Review of Civilian Flexible Benefits Payments

My Office reviewed insurance premium payments to contracted employee benefit providers under the Civilian Modified Flexible Benefits Program (Flex Program). This review was conducted because health, dental and other insurance providers were paid approximately $280 million in FY 2012-13 to provide coverage for active civilian employees of all City departments, except the Department of Water and Power. This cost is for the City’s subsidy as well as employees’ contributions under the Flex Program. The City contracts with Mercer Human Resources Services, LLC, to operate and maintain the Flex benefit system, calculate and initiate payment of the benefit premiums, and monitor employees’ and their dependents’ benefit eligibility.

Our review examined premium payments made to providers during FY 201 1-12. We noted that the processes used by Personnel and Mercer lacked sufficient controls to ensure terminated or retired employees were excluded from the City’s premium amounts, which led to overpayments of premiums for health and dental coverage. In addition, although the City has a policy to provide benefits coverage for domestic partners, the policy does not meet the criteria required for State-registered domestic partnerships. Our review also disclosed that the Department and Mercer lacked adequate processes to verify employees’ dependent eligibility.