A Report to the
Jackson County
Board of Commissioners
Commissioners
Doug Breidenthal
Rick Dyer
Colleen Roberts
County Administrator
Danny Jordan
Internal Audit Program
Eric Spivak County Auditor
Tanya Baize Senior Auditor
Nicole Rollins Senior Auditor
Monitoring of Third Party
Administrators by HR/Risk is
Adequate
December 2016
Monitoring of Third Party Administrators by HR/Risk is Adequate i | P a g e
Internal Audit Eric Spivak
County Auditor
10 S. Oakdale, Room 214
Medford, OR 97501
Phone: (541) 774-6021
Fax: (541) 774-6705
To: Board of Commissioners
Re: Audit of Monitoring Third Party Administrators by HR/Risk
Date: December 15, 2016
The enclosed report presents the results of an audit of oversight of third party administrators (TPAs)
by HR/Risk and the use of County financial resources as it pertains to payment of claims and
administrative expenses.
The audit was designed to determine if HR/Risk had designed and implemented appropriate
monitoring and other controls pertaining to the use of TPAs.
We found that HR/Risk has designed and implemented an appropriate system of control over
monitoring of the TPAs and the use of County financial resources as it pertains to payment of claims and
administrative expenses. We did identify some opportunities to further strengthen the control system
which are discussed within the report.
Please feel free to contact me at your convenience if you have any questions or would like
additional information not contained in the report.
C: Audit Committee
Cleve Brooks, HR/Risk Director
Moss Adams, LLP
udit Title ii | P a g e
Monitoring of Third Party
Administrators by HR/Risk
is Adequate
What We Found
Overall we found that HR/Risk has
designed and implemented an
appropriate system of control over
monitoring of the TPAs and the use of
County financial resources as it pertains
to payment of claims and administrative
expenses. We did identify some
opportunities to further strengthen the
control system. Those opportunities and
our resulting recommendations are
provided in the dialog box to the left and
further discussed in the body of the
report.
Why We Did This Audit
We conducted this audit in accordance
with the FY 15-16 Internal Audit Plan.
Our objective was to determine if:
- HR/Risk maintained proper oversight of
TPAs and the use of County financial
resources as it pertains to payment of
claims and administrative expenses.
What We Recommend
We recommend that HR/Risk:
- Give approval to the TPA to pay claims
over $3,000 in a written format.
- Work with relevant parties to
determine if time loss payments during
the three consecutive calendar day wait
period need to be paid and document
decision made.
- Implement a process to ensure the TPA
receives exact information to calculate
time loss payments.
- Periodically review actual medical
invoices for workers’ compensation.
- Perform review of cleared checks to
verify TPA wrote check to the
appropriate party.
- Consider codifying in policy that a
department notify an employee in
writing that no modified duty is
available.
- Obtain input from Counsel and then
consider developing a plan to notify
County departments of an employee
that is available for light duty.
- Add additional information to the
workers’ compensation checklist.
- Work with Counsel to determine what
pay information should be included in
the workers’ compensation calculation.
Audit Results
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Introduction and Background
Jackson County has three separate self-funded insurance funds: General and
Auto Liability (includes unemployment benefits), Workers’ Compensation, and
Self-Insurance Health Plan for management and confidential employees. The
HR/Risk Program, housed within the County Administration Office (CAO), is
responsible for program management of the three funds. HR/Risk contracts
with third party administrators (TPAs) that administer and process claims and
perform related tasks associated with each of the funds.
The timing of the audit coincided with two changes to personnel in the HR/Risk
Program. The HR/Risk Director had been employed for less than one year at the
time the audit was initiated. Additionally, one of the two Project/Program
Coordinators involved in the day-to-day operations of the Workers’
Compensation fund assumed her duties within 10 months of the start of the
audit, replacing a retiring employee.
We conducted our audit in accordance with Codified Ordinance 218 pertaining
to the County Auditor. This audit was added to the fiscal year 2015-16 Internal
Audit Plan.
We conducted this performance audit in accordance with generally accepted
government auditing standards. These standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
We did not include employee names or other identifying information when
providing examples of case file review, such as for workers’ compensation. No
other information was withheld from this report because it was considered
confidential or sensitive.
