Historically, most state retirees have paid deductibles and other costs for their state-provided health insurance, but they haven’t had to pay the premium cost for those policies. (Teachers are an exception, because they've always paid their own premiums.) A 2012 state law allowed the Department of Central Management Services (CMS) to split the cost of premiums with retirees, leading CMS to reconfigure the health benefits offered. [See “State retirees anxious about health benefit changes,” Oct. 31, 2013, by Patrick Yeagle.] Along with the new benefits comes an audit to verify the eligibility of all dependents on a retiree’s health plan.
The state hired Health Management Systems, Inc., of Texas to conduct the audit for $393,136, but with the caveat that HMS doesn’t get paid unless the state saves money. That led some retirees to question whether HMS has a financial incentive to make it difficult for them to comply with the audit.
Beverly Johns, a retired teacher and current public speaker on special education, testified before the Illinois Commission on Government Forecasting and Accountability on Oct. 23, asking why retirees are “being put through this elaborate and complex process.”
“I ask the question about whether it is to detect fraud or is it an attempt to cut off some senior citizens,” Johns said.
Janice Bonneville, deputy director of CMS’ Bureau of Benefits, answered questions posed by legislators about the audit and the health benefits changes at the same Oct. 23 hearing. Bonneville said prior to 2003, no verification was required for dependents on a group insurance plan offered by the state.
“You simply signed them up, put their Social Security number down, and they were on,” she said, adding that there are 183,000 dependents on the state’s coverage. She said that’s far too many people for the state to audit in-house.
“Everyone’s concerned about cost,” she said. “If I’m carrying dependents who aren’t eligible for coverage, it’s costing money to cover those dependents.”
Further questions emailed to two CMS spokeswomen were not answered by press time.
Fred Klonsky, a retired K-5 teacher in Chicago who blogs about topics affecting teachers and fellow retirees, says he and other retirees received no notice that the state planned to audit dependents until HMS sent out a letter demanding sensitive personal information like a certified transcript of a retiree’s latest federal tax return. Many retirees thought it was a scam, he said, and several have called the Office of the Illinois Attorney General asking whether to throw the letters out.
“You’re talking about 80-year-olds getting a letter demanding personal documents and saying they’re being audited,” Klonsky said. “They’re going to be scared shitless, and some of them may not respond.”
Bonneville told lawmakers that her department did tell retirees about the dependent audit.
Anyone who doesn’t respond to the audit, however, risks having their dependents kicked off the state’s coverage. Under state law, anyone who leaves the coverage is not allowed to rejoin, though CMS supports changing that law.
Due to the shutdown of the federal government that caused delays in retirees obtaining copies of official documents like tax returns, CMS extended the deadline for audit compliance from Oct. 25 to Dec. 6.
HMS previously did a similar audit for the State of Minnesota. More than 94 percent of dependents in the Minnesota audit were verified as eligible, according to a report from Minnesota Management and Budget, a state agency, with 5.6 percent of dependents unverified. The audit, which included not only retirees but also legislators, judges and other current state employees, resulted in 3,100 people being thrown off of the state coverage. About half of those were eliminated for failing to file paperwork, though a state employee union has filed a class-action lawsuit against the state, claiming many of those who were eliminated didn’t receive notice of the audit until it was too late. Minnesota Management and Budget estimated the savings from the audit at $4 million.
The audit generated many complaints among Minnesota state employees, including lawmakers who didn’t realize they had included themselves in the law that called for the audit.
Chet Jorgenson, president of the Minnesota Association of Professional Employees, says the audit in that state was harassing to employees, and that there was a presumption of guilt.
“There was no evidence that there was any fraud or that there were any problems,” Jorgenson said. “We really saw it as a solution looking for a problem. We had to produce all of this information when there was really no belief that employees were committing fraud.”
Jorgenson said several employees had trouble contacting HMS. On at least one day last week, the phone number listed in the HMS letter to Illinois retirees gave only dead air when called. The number appeared to be operational later in the week.
Bonneville told lawmakers in the Oct. 23 hearing that her department didn’t have evidence of fraud, but had heard several stories of retirees carrying ineligible dependents by mistake, which prompted the audit.
“It is a tightening of the belt, so to speak, in an age where it seems that we’re getting more and more pressure to provide coverage for anyone and everyone under a plan that simply can’t sustain that cost,” she said.
Contact Patrick Yeagle at firstname.lastname@example.org.