Auditor blocked in expenses probe

LINCOLN — When it comes to providing health insurance for its employees, the State of Nebraska might be one of the most generous states in the country.

The state, it also appears, might be spending much more on employee health insurance than other public agencies in the state, the University of Nebraska and K-12 public schools.

In light of the $751 million budget gap facing Nebraska, State Auditor Mike Foley said it is imperative to “drill down” into health insurance expenses to see whether the state could reduce spending by tens of millions of dollars.

“I would go so far as saying this is the single most important audit I've undertaken in my four years in office,” Foley said Friday.

While Foley won permission in April to conduct a first-ever performance audit by his office, he's being blocked by a state agency that says releasing the personal health care records of state employees would violate state statutes and possibly federal law.

Carlos Castillo, head of the Nebraska Department of Administrative Services, said Foley has no right to see the personal records of the 30,000 state employees and family members covered under the state's self-funded health insurance plan. He said information that identifies employees by name is off limits.

“We have an obligation to protect that information, and we're going to do everything to do that,” he said, adding that Gov. Dave Heineman agrees.

The showdown is headed to the desk of State Sen. John Harms of Scottsbluff, head of the Legislature's Performance Audit Committee, which agreed to let Foley conduct a performance audit of state health insurance spending.

It is the first conducted under a 2003 law. Such audits examine whether spending of taxpayer money is efficient.

Harms said he plans to meet with Foley and Castillo this week in the hope of working out an agreement so that what he calls an “important” audit can proceed.

“If you look at our costs, they're fairly high,” Harms said. “If there are ways to be more efficient or make costs cheaper for taxpayers, we ought to do it.”

It is significant money: The State of Nebraska spends about $160 million a year for health insurance for state employees.

That does not include spending on employees at the University of Nebraska, state colleges, State Patrol and public school teachers, who are on separate plans.

Foley said his “eyes popped out” when he saw a National Conference of State Legislatures report that put Nebraska No. 1 out of 48 states surveyed in monthly costs for family health insurance coverage. The per-family cost was $1,861 a month, of which the state picks up 79 percent, or $1,470.

By comparison, monthly family premiums for Iowa state employees were $932 a month, of which the state paid 100 percent. The lowest per-month premiums for family coverage in the survey were in South Dakota, at $636.

While the numbers might have some “imperfections” because of variations in state plans, Foley said, Nebraska's high numbers beg for more investigation.

His preliminary probing indicated that University of Nebraska and public school teachers appear to be getting health insurance at a much lower cost, he said. In 2010, he said, the monthly cost of health insurance for a family cost $1,194 at the university and $1,323 through the state teachers plan, compared with $2,056 for state employees.

Monthly premium costs for a single person were $579 through the state plan, $402 through the university and $480 for schoolteachers, he said.

“I want to find out what (the state) is doing differently and what this is costing you and me,” Foley said.

Castillo said he doesn't oppose a performance audit of health insurance spending but does oppose Foley's “unprecedented” request for personal information.

Employees, Castillo said, don't want their employers knowing why they are going to the doctor. Releasing such information might also violate the federal Health Insurance Portability and Accountability Act rules that pertain to the privacy of health care records. Foley disputed that, saying federal and state rules provide exceptions for audits by “health oversight” agencies.

Castillo said the state auditor doesn't qualify, but Foley said he does, pointing to a ruling by the New York State Supreme Court.

Foley said he has already obtained prescription drug records, which name state employees, from a national contractor that processes state drug claims. They know the federal laws, Foley said. “Why the change of heart here?” he asked.

Castillo said the state has adopted “aggressive” steps in the past two years to try to reduce health insurance expenses, including wellness efforts and insurance plan changes.

“It's clear you can't continue to have health costs rise the way they were rising,” he said.

Contact the writer:

402-473-9584, paul.hammel@owh.com

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