Internal Audit (IA) conducted this audit for the purpose of verifying that HR/Risk
maintains proper oversight of the TPAs and the use of County financial
resources as it pertains to payment of claims and administrative expenses. As
such, the focus of our audit was on determining if HR/Risk has designed and
implemented appropriate monitoring and other controls. Other information
identified during the course of the audit that relates to the general
administration of the self-funded insurance funds is included in the report. We
include this information as the overarching purpose of the audit is to provide
HR/Risk is
Responsible for
Oversight of TPAs
Audit Authority
Compliance with
Government
Auditing
Standards
Confidential or
Sensitive
Information
Audit Objectives
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independent and objective analysis, assurance, and information that aids
decision makers in the overall management of County resources and operations.
Overall we found that HR/Risk has designed and implemented an appropriate
system of control over monitoring of the TPAs and the use of County financial
resources as it pertains to payment of claims and administrative expenses. We
did identify some opportunities to further strengthen the control system. Those
opportunities and our resulting recommendations are discussed in the body of
the report.
We reviewed current practices and claims processed during fiscal year 2015-16
and the beginning of 2016-17. Our procedures involved:
Interviewing key personnel
Reviewing State regulations and County policies
Re-performing claims calculations
Analyzing claims decisions and approvals
Testing administrative and claims payments for accuracy, financial
control requirements, and other attributes
Observing a quarterly meeting between the General and Auto Liability
TPA and the County HR/Risk personnel
Criteria consisted of County policies and procedures pertaining to the insurance
funds, such as Policy #8-03 Workers’ Compensation Insurance Coverage;
contracts with the TPAs; and State of Oregon Statutes and Administrative Rules
associated with workers’ compensation.
Audit Conclusion
Audit Scope &
Methodology
Audit Criteria
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Chapter 1 – General and Auto Liability
The County maintains a General and Auto Liability fund to ensure the County
has set aside adequate resources to resolve claims against the County and/or
meet any financial obligations stemming from liabilities due to accidents,
property damage or other general liability claims. The fund is financed through
chargebacks to the County’s General and Operating funds and excess coverage
insurance is purchased to limit the County’s risk.
Every other year an actuarial firm conducts a study which is used to ensure the
fund maintains adequate and stable funding levels. A separate bank account
has been established and is used to make claim payments.
The County contracts with a third party claims administrator (TPA). The TPA’s
responsibilities include:
Investigating and, as appropriate, negotiating non-legal claims against
the County, and
Maintaining claims’ files and paying claimants upon instruction by the
County.1
What We Found
Financial Controls
HR/Risk has designed and implemented adequate controls that provide
reasonable assurance that payments are accurate and appropriate. HR/Risk,
County Counsel, and the TPA meet quarterly to discuss open claims against the
County and determine what course of action the County will take and the status
of the claims.
1 For claims of less than $3,000 the TPA has authority to pay the claim without approval from the County.
Overview of
General and Auto
Liability
Financial Controls
Are Appropriate
We Designed Our Audit Tests To
Determine if HR/Risk has developed adequate financial controls that provide reasonable
assurance that claims and administrative fees charged to the County are permissible,
accurate, and appropriate.
Determine if HR/Risk has developed adequate financial controls over the use of the
General and Auto Liability bank account.
Determine that costs are allocated on an appropriate methodology to those departments
requiring additional coverage (e.g., HHS medical malpractice insurance).
Monitoring of Third Party Administrators by HR/Risk is Adequate 4 | P a g e
Claims Controls
As part of the control structure, payment of claims greater than $3,000 are
approved by the HR/Risk Director. We noted that in some instances approval
was given verbally. We recommend that approvals be in a written format,
which can be something as simple as an email stating, “As discussed, I approve
payment of $X to claimant …. for claim #... against the County.” HR/Risk agreed
with this recommendation and the HR/Risk Director will begin documenting
approval in writing.
In conjunction with the audit, the HR/Risk Director asked us to opine as to
whether it would be appropriate to increase the financial authority of the TPA
to settle claims. Currently, the TPA has authority to settle claims against the
County in instances in which the claim amount is $3,000 or less.
