The Sacramento Bee reports that CalPERS is moving to strike from government health care rolls tens of thousands of people it believes are mistakenly or fraudulently receiving benefits. The fund, which is the second-largest health care purchaser in the nation after the federal government, figured last year that removing an estimated 29,000 wrongly listed children, spouses and domestic partners of government employees would save approximately $40 million annually. And one industry expert said CalPERS may have underestimated that 4 percent of the 739,000 dependents now on CalPERS’ medical plans don’t qualify for coverage.”Based on our experience, that 29,000 is a very conservative number,” said Karen Frost, a benefits administration expert at human resources firm Aon Hewitt. The global company has audited insurance eligibilities of nearly 10 million people in both public- and private-sector medical plans. CalPERS spends $7 billion annually on health care for 1.4 million state and local government employees, retirees and their families.
Most ineligible dependents wind up on insurance rolls because of honest mistakes, experts say. In many of those cases, children aren’t dropped when they should be, currently at age 26. Employees sometimes mistakenly continue covering spouses and ex-domestic partners who don’t qualify as dependents even if a court orders they must receive continued medical coverage. Ex-stepchildren aren’t eligible, either.
The new process will require verification of every dependent on CalPERS’ rolls. The agency expects the state’s human resources department and local governments “will take steps to ensure dependents enrolled in our health plans are eligible,” Madison said, “as will CalPERS.” The law allows the system and government employers who purchase medical coverage through it to drop anyone who shouldn’t be receiving medical benefits and retroactively recover costs.
CalPERS last month sent 390,000 letters to health subscribers carrying dependents on their plans, asking them to voluntarily drop ineligible beneficiaries by June 30. After that, members will have to send documents proving their dependents’ eligibility and could face penalties if they can’t.
And while the law allows insurers to go after subscribers who fraudulently add ineligible dependents to their health insurance, they rarely do.The University of California last summer found that 5 percent of dependents shouldn’t be on their employees’ plans. Removing them saved the system $35 million. The UC system didn’t offer amnesty, said spokeswoman Shelly Meron, and it didn’t impose penalties on any employees with ineligible dependents on the rolls. Recouping months or years of premiums paid by employers for ineligible dependents can be a difficult exercise, said Frost, the Aon Hewitt’s eligibility expert. “We see very few employers do that, less than 5 percent,” Frost said. “It’s just a very messy process to look retroactively and figure out the point at which someone should never have been covered.”
And proving fraud can be a high bar to clear, said Dennis Jay, executive director of the Washington, D.C.-based Coalition Against Insurance Fraud. “Most systems give the benefit of the doubt,” Jay said. “For example, if someone gets divorced and keeps the ex-spouse on the plan when they shouldn’t have, that’s pretty innocent stuff.”
CalPERS spokeswoman Rosanna Westmoreland cited a law that makes it a crime to improperly obtain a benefit – including health insurance – by making a false statement. Anyone convicted of that misdemeanor may be liable for paying reparations.