accomplish this under the same method used to collect such monies. I think I have sufficiently addressed why the surveys were performed in the audit methodology and in the included transmittal to the participant survey. To address your concern, I have attempted in relevant sections of the report to refer to the survey and the results such as in the performance levels of the TPA. In regards to GFOA's recommendations and your recent class. I have seen their last recommendation in 2004 on cost containment. In fact, this audit addresses a number of the issues addressed by that recommendation in terms of vendor management. The audit was not meant to delve into plan design, individual health management, aggregation, and cost sharing or other areas that you might have discussed in your class. Those are all valid areas to be looked at but were not an objective of this audit. Since you have always been an involved participant with EBAC I suggest you bring up your concerns for the areas you identified at EBAC.
Heath Benefits Trust Report #07/08-3 October 2008 Page 33 of 51 5.6. Third Party Administrator (EBMS) From: Julie Nelson To: David Givans Sent: Fri 17 Oct 2008 RE: Deschutes County report on health benefits trust for comment David – Good afternoon. Thank you so much for providing EBMS with a copy of your audit report. You did a wonderful job reviewing all aspects of this benefit plan and were a pleasure to work with. In response to your findings and recommendations in section 4.3, EBMS’ responses are below: Claims Processing Improved under current TPA We reviewed your graph for the sample of claims reviewed regarding accuracy and turn around time. I reviewed our reports for those same measures and below is what we have figured for those items: Financial Accuracy: 99.64% Payment Accuracy: 98.34% Turn Around Time – 91.40% of claims are processed within 14 calendar days. Benefit reports provided could be more accurate. You have recommended that EBMS provide the County with a detailed reconciliation between check registers issued, deposits received and our benefits reports. Currently EBMS provides the check register and the benefit reports to Deschutes County. The County maintains their own bank account and retains all related information. Therefore, EBMS does not have access to bank deposit
Heath Benefits Trust Report #07/08-3 October 2008 Page 34 of 51 information, etc. Should Deschutes County want EBMS to provide this reconciliation service, the County would need to supply additional information. You have also requested to see an overpayments receivable report on a monthly basis in addition to an adjusted Executive Summary. We can accommodate the overpayments receivable report on a monthly basis, it will be posted to your FTP site. The loading of the Rx detail into the EBMS reports was done as a special request for Deschutes County. We typically do not handle the Rx claims or input them into our reports for clients who utilize an outside PBM. There are many reasons for doing so, and one of them happens to be how the Rx is paid and reflected in our reports. The Rx claims for Deschutes County are paid via manual check off of an invoice we receive from NWPS. In an EBMS Rx situation, the Rx claims show on the weekly check register and are included in the funding request just like the medical claims. The EBMS Rx claims are loaded individually into our claims system and show up in reports just like a medical claim. For Deschutes County, we are receiving a monthly file from NWPS that includes the claims detail, and we load it into our system so that the members can see their Rx claims on miBenefits and the claims dollars can be reflected in the reports (we load these as a no-pay provider, so duplicate payments do not go out). Because the Rx invoices (which includes the claims dollars) are being paid via manual check, that amount is also reflected in the Executive Summary section under the Benefit Analysis Summary. The only place the Rx is appearing to show up twice, is in the Benefit Analysis Summary, once as a claim and once as a manual check. All of the other areas of the Executive Summary are correct. If we take the Rx claims paid amount and subtract it from the manual checks that will give you the total checks amount. Unfortunately we are not able to adjust the Executive Summary to exclude the Rx manual checks from the Benefit Analysis Summary, but if it would be helpful, I can provide you with a manual checks summary monthly so that you can exclude them from your calculations, etc. Pharmacy Benefit Manager We reviewed some of the findings and concerns you have regarding your current PBM arrangement and feel that EBMS can offer a product that will provide some solutions to those concerns. EBMS offers an Rx solution that is intergraded and managed by the EBMS Rx staff along with our team at Caremark (our preferred PBM). Utilizing EBMS Rx allows daily (7 days a week) file exchanges to Caremark, onsite customer service support, Rx reports that are integrated with our