For the five year period July 1, 2011 thru June 30, 2016 there were five (5)
claims settled for amounts between $3,001 and $5,000. Given the small
number of claims that settle within these amounts we see minimal risk in
increasing the TPA’s authority to $5,000. Moreover, when observing a quarterly
meeting between the TPA and County we noted that all open cases were
discussed, even those within the authority limits of the TPA to settle without
County approval.
Administrative Fee Controls
We tested a sample of transactions and found payments to the TPA agreed with
contractual rates, were adequately documented, appropriately authorized and
were paid in a timely manner.
Bank Account Controls
Controls in place over the bank account are appropriate. Reconciliations are
occurring and approval for account replenishment is happening per County
policy.
Chargebacks
County departments that require additional insurance coverage (e.g., HHS
medical malpractice insurance) are directly charged the costs associated with
the additional insurance coverage.
There were some
instances where
approval given to
the TPA to pay a
claim was not
written
Administrative
Fee Controls Are
Appropriate
Bank Account
Controls Are
Appropriate
Financial
Authority Level of
TPA Can Be
Increased
Method used to
Charge
Departments is
Appropriate
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Chapter 2 – Workers’ Compensation
State law provides that an employer must compensate an employee for the
resulting loss of income (referred to as time loss) if the employee is temporarily
unable to work or can only work reduced hours due to an on-the job
compensable injury and/or illness. The law is designed to ensure that while on
workers’ compensation status the employee receives compensation in an
amount equal to 66 2/3 percent of the employee’s pay. The employer is also
required to pay for medical expenses relating to the compensable on-the-job
injury or illness.
The County maintains the Workers’ Compensation fund and also purchases
excess coverage insurance to ensure monies are available to make required
workers’ compensation payments. The fund is financed through chargebacks to
the County’s General and Operating funds.
Every other year an actuarial firm conducts a study which is used to ensure the
fund maintains adequate and stable funding levels. A separate bank account
has been established and is used to make claim payments.
The County contracts with a third party claims administrator (TPA). The TPA’s
responsibilities include:
Reviewing, and investigating as necessary, claims to determine if the
claim is for a work-related injury or illness.
Processing payments for medical, time loss, and other expenses relating
to the claim.
Overview of
Workers’
Compensation
We Designed Our Audit Tests To
Determine if “time loss payments” were calculated in compliance with State regulations
governing workers’ compensation.
Determine if HR/Risk has developed adequate financial controls that provide reasonable
assurance that claims and administrative fees charged to the County are permissible,
accurate, and appropriate.
Determine if HR/Risk has developed adequate financial controls over the use of the
Workers’ Compensation bank account.
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What We Found
Time Loss Payments – Three Consecutive Calendar Day Wait Period
There is a question as to whether the TPA’s practice as it relates to the “three
consecutive calendar day wait period” exceeds the minimum requirements
established by Oregon Revised Statute (ORS) 656.210. We stress that there is
no risk of non-compliance from the TPA’s approach with State statute, as it
appears to exceed the minimum requirements. There is, however, the risk of
expending funds unnecessarily but the totality of these funds can be considered
limited.
The question pertains to whether case law or State statute establishes payment
criteria for the three consecutive calendar day wait period. We recommend
that HR/Risk work with relevant parties, including County Counsel, County
Administration and the TPA, to determine the appropriate requirements to be
used in determining if an employee is entitled to time loss payments during the
three consecutive calendar day wait period.
ORS 656.210 establishes that there are some conditions under which an
employee is entitled to time loss payments for the three consecutive calendar
days but that under other conditions the employee is not entitled to these
payments. The statute states:
No disability payment is recoverable for temporary total or
partial disability suffered during the first three calendar days
after the worker leaves work or loses wages as a result of the
compensable injury unless the worker is totally disabled after
the injury and the total disability continues for a period of 14
consecutive days or unless the worker is admitted as an
inpatient to a hospital within 14 days of the first onset of total
disability. If the worker leaves work or loses wages on the day
of the injury due to the injury, that day shall be considered the
first day of the three-day period.
Source: ORS 656.210 (3) (Boldface/underlining added)
Guidance from the Department of Consumer and Business Services addresses
the differing requirements between total and temporary/partial disability as
expressed in the statute.
