Audit: Insurance errors costing state

Saturday, Jan. 17, 1998 | 9:28 a.m.

The audit of the state Division of Risk Management, which administers health insurance for nearly 26,000 current and former employees, said the agency "has significant internal control weaknesses over the $37 million it collects in checks and cash each year from state workers, retirees and others to cover premiums."

"Without proper safeguards, fraud and abuse could occur and go undetected," the report says, adding that a lack of management controls contribute to delays and errors in processing claims.

The financial examination, released Thursday to the Legislative Audit Committee, looked at the agency's collection and enrollment procedures.

There was a lot of criticism when L & H Administrators, hired by the state to process and pay medical claims, fell behind and was fired, leaving 75,000 unpaid claims. The new claims administrator, UICI Administrators of Texas, doesn't expect to get caught up on paying claims until March.

This audit focused on different problems. For instance, the division spent $2 million on a new computer system and hired five new employees in 1996 but auditors said it's "unable to process forms timely and generate accurate bills for large pay centers."

For instance, risk management billed the central payroll system for state workers $4.3 million in April 1997 to cover the insurance premiums for the month. But the center paid only $3.2 million - $1.1 million less than billed.

Auditors also said the division fails to promptly process applications for entry into the health insurance plan. These delays force newly hired state workers to prepay for service when seeking medical treatment and the claims are often rejected when submitted to the state.

Dave Thomas, administrator of the risk management division, said he welcomed the audit and recognized the deficiencies it reported. But he said all of the recommendations, with the exception of two, have been put in place.

The real problem, Thomas said, is that the division's computer is not hooked into the seven payroll centers in government. He said that makes it difficult to maintain consistency.