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Wednesday, October 15, 2008

Auditor: Oversight of State Health Plan 'inadequate and ineffective'

Posted by on Wed, Oct 15, 2008 at 3:30 PM

The Office of the State Auditor released its assessment (PDF, 182 KB) of the N.C. State Health Plan for Teachers and State Employees today, and determined that the plan "lacks executive branch oversight that is clearly responsible and accountable for Plan decision-making and operational results." State Auditor Leslie Merritt notes that the Plan's Board of Directors lacks the ability to hire or fire the Plan's Executive Administrator, and does not possess the necessary financial information to make informed decisions. In addition to a diminished role played by the Board, the Commissioner of Insurance, an executive branch, holds mere nominal power over the Plan. Instead, the Committee on Employee Hospital and Medical Benefits--a legislative committee--holds primary authority, which, in addition to providing inadeuqate oversight, creates a potential conflict of interest:

In addition, the Legislative Committee's influence over the Plan's management functions may violate the North Carolina State Constitution's separation of powers clause, creates the potential for undue political influence in the Plan's administrative decisions and contract negotiations, and creates the opportunity for conflicts of interest.

Perhaps the most damning portion of the report is on page 5, where Merritt notes that a State Audit in 1994 identified fundamental oversight problems, created by "the existence of both a Board of Trustees and a legislative oversight committee."

"The same conditions exist today," Merritt writes.

According to the report, the Plan is reporting a $137 million shortfall for the 2008 fiscal year, and predicts losses of up to $280 million for the 2008-09 fiscal year. These financial woes may have been exacerbated by fundamental flaws in the Plan's oversight:

During the 2008 fiscal year, all of the entities involved in the Plan's oversight lacked the authority, the access, or the time to properly evaluate the former Executive Administrator's estimates, administrative decisions, and operational results.

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