We did not find
any risk of non-
compliance with
State statute,
however,
management
should evaluate if
the direction
taken by the TPA
is the direction
management
wants to take
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The guidance states:
You will not receive time-loss benefits for the three-day waiting
period if you are released to light duty within the first 14 days of
disability, even if your employer does not have any work within
your light-duty restrictions.2
In our review of nine case files we found three instances in which the TPA made
payments for the three consecutive calendar day wait period, though the
employee had been released to light duty. In each instance, the employee
received medical clearance to work “light duty” but the department did not
have appropriate light duty work available. Additionally, we found one case in
which the employee worked part time after the date of injury but it appears the
three consecutive calendar day wait period was calculated based on the date of
injury and not the date at which the employee incurred lost wages and/or loss
of time. Per our understanding of the statute and guidance quoted above, the
County was not required to make payment for the three consecutive calendar
day wait period for any of the four cases.
When asked to explain why payments were made, the TPA expressed that its
approach is consistent with case law and that the approach decreases the
likelihood of being sued and/or found to be non-compliant with workers’
compensation regulations.
Each of the four cases involved additional details but those details appear to be
extraneous to the three consecutive calendar day criteria. These case details
may or may not have relevance to the TPA’s statement that it makes its
decisions based on case law. A summary of the cases are provided below.
File One. The employee was injured on Monday June 6th. Per County
payroll records the employee worked 6 hours that day and had 4 hours
of sick leave. The employee received authorization from a medical
provider to be released to work with modified duties on June 6th. The
same day the department notified the employee that the department
did not have work within the modified duty restrictions for the
employee. The employee received time loss workers’ compensation
payments for June 6th, 7th and 8th while simultaneously receiving sick pay
for those same days. Per our understanding of the law, June 6th, 7th, and
8th would have been considered the three consecutive day wait period,
2 https://www.oregon.gov/DCBS/OIW/Pages/time-loss.aspx
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as such no time loss payment was necessary regardless of whether or
not sick time pay was provided.
File Two. The employee was injured at work on Saturday February 13th
and received a modified duty release to work from a medical provider
on Sunday February 14th (a non-regular work day). Per discussion with
HR/Risk, the department did not have modified duty work available for
the employee. Per County payroll records, the employee had no time
loss or wage loss on Saturday February 13th and Monday February 15th
was a holiday for which the employee received pay for that day. The
employee received workers’ compensation time loss payments for
February 16th, 17th, and 18th. Per our understanding of the law, the
County was not required to pay time loss payments for these three
consecutive days, since the employee was released to work by a
medical provider.
File Three. The employee was injured on Monday August 24th. County
payroll records document that the employee was paid for a full day’s
work on the 24th but case file notes indicate the employee might have
left work to seek medical attention. On Monday August 24th the
employee received authorization from a medical provider to be released
to work with modified duties. Per discussion with HR/Risk, the
department did not have modified duty work available for the
employee. The employee received workers’ compensation time loss
payments for August 24th, 25th, and 26th. Per our understanding of the
law, the County was not required to pay time loss payments for these
three consecutive days, since the employee was released to work by a
medical provider.
File Four. The employee was injured on a Tuesday August 25th but
worked the remainder of the week. The employee also worked on
Monday of the following week but on Tuesday September 1st the
employee received authorization from a medical provider to be released
to work with modified duties to work only 4 hours per day. The
employee worked 4 hours per day and workers’ compensation and sick
leave was received to compensate for the remaining 4 hours per day for
September 1st till October 8th then the employee was released to full
duty status by a medical provider on October 9th. Per our understanding
of the case, the first day that the employee experienced lost wages
and/or loss of time was September 1st. Given the three consecutive
calendar day rule, our analysis indicates the County was not required to
pay time loss payments until September 4th, since pay is not required
during the three consecutive calendar day wait period.
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As discussed above, the practice does not violate any State statute or other
requirement since the County is choosing to pay the employee potentially more
than required by law. Nonetheless, we recommend that the practice be
discussed among the relevant parties, including County Counsel, County
Administration and the TPA, to ensure the practice represents the direction the
County wishes to take. Regardless of which direction is selected. The direction
should be documented and used to produce guidelines for the purpose of
ensuring future decisions are consistent with the direction chosen.
