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City stops paying insurance premiums for dead

May 24, 2011

WOONSOCKET — The city found out it was continuing to pay the health insurance premiums of dead people after double-checking its eligibility lists in an effort to identify wasteful spending.
The recertification of the eligibility list was intended to identify precisely those sorts of problems, said Mayor Leo T. Fontaine, who ordered the process several weeks ago.
During the process, the city asked some 830 current and retired employees for legal records to see whether the individuals claimed as beneficiaries on the city's insurance contracts were still current. Children who had grown too old to qualify under family plans or ex-spouses of covered individuals who were still listed as qualified beneficiaries after a divorce were among the problems the city was looking for.
“They complied but they complained,” said Personnel Director Christina Duarte. “Some of them called us everything but children of God. They felt like we just didn't have a right to ask for the information.”
The requests went out to police officers, firefighters and workers in every branch of city government, both current employees and retirees, or their eligible spouses, said Duarte.
In the end, better than 90 percent of those who received letters supplied the necessary information, a rate Duarte said she was quite pleased with. “Anytime you send out letters to over 800 people and you get a 92 or 93 percent response rate, that's pretty good.”
More importantly, said Duarte, the process revealed some significant problems that could have proven quite costly had they gone undetected. The single most prevalent issue involved cases in which the city had never been informed of the death of elderly retirees who had been collecting Blue Chip benefits.
Because the city was acting on the false assumption that those beneficiaries were still alive, it had continued to pay the premium, about $190 a month, said Duarte.
“There were cases where someone died and we were never informed,” she said. “We had about six of those.”
Certain provisions in the city's contract with Blue Cross/Blue Shield of Rhode Island permit the city to recoup premiums paid out up to a year after the beneficiary's death.
As a result, the city stands to be reimbursed for most of the money that had been improperly paid out, but not all of it, said Duarte.
Prospectively, however, Duarte said the recertification of the eligibility list will have a far more significant impact. Had the city not undertaken the procedure, said Duarte, it would not have caught the errors and would have been on the hook for payments that were not eligible for reimbursement.
The recertification was a time-consuming, labor-intensive affair that was carried out with the assistance of the insurance company Keough Kirby Associates, acting as an advisor.
“We thought it was something that was prudent to do in the city of Woonsocket because it had not been done in many, many years,” said Normand St. Laurent, a partner in the company. “We've done this in multiple places, including a number of private companies. The Cumberland School Department and the town did it in recent years, and they both saved some money.”
Fontaine is looking for savings anywhere he can find it as the City Council prepares to chip away at his proposed $120 million budget for fiscal 2012, a package that calls for a 4.25 pecent increase in the tax levy.
The recertification idea had worked for Fontaine before.
Several years ago, as president of the City Council, Fontaine pushed for a similar verification of Plan 65 beneficiaries. As a result, Fontaine said, the city pared a number of ineligible recipients from the list and ended up eliminating tens of thousands of dollars' worth of waste from the budget.
“Our goal is simply to make sure that everyone who is on a health plan that the city pays for is still eligible,” said Fontaine.
The city structures its insurance coverage with Blue Cross a little differently than many communities. Instead of paying Blue Cross to cover claims, the city pays them merely to administer the payment of claims, which are actually covered out of operating revenues carried as a line item in the city's budget – about $8.3 million in 2012, according the latest projections.
The system, known as self-insurance, makes it even more important for the city to keep an accurate list of who is eligible — and who isn't — to keep from being burdened with unjustified costs, according to the mayor.
Potentially, Fontaine said, the city could end up being liable for up to $150,000 in yearly medical costs for individuals listed on the plan. That's the limit of the city's liability in the “stop loss” provision of the contract.
Like a deductible, it represents the amount the city is responsible for before Blue Cross coverage kicks in in the event of high-cost medical treatments.

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