Heath Benefits Trust Report #07/08-3 October 2008 Page 35 of 51 existing medical reports, Rx specific reports, Drug Utilization Review programs, integration with the Care Link and Case Management members, Rx data available to assist in disease management program, among others. This option has been presented to the EBAC committee in the past, but given some of the concerns you mentioned in your audit, I feel that we may have a viable solution for you. Please let me know if you would like further information or to discuss our options more in depth. Thank you for your time and assistance during this process. Please let me know if you have any questions about our responses, would like to discuss in further detail or if there are any concerns. Thank you again and have a wonderful weekend! Julie Nelson Account Manager Employee Benefit Management Services, Inc. 2075 Overland Avenue • P.O. Box 21367 • Billings, MT 59104-1367 5.7. Pharmacy Benefits Manager From: Anja Kraemer ] Sent: Wednesday, October 15, 2008 To: David Givans Subject: RE: Deschutes County report on health benefits trust for comment Hi David, Attached is our response to section 4.4. “A quarterly Drug Usage Review was implemented on January 1, 2008. The current criteria identifies patients utilizing nine (9) or more controlled substances, two (2) or more different pharmacies and two (2) or more different physicians. Detailed reports are reviewed and reported if the usage seems excessive. These reviews are based on limited information available. Cases flagged may represent “false positives” or “false negatives” for any of the following reasons: · patients may have received prescriptions not processed by NWPS. · patients may not have consumed prescriptions dispensed to them. · there may be appropriate medical reasons for the reported dispensing
Heath Benefits Trust Report #07/08-3 October 2008 Page 36 of 51 · patterns. Comments are limited based on the absence of diagnosis, lab tests and/or other medical information. Detailed information is forwarded to the designated Third Party Administrator to be coordinated with the patient’s medical data.” If you have any questions or concerns, please do not hesitate to contact me. Thanks Anja Kraemer Northwest Pharmacy Services
Heath Benefits Trust Report #07/08-3 October 2008 Page 37 of 51 APPENDICES A1 AUDIT METHODOLOGY The audit attempted at addressing similar service areas noted in the prior audit of third party administration for the Plan. In addition, a survey was considered necessary to assess the extent of satisfaction/dissatisfaction with the current level of services. The audit was also discussed with Personnel staff working on the HBT, EBAC as well as management to assess any other issues. Interviews of the Health Benefits Coordinator and Third Party Administrator allowed a better understanding of the control environment. Since the health benefits system is operated on the TPA’s hardware and software, an understanding of the support for this information was required. A random sample of 184 claims was generated. The sample size was determined from the number of 2007 claims (~32 thousand claims). The sample size for medical, dental, and vision claims was calculated using a confidence level of 95%, 5% precision and with a tolerable error of 2%. The sample size for alternative care claims was calculated using a confidence level of 90%, 10% precision and with a tolerable error of 5%. The claims were examined and compared to the data in the computerized system. During this process, the claims were also recalculated and the eligibility checked. A number of the findings were identified through this process. Only after testing and concluding on the reliability of the computerized systems could data be utilized to perform further analysis. We did conclude we could place reliance on the data provided by their systems. Separate data from NWPS was also obtained and analyzed. Reliance on the data came from other auditors who have audited and rendered an opinion on those systems. Our assessment was that we could place reliance on the other auditors work to utilize the data from this system. Additional audit evidence was obtained through observation, interviews, analysis and testing. Audit Procedures: Audit procedures included: · Followed up on prior internal audit recommendations. · Analysis of budgets and actual results for fund by fiscal year and by covered employee. · Developed an understanding of Health Benefits issues through o review of similar audit reports and associated recommendations issued by other local
Heath Benefits Trust Report #07/08-3 October 2008 Page 38 of 51 governments, o attendance of EBAC meetings, o survey of participants, and o survey of providers · Discussed with the Health Benefits Coordinator and TPA management procedures and internal controls in place. · Performed testing of data entry, eligibility and calculated turnaround time and financial and payment accuracy for randomly selected sample. · Assessment of reliability of computerized systems to properly collect data · Analytical and computerized procedures for EBMS as well as NWPS claims including o Analysis and charting of trends and composition. o Reconciliation between benefit reports from TPA and County information. o Analysis of claims paid for terminated participants. o Analysis for unusual prescription claim usage. o Analysis of PPO turnaround on claims. o Analysis of handling of EBT, colonoscopy, and chiropractic claims. o Analysis of sleep apnea benefits. o Analysis of participation in health spending account. Financial accuracy was measured by dividing the total dollars paid incorrectly (using the absolute sum of all overpayments and underpayments) by the total correct dollars which should have been paid, and subtracting the result from 100%. A reasonable target rate for this measure is 99%. Payment accuracy was measured by dividing the number of claims paid correctly by the number of claims audited. A reasonable target for this measure is 97%. The audit was conducted in accordance with Government Auditing Standards issued by the Comptroller General of the United States. The follow-up of prior recommendation implementation utilized information without verification and therefore was not completed in accordance with standards and is provided in this report to reiterate items that have not been fully addressed. The surveys are included for informational purposes, were used in planning objectives and procedures, and were not issued as audits in accordance with standards herein or by themselves.