Time Loss Payments – Calculation Process
The current time loss calculation process can result in a slight overpayment of
benefits. We found three instances when employees were overpaid total
amounts ranging from $9 to $400. These small discrepancies occurred because
the TPA received too much or too little pay period data (each pay period
represents two weeks) and then used that data to calculate the weekly pay
rates for time loss payments. Audit discussed this with HR/Risk and HR/Risk will
implement a simple and easy process change that will result in the TPA receiving
salary data for the exact time period to be used in the calculation.
Financial Controls
Appropriate financial controls are in place. The County has policies and
procedures in place over what information is needed by the department and
employee when a workers’ compensation claim is made. HR/Risk reviews the
open claims on a weekly basis to ensure the departments are gathering all
appropriate documents to be provided to the TPA. As such, HR/Risk is familiar
with what claims are currently being paid on and what the status of those claims
are.
At the beginning of the audit, HR/Risk brought up with us that their practice had
not been to review actual medical invoices to ensure that the TPA is paying an
appropriate amount. Therefore, as part of the audit HR/Risk and Internal Audit
selected and reviewed medical invoices for nine case files. There were no issues
noted. We recommend that HR/Risk periodically review a few medical invoices,
possibly during the reconciliation process, to ensure payments are for legitimate
purposes and were paid at appropriate amounts.
HR/Risk Will
Implement a
Process Change to
Prevent Payment
Calculation Errors
Financial Controls
Are Appropriate
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Bank Account Controls
One improvement can be made to increase control over the bank account.
Reconciliation of the workers’ compensation bank account has been occurring,
however, the process has not included a review of cleared checks to verify that
checks were made out to the appropriate party by the TPA. We recommend
HR/Risk include a review of cleared checks when performing the bank account
reconciliation. Check reviews are considered a detective control that may
identify check fraud, though there is no guarantee that a check review would
identify fraud if it were occurring.
Other Observations
In performing the audit we also identified the following conditions relating to
the workers’ compensation program. Though not specific to TPAs, we include
this information as it may be helpful to those charged with administration and
oversight of HR/Risk.
One Form was not Complete. In reviewing a sample of nine case files,
we did find one instance in which the file contained an incomplete
Report of job Injury or Illness form (801 form). The operating
department had not completed the employer’s section of the form and
it was not noticed during review. However, there is no evidence to
indicate this one instance represents a systemic problem. We attribute
it to the occasional human error that is bound to occur.
Policy Modification. Policy does not require that departments provide
written notification to employees when an employee received modified
duty medical authorization but there is no light duty (modified) work
available and the department will re-evaluate the situation after the
employee’s next doctor’s appointment. We found that at least one
department does provide this notification. HR/Risk may want to
consider whether the practice of providing written notification should
be codified within policy.
Light Duty Status (Modified Duty). When an employee is given
authorization to return to work on light duty (modified) status but
his/her department does not have a need for light duty work, then
he/she is put on workers’ compensation time loss status. There is no
mechanism in place to determine if any other departments are currently
employing (or plan to hire) extra help employees for work that could be
performed by a person on light duty status. We note that in some
situations it would not make fiscal sense to utilize a person on light duty
status for work that can be performed at a lower pay rate, but there
Bank Account
Controls Are
Appropriate
One Improvement
Can be Made
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may be some instances in which it would. Therefore, we recommend
that HR/Risk obtain input from County Counsel and then consider
developing a communication plan to alert departments when a person
is available for light duty and what the cost of utilizing that person
would be.
Checklist. The checklist used by HR/Risk as a tool for ensuring that all
necessary procedures are performed and documents obtained for
workers’ compensation can be enhanced by adding two items to it.
Specifically:
o The checklist could be enhanced by adding a reminder to ensure
that certain OSHA-related forms that are completed and filed in
those instances in which a person is exposed to bodily fluids.
o The checklist could be enhanced by adding a reminder to ensure
subsequent required medical evaluations are documented.
County policy requires employees on workers’ compensation
status to be re-evaluated by a doctor every 14 days. The checklist
provides a reminder to HR/Risk to obtain documentation of the
initial medical statement but the checklist does not remind
HR/Risk to verify that the subsequent evaluations are occurring
every 14 days as required.
