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.
But early returns from an amnesty program launched last month indicate the
savings may double that early appraisal. 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.
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.
For the last decade, more and more employers both public and private have been
using relationship verification to weed out people they never intended to cover,
Frost said, and then follow up with regular audits.
CalPERS spends $7 billion annually on health care for 1.4 million state and
local government employees, retirees and their families. The system has been
spot-checking health insurance enrollments for individual departments and local
agencies since at least 2006, system spokesman Bill Madison said.
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.
"If we discover ineligible dependents during the verification period or if you
fail to provide appropriate documentation for eligible dependents," the letter
said, "those dependents will be removed from your health plan and you may be
liable for health care costs incurred for them."
Employees and retirees can't lose their own coverage for putting unqualified
friends or family on their insurance. "We do not have the legal authority to do
that," said Doug McKeever, chief of CalPERS Health Policy Research Division.
And while the law allows insurers to go after subscribers who fraudulently add
ineligible dependents to their health insurance, they rarely do.