Heath Benefits Trust Report #07/08-3 October 2008 Page 39 of 51 A2 PARTICIPANT SURVEY (INFORMATION ONLY) SURVEY TRANSMITTAL Dave Kanner, County Administrator Employee Benefits Advisory Committee 1300 NW Wall St, Suite 200 Attn: Timm Schimke, Chair Bend, OR 97701 61000 SE 27th St Bend, OR 97702 cc:\ Audit Committee, Personnel, EBMS, County Intranet The attached survey of participants of the County’s self-insured health plan is part of the planned review of services provided by the County’s third party administrator (EBMS). Information contained in this report is solely from data received from the survey. There were over 400 hundred surveys received. The results of the survey have been discussed with EBAC (Employee Benefits Advisory Committee) and the County Administrator. They wanted to make sure employees have access to these results as well as what will be done with them. This transmittal and the survey results will be made accessible on the County’s intranet site or on request. Some of the general themes that emerged from reviewing the survey data included: · A significant number of participants have been experiencing problems in claim processing. Participants noted a number of areas with problems, including claim denials and incorrect information. It is not clear that participant problems are being effectively resolved. · Services were rated in all categories below average. Participants noted the worst service in the areas of timeliness of claim processing, claim review requests, and coverage changes. Claims that were rated lowest in satisfaction were medical claims and claims where there is coordination of benefits with other insurance. · Participants expressed concerns related to benefits coverage. EBAC has discussed conducting this survey on an annual basis to assess whether the problems being raised are being addressed. EBAC has also formed a subcommittee to address the problems being encountered. It is anticipated the subcommittee in coordination with the audit will help determine how better to address these problems. The survey has already helped play a role in identifying the significant areas that should be covered during
Heath Benefits Trust Report #07/08-3 October 2008 Page 40 of 51 the audit of plan services. The audit focus is so far in three areas. · Perform testing of actual claims to address timeliness and accuracy of claims processed. · Review administration of benefit payments including services provided by the preferred provider organization. Significant issues identified during the survey will be considered in analyses. · Comparison of County and COIC eligibility records with the third party administrator and the pharmacy benefits manager. Other areas for review might be identified during the audit work. In addition, planning will include a survey of providers to assess their satisfaction with administration of claims. David Givans, County Internal Auditor December 19, 2007 A2-1.1 BACKGROUND ON AUDIT Audit Authority: The Deschutes County Audit Committee authorized the review of services being provided by the County’s third party administrator of health benefits in the Internal Audit Program Work Plan for 07/08. The survey is considered part of the audit in that it will be used to address audit objectives. A2-1.2 SURVEY OBJECTIVES and SCOPE Objectives: The survey was identified as a tool to plan and develop audit objectives. The survey’s objective was to determine the prevalence and existence of service issues with the current third party administrator. These results are to be discussed with EBAC to see if they have any other concerns that should be considered in advising on objectives for the audit. Scope: The scope of the survey included all employees and retired employees participating in the Plan. A link to the survey was emailed to all employees as well as mailed out to retirees and with paychecks to employees. The survey was also made available in paper form. Over four hundred employees participated in the survey. There are 858 employees and 59 retirees in the plan. This indicates that over 40% of participants responded to the survey.
Heath Benefits Trust Report #07/08-3 October 2008 Page 41 of 51 A2-1.3 SURVEY METHODOLOGY Survey questions were identified through discussions with the EBAC committee members, health benefits coordinator and prior audit work. The survey questions were run by EBAC and the County administrator during development. A2-2 RESPONSES FROM THE PARTICIPANT SURVEY 1. How well do you understand your health plan? Average of 2.8 on this scale. (better than somewhat) Some additional observations when looking at the other questions 0 50 100 150 200 2505-Not at all4-Not too3-Somewhat2-Very1-ExtremelyRating# of responses Extremes – ratings of “Not at all” / “Extremely” Overall service rating levels (Q5) - There seems to be a higher proportion of worst ratings coming from these two groups. Those with “Not at all” ratings were the lowest in most of the service categories. Problems (Q7) - There does not seem to be a correlation with understanding and higher levels of problems. “Extreme” and “Not at all” groups seem to have a higher proportion of the >10 problems. Involvement (Q4) – These groups are polar opposites, as the “Extremely” group wants less involvement and the “Not at all” group wants more involvement. “Not at all” rating Reliance on providers (Q3) - This group has a significantly higher level of reliance than the other groups. Utilization of resources (Q2) - This group does not utilize EBMS at all.