Vacation Buy-out. Vacation buy-outs are included in wages when
calculating workers’ compensation in an amount that equals 66 2/3
percent of the employee’s average weekly wage. We question whether
vacation buy-outs should be considered in this calculation. Vacation
buy-outs represent compensation above and beyond hourly
compensation of the standard 2,080 hours per year but should not be
viewed as being comparable to overtime pay.
Oregon Administrative Rule (OAR) 436-060-0025 addresses items that
should and should not be included as wages but it does not address
vacation buy-outs. We noted that OAR 436-060-0025 states “End-of-
the-year and other one-time bonuses paid at the employer’s discretion
shall not be included in the calculation of compensation.” The County
established within policy allowing vacation buy-outs when certain
conditions are met and the buy-out is in addition to the agreed-upon
annual wage of the employee. For these reasons, we do not think it
should be included in the wage calculation.
We attempted to obtain clarification from the State as to whether
vacation buy-out should be included in the calculation. The State
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representative we spoke with was not familiar with the term “vacation
buy-out” and did not seem to understand the distinction between
vacation (as paid time off that represents a component of the standard
2,080 work year) and vacation buy-out (as a payment that exceeds
payment for a standard 2,080 work year).
We recommend that HR/Risk work with County Counsel to review the
relevant statutes and regulations and establish guidance on what pay
information should be included in the calculation of weekly wage. The
County may find that vacation buy-out revenue should be included
when calculating weekly wages for the purpose of workers’
compensation payments or it may find that the vacation buy-outs need
not be included in the calculation.
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Chapter 3 – Self-Insured Management & Confidential Employee
Health Insurance Plan
The County maintains a self-insured health insurance plan for management &
confidential employees. For employees represented by a bargaining unit, the
County provides a monthly health insurance stipend and the bargaining units
obtain and manage health insurance coverage.
Every other year an actuarial firm conducts a study which is used to ensure the
fund maintains adequate and stable funding levels. Excess insurance is
purchased to limit the risk exposure stemming from large dollar medical needs.
The County contracts with a third party claims administrator (TPA). The TPA’s
responsibilities include:
Receiving and processing claims in accordance with the insurance
coverage limitations established by the insurance plan.
What We Found
Administrative Fee Controls
The administrative fees paid to the TPA are in accordance with contract
stipulations and were appropriately authorized.
Claim Invoice Controls
The amount invoiced by the TPA agree with the amount paid as recorded in the
County’s financial records and the bank statement. Claim invoice payments
were appropriately authorized.
Overview Self-
Funded Health
Insurance Plan
We Designed Our Audit Tests To
Determine if the program has developed adequate financial controls that provide
reasonable assurance that claims and administrative fees charged to the County are
permissible, accurate, and appropriate.
Administrative
Fee Controls Are
Appropriate
Claim Invoice
Controls Are
Appropriate
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Medical Claims Auditor
The County does not engage services of a medical claims auditor to provide
assurance that the TPA is adjudicating (paying) claims in the least cost manner
and in accordance with the plan. Medical claims audits are conducted to
identify the instances of duplicate billing, wrong or missing discounts, mistakes
in member eligibility, incorrect plan setup, and other problems.
HR/Risk informed us that the County’s broker has recommended that the
County not audit its TPA because it could cause negative relations between the
two parties. We offer no opinion regarding whether the County should or
should not engage in a medical claims audit. We include this discussion in the
audit report for informational purposes only. We do note that the County has
its own clinic which helps reduce the number of claims the TPA is processing for
basic medical services and pharmaceuticals and therefore the risk of
unnecessary claim payment is less than if the County did not have its own clinic.
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Chapter 4 – Unemployment Claims
The payment of unemployment claims is handled under the General and Auto
Liability fund, however, it is discussed separately within this report since the
County contracts with a separate TPA to help handle unemployment claims
administration.
The County contracts with a third party claims administrator (TPA) that provides
the following services relating to unemployment claims:
Acts as an intermediary between the County and the Oregon
Department of Employment.
Coordinates with HR/Risk in gathering relevant facts in preparation for
appeals.
