Oregon Educators Benefit Board Uncovers Fraud by School Employees
But the board decides against an audit this year, citing a shortage of time and money
February 28, 2011 – Several instances of fraudulent claims made to the Oregon Educators Benefit Board by school employees prompted the board to consider conducting an audit.
But the board stopped short of green-lighting a process that would only sample 10 percent of those employees and cost upwards of $150,000 even though it’s unknown how many people have abused the system.
“I think we’re dealing with intelligent people, and they’re defrauding the system,” said Wally Hazen who sits on the Coos Bay School District Board, who favored moving ahead with the audit.
Actually, there were only three documented instances of employees “going into the system … and adding spouses and others onto their plan who are clearly ineligible” in the past year, according to April Kelly, OEBB’s lead benefits analyst.
OEBB unearthed one employee who gamed the system by collecting benefits for over two years for a spouse she divorced in 2004, before OEBB even existed. The benefits office at the school where the employee worked gave OEBB the heads-up, and the board terminated her coverage.
“A superintendent has at least one or two occasions a year or more of this, depending on size of his district,” said Peter Tarzian, PhD, superintendent of the Falls City School District. He suggested the problem could be much larger than what OEBB’s staffers have uncovered.
Rather than rush to conduct an audit when it’s unknown how many fraud cases would actually come to light, the board decided not to take any action on February 10 even though some members thought they should move ahead.
“Out on the ground, OEBB does not have a good relationship with folks in eastern Oregon,” said Dave Fiore, a consultant with the Oregon Education Association who works out of its Pendleton office. “We’re seen as the big bad wolf looking over their shoulders.”
While Fiore agreed with the principles of the audit, he was “a bit uncomfortable” with the rapid timeline proposed by Geoff Brown, a consultant with Towers Watson, OEBB’s consulting firm, and other board members, worrying there wouldn’t be enough time to communicate with school district employees.
Had the board decided to move forward, it would have needed to start the process immediately to identify a sample population for the audit, and asking for evidence of their eligibility such as a birth or marriage certificate, said Denise Hall, the board’s deputy administrator.
The data collection and analysis, along with advance communication to OEBB members and insurance companies, would have taken several months, said Heidi Williams, the board’s operations director. “If we wanted to do it this year, we’d need to vote today [Feb. 10] to start the process March 1.”
Moreover, added Hall, doing an audit would require OEBB to re-enroll all its members – a huge time investment for staff and those receiving benefits.
“We all took a breath when we heard that,” she said.
A Towers Watson audit of a 10 percent sample of OEBB members with dependents – roughly 4,000 people – would have cost the board $160,000, Brown told the board. The one-year savings to the board, assuming a conservative 3 percent return on investment, would be just under $700,000.
Audits are “gaining momentum with companies looking to manage cost without changing benefits,” Hall said.
Weeding out fraud and recouping wasted resources, said Brown, is increasingly being seen as an effective way of reining in spending.
Some board members were uneasy about how the audit would play with those in their districts.
“We need to give [members] a heavy-handed warning, so they’re not surprised and saying, ‘why me’?” said Mary Lou Hennrich, executive director of the Oregon Public Health Institute and Community Health Partnerships. She also emphasized the need for a well-planned communications strategy to keep suspicions of the audit at bay.
The board may look into this issue once again next year, while OEBB staff will no doubt keep an eye out for potential fraud throughout 2011. As Brown put it, “There’s a slice of the population that doesn’t play by the rules.”
Currently, when OEBB discovers such a violation, it terminates both the member and the dependents or spouse receiving the fraudulent benefits.
The board introduced rule changes on February 10 to prevent the fraud-committing member from seeking OEBB coverage for a year after the fraud is discovered, and retroactively terminating the ineligible member to the date that he or she was determined to be ineligible. The insurance companies would collect the ineligible member’s premiums back to that date, and then redistribute them to the educational entities where the OEBB member worked.
TO LEARN MORE
Bookmark/Search this post with
Keywords:
- Login or register to post comments
- Email this page
Printer-friendly version
Comments Welcome
If you'd like to submit a comment on any of the stories that appear in The Lund Report, you'll need to become a subscriber and share your name and email address with us.
You can also send us story tips anonymously.
Here is what the State of Texas is telling their employees about the dependent audit they have engaged:
ERS works hard to make sure that only people who are eligible for benefits receive them. As part of this ongoing effort, ERS will conduct a 100% dependent verification audit through August 2011.
ERS is working with an independent company to conduct the audit. The audit will require each employee and retiree who covers a dependent in the Texas Employees Group Benefits Program (GBP) to provide copies of documents to prove the dependent is eligible. Higher education employees will be audited in the first phase, which starts this month.
If you cover a dependent in the insurance program, you will receive a letter asking you to provide the appropriate documents.
If you don’t cooperate with the audit, your dependents will be dropped from coverage. To prepare for the audit, ERS reminded employees and retirees to drop ineligible dependents during last summer’s Annual Enrollment.
Employees who cheat and commit fraud should lose their job and be prosecuted. An eligibility audit should happen and be done annually
Today's data enviroment allows for 100% of all claims to be audited at an expense similar to what is cited for a 10% audit. Perhaps the board should review other options that will assure 100% of all claims are audited in detail.
I would be happy to recommend a firm that does this work quite well.
I would like the name of this firm.
jayhutchins@comcast.net