Heath Benefits Trust Report #07/08-3 October 2008 Page 42 of 51 2. Which resources do you use to understand your health plan benefits? {Respondents could make more than one choice} ResourceResponses% of responsesHealth Plan Document28970.3%Personnel21452.1%EBMS18545.0%County Intranet8921.7%Other368.8%None of the above112.7%TOTAL411 0 50 100 150 200 250 300None of the aboveOtherCounty IntranetEBMSPersonnelHealth Plan DocumentUse of resourceResponse count It was interesting that those with “Not at all” understanding of the plan did not utilize EBMS as a resource. This group utilized the health plan documents less, and relied more on the Personnel department as well as providers. Of those indicating “other”, comments indicated they were primarily utilizing fellow employees (10) and their providers (9).
Heath Benefits Trust Report #07/08-3 October 2008 Page 43 of 51 3. How much do you rely on your health care provider to understand your benefits? Over half of the participants rely somewhat on providers to understand benefits. 0 50 100 150 200 250ExclusivelySomewhatNeverRatingResponse count Those with “Not at all” understanding (Q1) seem to have a higher degree of exclusive reliance on providers. 4. How actively involved do you expect to be in managing your self-insured health plan benefits? Average of 3.0 on this scale. (moderate involvement expected) Some additional observations when looking at the other questions 0 50 100 150 200 250 3004-significant involvement3-moderate involvement2-Some involvement1-No involvementRatingResponse count Responses indicated overall good level of involvement. It is not clear how much this might be to clear up problems. As problems increased (Q8) so did desire for involvement. The “Extremely” understanding group (Q1) wants less involvement whereas the “Not at all” understanding group wants more involvement.
Heath Benefits Trust Report #07/08-3 October 2008 Page 44 of 51 5. How would you rate the current health plan administrator (EBMS) in the following areas? {on Averages and on Counts} Overall rating of 2.7 on 5-point scale puts it just below average. Lower services noted in the areas of timeliness of claim processing, claim review requests, approval process for new or changed coverage, and accuracy of claims processing. 2.52.72.82.62.62.52.52.82.70.0 1.0 2.0 3.0 4.0 5.0Approval process for new or changed coverageInsurance explanation of benefits (EOB)Customer serviceInformation provided on benefits/coverageAccuracy of claims processingClaim review requestsTimeliness of Claim processingTimeliness in responding to questionsOVERALL Average rating (1-worst to 5-best Generally, as problem occurrence (Q8) increased the ratings decreased. There was a greater reduction in service rating for those with problems in the areas of accuracy of claims processing, claim review requests, and overall. The better overall service ratings came from those wanting less involvement (Q4) (have less problems). 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0Approval process for new or changed coverageInsurance EOBCustomer serviceInformation provided on benefits/coverageAccuracy of claims processingClaim review requestsTimeliness of claim processingTimeliness in responding to questionsOVERALLResponse count12345Rating scale 1-5 (1 -worst)
Heath Benefits Trust Report #07/08-3 October 2008 Page 45 of 51 6. How would you rate your overall satisfaction with claim handling in the following areas? {on Averages and on Counts} Ratings highlight greater issues in the areas of medical claims and coordination of benefits Counts indicate a greater number of responses on more common types of claims. Both show lower satisfaction with coordination of benefits, alternative care and medical. 2.53.03.43.13.12.70.0 1.0 2.0 3.0 4.0 5.0Coordination of benefits-otherinsuranceAlternative claimsPrescription claimsVision claimsDental claimsMedical claimsAverage rating (1-worst to 5-best) 0 50 100 150 200 250 300 350 400 450Coordination of benefits-otherinsuranceAlternative claimsPrescriptionVisionDentalMedicalResponse count12345Rating scale 1-5 (1-worst)
Heath Benefits Trust Report #07/08-3 October 2008 Page 46 of 51 7. In the last year, have you experienced a problem processing a health benefits claim? 65% of respondents indicated a problem. 0 50 100 150 200 250 300NoYesResponse count 8. If you experienced a problem(s) processing a health benefits claim in the last year, how many problems have you encountered? 0 20 40 60 80 100 120 140 160>106-102-51Count of problemsResponse count As problems increased, the overall rating of services (Q5) decreased.