What We Found
Contracting with TPA
At the beginning of the audit, the question of performing the unemployment
claim processing in house by HR/Risk was brought up. Currently the County
pays the TPA an inconsequential amount ($3,000) per year to help with the
processing of unemployment claims. The level of work performed by the TPA
did not seem to be significant, however, this is reflective in the contract
amount. Nevertheless, HR/Risk staff expressed that the filing of paperwork, the
monitoring of deadlines, knowledge of laws, and the qualitative attributes that
the TPA provides are meaningful to the department.
We do not have an opinion whether HR/Risk should do unemployment claim
processing in house or continue to contract with the TPA that is a decision that
management should make.
Overview of
Unemployment
Claims
We Designed Our Audit Tests To
Determine if HR/Risk is receiving a benefit from contracting with a TPA to handle
unemployment claims.
Determine if the TPA is helping represent the County’s position when a claim for
unemployment might be invalid.
Question was
Posed if
Unemployment
Claim Processing
should be Done in
House
Monitoring of Third Party Administrators by HR/Risk is Adequate 16 | P a g e
Review of Claims
We reviewed 16 unemployment claims and we agreed with the outcomes for all
16 claims. Therefore, we believe that the TPA is helping represent the County’s
position appropriately.
Other Observations
Method Chosen to Pay Unemployment Claims. State law allows a local
government to either choose to pay an unemployment tax or reimburse
the State for actual unemployment claims paid by the State on behalf of
the County. The County chooses to use the direct reimbursement
method. For the audit, the TPA put together a comparison of the two
methods. Based on review of the comparison and how much the
County has reimbursed to the State for last six years, the direct
reimbursement method is the best method for providing the County
with a cost savings.
Quarterly Unemployment Claim Reimbursements. We agreed the
TPAs quarterly report to the State invoice, which agreed to the amount
recorded as paid in the County’s financial records. The quarterly
payments reviewed were also appropriately authorized.
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Chapter 5 – Summary of Recommendations
We recommend the following:
Chapter 1 – General and Auto Liability
HR/Risk give the TPA approval to pay claims over $3,000 in a written format.
Chapter 2 – Workers’ Compensation
HR/Risk work with County Counsel, County Administration and the TPA to determine the
appropriate requirements to be used in determining if an employee is entitled to time loss
payments during the three consecutive calendar day wait period and document results.
HR/Risk implement a process change that will result in the TPA receiving salary data for the
exact time period to be used to calculate workers’ compensation benefits.
HR/Risk periodically review a few medical invoices, possibly during the reconciliation process, to
ensure payments are for legitimate purposes and were paid at appropriate amounts.
HR/Risk include a review of cleared checks when performing the bank account reconciliation to
verify that the TPA wrote the check to the appropriate party.
HR/Risk consider codifying in policy the requirement that a department notify an employee in
writing that modified duty (light duty) is not available.
HR/Risk obtain input from County Counsel and then consider developing a communication plan
to alert departments when an employee is available for light duty and what the cost of utilizing
that employee would be.
HR/Risk add additional information to the workers’ compensation checklist to help ensure that
all documentation is obtained as necessary.
HR/Risk work with County Counsel to review relevant statutes and regulations and establish
guidance on what pay information should be included in the calculation of weekly wage for
workers’ compensation.
Chapter 3 – Self-Insured Health Insurance
No recommendations made.
Chapter 4 – Unemployment Claims
No recommendations made.
Monitoring of Third Party Administrators by HR/Risk is Adequate 18 | P a g e
Chapter 6 – Management Response
Monitoring of Third Party Administrators by HR/Risk is Adequate 19 | P a g e
Jackson County Eric Spivak, County Auditor
Internal Audit Program 541-774-6021
10 S. Oakdale, Room 307 [email protected]
Medford, Oregon 97501
Please Report Fraud, Waste, Abuse Other Recent Audit Reports:
1-844-237-9697 Compliance Audit of Federal Awards
www.jacksoncounty.ethicspoint.com
This report is intended to promote the best possible management of public
resources. This and other audit reports produced by the Internal Audit Program are
available for viewing on the web at:
http://jacksoncountyor.org/Departments/Internal-Audit/Performance-Audit-
Reports. Printed copies can be obtained by contacting the Internal Audit Program.