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Audit: Nebraska Employees Running Up Rolls Royce Health Bills

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LINCOLN, Neb. (AP) — Nebraska taxpayers are paying far more than necessary into the state’s health insurance program because of high administrative costs, poor oversight and a failure to monitor and control spending, State Auditor Mike Foley said Monday.

The Republican auditor said the cost of the most popular state employee coverage plan rose to more than $27,000 per worker in 2011 — nearly $12,000 more than the national average.

Foley said the family coverage plan was designed inefficiently and has led to nearly $1.1 million in questionable or unallowable expenses, such as claims from people who are not eligible. His comments came as he released an audit highly critical of the state’s health care costs.

Nebraska’s health insurance program covers 29,000 state employees and dependents. The state pays 79% of the premium costs, while employees cover 21%.

“I’m sure (the Department of Administrative Services) will want to quibble with some of the details we have in this report,” Foley said at a press conference. “The bottom line is we have the highest-cost plan in the country. That needs to change.”

The audit found that the most popular choice among state employees, the State BlueChoicePlan, had the highest premiums among the four available coverage options. The plan accounted for more than 5,700 of the 13,183 employees covered by the state in December 2011, according to the audit. But the number of employees participating in the plan has shrunk from nearly 8,400 in June 2010.

The audit shows the state paid $9.3 million in administrative expenses in 2010, with 14,000 enrolled participants. The University of Nebraska, by contrast, spent $4.4 million while covering fewer than 12,000 current and former employees. The plan charges a $37.47 monthly administrative fee for each employee, more than the comparable plans in Kansas, Wyoming and Montana, the report says.

Auditors also questioned the need for so-called “stop loss” insurance designed to reduce the risk of significant claims made by a single participant. The audit said the program holds a $65 million cash reserve, an amount large enough to cover 5 months of claims expenses. But the department “has not performed an analysis to determine whether stop-loss insurance has been beneficial to the state,” the report says.

Foley said he wasn’t sure whether a recently announced switch to UnitedHealth Group Inc., Minnetonka, Minn. (NYSE:UNH), would lower the state’s costs. The Department of Administrative Services has estimated the move will save taxpayers and state employees a combined $8 million a year, but the state’s longtime provider, Blue Cross and Blue Shield of Nebraska, Omaha, Neb., is challenging the decision in court.

Foley said many of the doctors that state employees use are not part of the United Health Care network.

Carlos Castillo, Nebraska’s director of Administrative Services, disputed the audit’s findings.

“We have big disagreements over the facts as reported in the performance audit,” Castillo said. “There are a lot of things that we contend are not portrayed accurately.”

Castillo said the audit focused on the most expensive coverage available to state employees, and noted that the proportion of participants has shrunk in recent years.

One part of the audit says the state has improperly allowed Nebraska State Credit Union employees to participate in the plan, which generated $147,500 in costs but only $62,175 in premiums paid into the plan. Castillo said the Nebraska Attorney General’s office has issued an opinion saying the state could fall victim to a legal challenge if those employees were excluded.

“There’s some disagreement over how he defines eligible and how we define eligible,” Castillo said.

Omaha Sen. Bob Krist, a member of the Legislature’s Performance Audit Committee, said lawmakers will “take every action necessary to resolve this situation.”

Krist said the committee’s chairman, Sen. John Harms of Scottsbluff, had reviewed the audit and agreed that lawmakers will need to act.

The plan does not apply to state employees who work for the University of Nebraska, the Nebraska State College System or the State Law Enforcement Bargaining Council, which operate separately.