Self-funded Health Plan

Without effective monitoring, the Office of Human Resources cannot accomplish its goal of saving taxpayers and city employees money through the self-funded health plan, nor can it guarantee that its third-party vendors fulfill their contractual responsibilities in administering the plan.

Additionally, without adequate oversight, ineligible dependents of city employees could receive benefits they are not eligible for and claims might be processed incorrectly — both of which could cause unnecessarily higher premiums for city employees.

FINDING 1 — The Office of Human Resources is not effectively overseeing the city’s self-funded health plan

The office is not complying with a city ordinance that requires external audits every five years to ensure employees’ dependents are eligible to be covered by the city’s health insurance plans. Human Resources is also not effectively monitoring its third-party contractors to ensure:

• Only eligible dependents of city employees are receiving health insurance benefits.
• Officials annually review United Healthcare’s claims administration process for any gaps or deficiencies the city should compensate for.
• Third-party vendors, including United Healthcare, adequately provide the services they have been hired for as part of administering the city’s self-funded plan.

FINDING 2 — The Office of Human Resources lacks documented guidance to effectively support the city’s self-funded health plan

The office does not have adequate policies and procedures to ensure staff:

• Review and approve invoices from United Healthcare that ask for the money the city needs to pay toward employees’ medical claims.
• Implement and communicate changes to the benefits plan in a timely manner before the changes take effect.
• Review the levels of access Human Resources staff have to United Healthcare’s online portal, which has sensitive city and employee data.
• Remove former city employees’ health insurance coverage in a timely manner given they are no longer paying for the benefits.

1.1 Comply with city ordinance – To ensure compliance with the city ordinance that requires an external audit of dependents’ eligibility every five years, the Office of Human Resources should — as soon as possible — follow the city’s procurement process and hire an external audit firm qualified to assess the eligibility of all dependents on the city’s health plans. The office should then take the necessary steps to resolve any issues noted by the audit to ensure only eligible dependents receive benefits from the city’s self-funded health plan. 

Agency Response – Agree; Implementation expected by Dec. 31, 2024

1.2 Develop, document, and implement procedures to review eligibility – The Office of Human Resources should develop, document, and implement procedures to regularly review the eligibility of employees’ dependents — especially in instances where automated processes are limited in the city’s system of record, Workday. The office’s processes should, at a minimum:

• Ensure the city obtains all required documentation from employees about their dependents and keeps those records in Workday, including documentation to show the disability status of applicable dependents.
• Work with the city’s Technology Services agency, or other agencies as necessary, to obtain data from Workday about the employees and dependents participating in the city’s self-funded health plan.
• Use employee participant and dependent data in Workday to regularly check for instances of dual coverage where an individual is receiving benefits as both an employee and a dependent.
• Document the results of the review and the actions to resolve any ineligible.

Agency Response – Agree; Implementation expected by June 30, 2024

1.3 Obtain training on reading service provider reports – Before implementing Recommendation 1.4, the Office of Human Resources should obtain training on how to read and implement the contents and results of United Healthcare’s service provider report. This training should enable the office to:

• Identify the processes and procedures that complement United Healthcare’s claims administration process.
• Identify control deficiencies and gaps in United Healthcare’s claims administration processes.
• Understand what processes the city needs to implement to accommodate and compensate for those deficiencies and gaps.

Agency Response – Agree; Implementation expected by June 28, 2024

1.4 Obtain and review United Healthcare’s service provider report – The Office of Human Resources should annually obtain and review United Healthcare’s service provider report. The office should develop a policy and procedure to ensure this task is completed every year, and it should identify the staff member who should perform this duty.

Agency Response – Agree; Implementation expected by March 29, 2024

1.5 Assess the need for a medical claims audit – The Office of Human Resources should design and complete a formal and documented needs assessment to evaluate whether it should pursue a medical claims audit — and if so, how often and for what scope of time, in compliance with its contract with United Healthcare. The assessment should include a risk assessment of third-party processes, and it should serve as the foundation for managers’ annual decision-making on whether to seek a medical claims audit.

Agency Response – Agree; Implementation expected by Dec. 31, 2024

1.6 Create and implement policies and procedures for monitoring third parties – The Office of Human Resources should establish and implement policies and procedures for how it will monitor Lockton’s and United Healthcare’s procedures related to the self-funded health plan so the office can ensure health plan decisions are made using correct information.

Agency Response – Agree; Implementation expected by April 30, 2024

2.1 Develop, implement, and finalize policies and procedures – In addition to its existing documents, the Office of Human Resources should develop, implement, and finalize policies and procedures that provide the sufficient level of detail described in federal standards for internal controls and ensure:

• Funding requests are properly authorized and reviewed for completeness.
• Changes to benefits plans are implemented and communicated in a timely manner and with sufficient advanced notice before the changes take effect.
• A staff member is designated as being responsible for granting Human Resources staff access to United Healthcare’s online portal and that only authorized Human Resources staff have access.
• Former employees are removed from the city’s health insurance plans in a timely manner.

Agency Response – Agree; Implementation expected by April 30, 2024