Heath Benefits Trust Report #07/08-3 October 2008 Page 47 of 51 9. If you experienced a problem(s) processing a health benefits claim in the last year, what problems have you experienced? Problem description >10 6-10 2-5 1 n/aGrandTotal% of ResponsesDenials14208922114658%Incorrect information11206513111043%Benefits less than expected9186510110341%Communication problem1217561219839%Lack of follow-up 131656929638%Incorrect application of benefits111450628333%PPO processing/delays 9 14 49 6 3 81 32%Other,described81339816927%Missing information51135715923%Recurring problem14172715923%Medical necessity issues8626314417%Accident coverage4616313012% Participants identified a number of areas that have been a problem including denials, incorrect information, and benefits less than expected. 10. If you had any claim issues, what was your primary means for resolving it? A majority of the problems are being addressed directly with EBMS (63%). 0 20 40 60 80 100 120 140 160Contacted service providerContacted EBMSContacted countyNo actionResponse count
Heath Benefits Trust Report #07/08-3 October 2008 Page 48 of 51 11. Was your problem claim issues resolved satisfactorily? 0 20 40 60 80 100 120 140 160 180ResolvedResolved but not in the wayyou would have liked itIn progressNot resolvedResponse count Nearly 37% were not resolved in a way the participant would have liked it. That does not necessarily indicate the outcome was wrong but could indicate the participant is frustrated with the outcome. 12. If you have experience with other health insurance, please grade your overall satisfaction with Deschutes County claim administration. 0 20 40 60 80 100 120 140 1601-Worst23-Average45-BestRatingResponse count Average of 2.7 on this scale is in alignment with overall service rating of EBMS (Q5).
Heath Benefits Trust Report #07/08-3 October 2008 Page 49 of 51 13. Any other comments Overview of comments received based upon overall rating (Q5) Overall Rating No Comment Comments TOTAL % with comments n/a 14 11 25 44% 5-Best 6 4 10 40% 4- 51 16 67 24% 3-Avg. 121 39 160 24% 2- 62 46 108 43% 1-Worst 17 30 47 64% TOTALS 271 146 417 35% There was a higher level of comments with respondents who grade overall satisfaction with EBMS at the worst rating. The lowest level of comments were received for respondents with fairly average service ratings. {END OF PARTICIPANT SURVEY REPORT} A3 PROVIDER SURVEY (INFORMATION ONLY) The following survey of providers of services to the County’s self-insured health plan is part of the planned review of services provided by the County’s third party administrator (EBMS). Information contained in this report is solely from data received from the survey. There were only 13 surveys received. The overall results of the survey have been discussed with EBAC (Employee Benefits Advisory Committee) and the County Administrator. They wanted to make sure providers were provided an opportunity to provide input on services provided by our third party administrator. Some of the general themes that emerged from reviewing the survey data included: · Too few surveys were received to make any significant conclusions. · Overall, providers rated services above average. Providers’ responses were lower in the areas of providing information, EOB usefulness and secondary processing. Alternative care providers had generally more positive ratings.
Heath Benefits Trust Report #07/08-3 October 2008 Page 50 of 51 A3-1 SURVEY OBJECTIVES, SCOPE and METHODOLOGY Objectives: The survey was identified as a tool to better plan and assesses audit objectives. The survey’s objective was to determine the prevalence and existence of service issues with the current third party administrator. These results are to be discussed with EBAC to see if they have any other concerns that should be considered in advising on objectives for the audit. An effort was made to distinguish between alternative care providers and medical/dental/vision providers. Scope: The survey was notified to selected providers (over 163) by a post card with a link to the internet survey. Selections were made for medical/dental/vision providers as well as of alternative care providers. EBMS also notified all providers receiving checks over the course of two weeks. Of a potential base of 2070 providers, we received thirteen completed surveys. As there was not a reasonable amount of participation in this provider survey the results may not be representative and are only included herein for informational purposes. Methodology: Survey questions were identified through discussions with the EBAC committee members, health benefits coordinator and prior audit work. The survey questions were run by EBAC and the County administrator during development.
Heath Benefits Trust Report #07/08-3 October 2008 Page 51 of 51 A3-2 RESPONSES FROM THE PROVIDER SURVEY Health care provider service ratings for service from claim administrator (EBMS) as compared to their other insurance claim payors (13 responses)(1.0) (0.8) (0.6) (0.4) (0.2) - 0.2 0.4 0.6 0.8 1.0As Primary-timeliness_As primary - accuracy_As secondary-timeliness_As secondary-accuracy_EOB statement_EOB unbundling codes_EOB usefulness of codes_Customer service_Info provided_Timeliness in responding to questions_Overall_Below AverageAboveAverageAverage In looking at the responses from alternative care vs. medical/dental/vision, it was noted that the providers for alternative care benefits generally provided more positive ratings. {End of Report}