Deficiencies abound in NSCS insurance audit

Nebraska’s Auditor of Public Accounts raised concerns about foundation employees from each of the three colleges participating in the Nebraska State College System’s health insurance program.

The report notes that 10 people employed by the three colleges’ foundations are ancillary workers  not employed by the NSCS. The report further noted those 10 non-NSCS employees are enrolled in the System’s health insurance plan.

The auditor questioned whether the NSCS had the authority to approve non-employees participation in the System’s plan.

The issue came to light in a March 8 auditor’s report that highlights five deficiencies “in internal control and other operational matters” by the NSCS.

The deficiencies are:

1. Lack of Authority for Non-Employee Participation in Plan; 2. Lack of Board Approval for Non-Union Premiums; 3. Inaccurate Retiree Information; 4. Payroll Vendor Payments; 5. Claims Detail Not Provided.

In its report about that first deficiency, the Auditor’s office stated that from July 1, 2009, to June 30, 2010, Chadron State’s Foundation had two employees enrolled in the insurance program; Wayne State had five enrolled; and Peru State had three enrolled.

In contrast, NSCS board policy allows for ancillary employees to be enrolled in its health insurance program. Nonetheless, the APA questioned the NSCS’ authority to create such a policy.

Citing Neb. Rev. Stat. § 85-301, the APA stated “Nowhere in statute is the Board expressly authorized to provide benefits to non-employees.”

Citing precedent, the State Auditor referred to a 2001 opinion by then Nebraska Attorney General Don Stenberg that found “nonstate employees should not be permitted to participate in the Nebraska State Insurance Program.”

Despite questions raised by the auditor, ancillary employees already enrolled might be protected by Stenberg’s opinion, which also states, “while no new non-employees should be allowed to receive coverage . . . it might be impermissible to remove those non-state employees already participating in the program.”

The state auditors’ report recognized the autonomy of the NSCS Board via the powers granted by the Nebraska Constitution, but contends that limiting the board’s authority to decide which employee’s can benefit from inclusion in the NSCS’ program would not be an “intrusion upon the governance of the NSCS.”

Even though the premium cost is paid entirely by the non-employee, and the institutions’ foundations pay the cost of employee participation in the plan, the APA stated it believes that inclusion of non-employees raises the potential for higher premiums system-wide.

“Allowing non-employees to participate in the NSCS health insurance plan,” the report states, “increases the risk that those non-employees or their dependents may have high insurance claims; this could require an increase in premiums or changes in the benefit plan designs to recover the cost of the high claims.” The APA’s staff stated that they had insufficient data to estimate the risk of that possibility.

“Because detailed claims data was not provided, the APA cannot determine the magnitude of the claims paid for these ineligible participants,” the report states.

The APA recommends the board seek two opinions from Nebraska’s current AG – first, determine the legality of allowing non-employees to be included in the NSCS’ program, and second, determine whether those non-employees have a right to continue participating in the plan.