Depending on the plan design, consolidating K-12 health insurance plans for the 101 districts in our sample could save an estimated $63 million a year. Specifically, consolidation would generate an estimated $38 million in annual savings through increased plan efficiencies regardless of plan design. Additionally, consolidation would also generate $25 million a year in savings for districts by shifting costs to employees. Also, we found that joining the state employee health plan is just one of several consolidation options available and that any savings from consolidation would be realized by school districts unless a mechanism is developed to transfer them to the state. The Legislature has several decisions to make regarding the implementation and savings associated with consolidating K-12 health insurance statewide. For example, the Legislature would need to decide whether the state or school districts keep the potential savings from consolidation and would need to make several other key decisions that could affect how much is saved. We also noted that the time needed to implement a consolidated K-12 health insurance plan and several other factors will make it difficult for the state to achieve savings outlined in the Governor’s Budget. Finally, we identified two other issues that should be considered if the state decides to consolidate K-12 health insurance.
State Agency Information Systems: Reviewing Security Controls in Selected State Agencies - Kansas Insurance Department (CY 2015)
State law requires the Kansas Workers’ Compensation Insurance Plan, a plan to provide workers’ compensation insurance for high-risk companies. In early 2014, the board that oversees the plan reviewed bids from two vendors interested in administering the plan. As a result of that review, the board awarded the contract to the National Council on Compensation Insurance (NCCI). We compared the cost estimate in NCCI’s bid to requirements in the state’s request for proposal (RFP) and determined that it appeared to include the required costs. However, we also found that NCCI receives other administrative payments related to the plan that were not captured in its cost estimate. Although inclusion of those payments did not appear to be required by the RFP, the RFP language was not entirely clear and resulted in inconsistent cost estimates between the two vendors.
State Agency Information Systems: Reviewing Selected Systems Operation Controls in State Agencies
State agencies make enticing targets for hackers because of the wide range of sensitive information they maintain. A significant threat to securing agency data is failure to comply with basic security procedures such as installing software patches and controlling the software on computers. We looked for unpatched or unauthorized software in five agencies, and found that three of the five agencies had significant vulnerabilities because of inadequate workstation patching processes—vulnerabilities that potentially could be exploited to gain access to sensitive data. Those agencies had few problems with unauthorized software, but two still need to improve their process for managing software.
Health-Care Related Services: Reviewing Opportunities for Better Coordinating the State's Health-Care Related Programs
By changing Medicaid billing practices, the State could save money spent on inpatient care for Department of Correction’s inmates. Although State agencies could also better coordinate a number of other health-care related programs, service gap issues such as lack of affordable health insurance for low-income single adults can only be addressed through State-level policy decisions. Of more importance is the upcoming federal health care reform, which will greatly affect how health-care related services are provided in Kansas. Its primary goals are to reduce the number of uninsured, slow increases in health care costs, and increase access to health care services and providers. Implementing those reforms will require significant coordination among State agencies. Some State agencies that traditionally have provided health care services will have added responsibilities, while other State agencies—such as the Kansas Insurance Department—will start having a role. At this point, it is too early to know whether State agencies are on track to implement the various provisions of federal health care reform.
Firefighters Relief Fund: Reviewing the Use of Fire Insurance Premium Taxes Distributed to Local Firefighters Relief Associations (100-hour audit)
A 2% tax collected on fire and lightning insurance premiums in Kansas goes to the Firefighters Relief Fund and is distributed to local firefighter relief associations for benefits to firefighters. In July 2002, about $6.3 million was available for distribution to the associations. That was 22% more money than in the previous year, primarily because of increased insurance rates. Most of the money the associations receive was spent on life insurance premiums, relief payments to firemen who were injured on the job, pensions and annuities. All of those uses are allowed by law. In a few cases, there was insufficient documentation of expenditures or money was used to pay for unallowable things like equipment or conference registration fees. Usually, but not always, the Insurance Department's procedures caught those items and, if necessary, recoupments were being sought. Also, there were a number of payments for salaries to relief association treasurers or for computer equipment that didn't have required approvals. The Department needs to update its firefighters relief handbook to provide clearer guidance on the approval process for salaries and computers, to include some statutory changes, and to give examples of the types of documentation it wants for expenditures.
Employee Credits Against Premium Taxes: Reviewing Issues Related to Those Credits
The 1997 Legislature made a number of changes to the premium tax law, including “equalizing” tax rates at 2% of taxable premiums for in-State and out-of-State insurance companies, letting all companies with Kansas salaries claim a salary credit of up to 1.25% of their taxable premiums, and letting “affiliated” companies share each others' unused salary credits, whether or not they had Kansas employees. These changes reduced premium tax receipts by $12 million in 1999 and almost $25 million in 2000, compared with Insurance Department estimates of $3.7 million and $7.1 million, respectively. The drop was so much greater than expected because far more out-of-State companies were able to take the salary credit than the Department had projected. Some had operations in Kansas the Department was unaware of. In addition, many companies were able to claim a salary credit they otherwise wouldn't have been entitled to because of the affiliate provision in the law. A number of insurance companies reported higher salaries to the Insurance Department for salary credit purposes than they reported to the Department of Human Resources for unemployment tax purposes. But those discrepancies didn't appear to affect the amount of salary credits the companies were eligible for. The Insurance Department needs to improve its procedures for making sure that only eligible salaries are being claimed, and that companies sharing salaries meet the legal definition of affiliation.
Reviewing the Workers’ Compensation Claim By Former Insurance Commissioner Fletcher Bell
Mr. Bell’s workers' compensation claim was not handled appropriately by either the State Self-Insurance Fund or the Division of Workers’ Compensation. Self-Insurance Fund staff failed to investigate the claim’s compensability, did not ask doctors whether Mr. Bell’s preexisting back condition contributed to the injury, used an unfamiliar doctor to obtain a second opinion on Mr. Bell’s injury, and failed to seek assistance from the Workers’ Compensation Fund in paying the claim. The administrative law judge responsible for Mr. Bell’s award did not order an independent medical evaluation of Mr. Bell even though the law allowed him to do so. Changes made in 1993 to the Worker’s Compensation statutes would have reduced Mr. Bell’s $94,000 award to no more than $50,000 and possibly less.
Compliance and Control Audit: Insurance Department
For the most part, Kansas’ workers’ compensation benefits are neither high nor low when compared with other states. Based on available information, Kansas’ premiums also were slightly below the median for other states and increased at about the same rate as premiums nationally. Over the past few years, laws have been enacted that increased maximum payments for disabilities and death benefits, and required vocational rehabilitation to be provided for many workers’ compensation cases. No information exists to determine their exact cost impact. Other states have enacted a number of measures aimed at reducing litigation, controlling medical costs, reducing fraud and improving workplace safety. Those measures include using arbitration services, implementing medical fee schedules, performing utilization and bill reviews, creating fraud hotlines and investigation units, and overseeing workplace safety. Finally, we found that workers’ compensation agencies in some states have developed extensive data collection systems that allow them to answer basic questions about workers’ compensation, such as which injuries are most frequent or most expensive.
Examining Increases in Expenditures from the State Workers’ Compensation Fund
Between fiscal years 1983 and 1992, expenditures from the Fund more than quadrupled to nearly $33 million. The Fund’s expenditures increased primarily because more claims were opened than closed each year, creating an ever-growing pool of active claims for which expenses are being incurred. In addition, medical costs have skyrocketed, and amounts that can be paid in compensation for lost wages have increased over the years. Because of legislative actions and judicial decisions, Kansas currently has one of the most liberal second-injury funds of all the states we contacted. Limiting the Fund’s coverage would not reduce workers’ compensation costs. It would simply shift those costs from the Fund back to the insurance companies and employers. Other states have implemented a number of alternatives to control workers’ compensation costs, but Kansas does not have the basic management information needed to take similar measures. Although administrative costs have increased more slowly than benefit-related costs, the Department could do more to control attorney costs.