State/Provincial Update - July 29, 2015

Catch up on the 109th Annual Conference

The presentations and available outlines from GFOA’s 109th Annual Conference held several weeks ago in Philadelphia are available online and can be accessed by clicking on the respective session titles in the following link:

The GFOA made audio recordings of each session so you will be able to bring the conference to your office. The recordings offer a unique learning opportunity regardless of whether you attended the Philadelphia conference. The recordings can be purchased and downloaded from GFOA’s website. To do so, submit an order form to GFOA, or place your order online using GFOA’s e-storeSessions will be available in audio format only. CPE credits are not awarded for listening to the recordings.

Save the Date for GFOA’s 2016 Conference

The GFOA’s 110th Annual Conference will take place on May 22−25, 2016, at the Metro Toronto Convention Centre in Toronto, Ontario, Canada. We ask that you please post the dates to your organization’s website.

We also encourage you to submit topic and speaker suggestions. Registration for the conference and information about first-time attendee scholarships will be posted to the GFOA’s website in late fall. GFOA state and provincial representatives and presidents will be able to take advantage of the early government registration fee through the span of the conference.

U.S. citizens are required to have a current passport to enter Toronto. Click here for information on how to easily apply for one today.

We look forward to seeing you in Toronto!

Controlling Health-Care Cost with Dependent Eligibility Audits

Dependents represent a large portion of the cost of many employers’ health plans, but how many of those enrolled dependents are legitimately eligible for health coverage benefits? Fewer than you think. One might assume that ineligibility is a matter of extraordinary circumstances, but the internal audits of an increasing number of public and private sector organizations are proving otherwise. The bottom line: Ineligible dependents are probably costing your government money.

Studies suggest that roughly 8 percent of dependents enrolled in health-care plans are ineligible for coverage. The City of Corpus Christi, Texas, was surprised to find that 9 percent of dependents covered by its plan were technically ineligible for coverage. These cases cost employers an average of roughly $3,500 a year, per dependent, so identifying them is an economic imperative. Conducting a dependent eligibility audit (DEA) saved Corpus Christi more than $1 million in the first year alone.

The central task of dependent eligibility audits is to verify the eligibility of each dependent claimed by an employee. DEAs are a particularly helpful health-care cost-containment strategy because they do nothing to erode the quality of the health-care benefit. After the audit, employees still receive exactly the same benefits, and their out-of-pocket cost does not increase. Further, unlike many other cost-containment strategies, DEAs are straightforward and expedient; they can be accomplished in a matter of months.

While DEAs are relatively common in the private sector, they appear to be more rare among local governments. The purpose of this article is to answer important questions that local governments might have about DEAs so that they can begin to realize the same type of savings as Corpus Christi and other early adopters of DEAs in the public sector.

About 8 percent of employees’ dependents are ineligible for coverage. Since dependents (as a category) often make up the majority of lives covered by an average health-care plan, identifying them can have a significant financial impact.

Sixty percent of ineligible dependents enrolled in an employer’s health plan are children. The most common reason a child is found to be ineligible is that the employee is not the legal guardian of the child (e.g., a stepchild or a grandchild who lives with the employee). Older children who have passed the eligible age (now 26 under the Affordable Care Act) are also a part of this 60 percent, usually having inadvertently remained on a parent’s health plan past eligibility.

Spouses, who are typically the heaviest users of health benefits, make up the remaining 40 percent of ineligible dependents. The most common reason for spousal ineligibility is divorce, where the ex-spouse was never removed from the health plan.

The potential reductions in cost provided by a DEA are obviously substantial. However, two questions must be answered before a final conclusion can be reached on the net financial benefit. First, even though substantial savings are available across all employers, how likely is any individual employer to realize savings? Second, how do the savings compare to the costs of performing a DEA?

An important part of the answer to the first question is “the law of large numbers,” which holds that as a sample size gets larger, its mean will become increasingly closer to the average of the whole population. In other words, larger employers are more likely to have closer to 8 percent of their dependents ineligible, while smaller employers are more likely to experience wider variation (much higher or lower than 8 percent).

To better understand this principle, we examined a sample of 17 local governments – cities, counties, and school districts – that conducted DEAs in 2013. The average number of ineligible dependents across all 17 governments in the sample was 7.14 percent, which is close to the nationwide average of 8 percent.

The five largest jurisdictions had between 3,581 and 7,507 dependents in their health plans, and the five smallest ranged from 367 to 759. The percentage of ineligible dependents were closer to 8 percent for the larger governments, while there was more variation among the smaller governments.

The conclusion from looking at these samples is that, in general, DEAs are more of a “sure thing” for larger governments (with smaller governments realizing substantial savings as well, but with wider variation). But how can we know if a particular government is likely to benefit from a DEA? Fortunately, practitioner experience with DEAs has revealed a number of characteristics that the organizations most likely to benefit often share:

  • Loose process for bringing in new employees and poor communication of benefit eligibility rules (e.g., the employer does not collect documents from new hires when adding them to the plan and/or does not clearly explain the rules to new employees).

  • Low percentage of “information workers” in the workforce. Information workers are likely to be familiar with interpreting documents such as the eligibility rules provided to them by the employer and therefore less likely to mistakenly enroll an ineligible dependent. 

  • Environments governed by complicated labor contracts, and more adversarial relations between management and organized labor. Such environments may impede the clear communication and understanding of eligibility rules to employees. 

  • The employer has not performed a proof-based audit in the past, or has not taken steps to make sure that ineligible dependents did not enroll in the years since the audit. 

  • The employer does not collect documents from employees after life-changing events (e.g., marriage or the birth of a baby). 

The second question to ask is how savings compare to the cost of the audit itself. Keep in mind that the benefit of a DEA stretches many years beyond the first-year savings, since your organization won’t have to pay future premiums. These savings must be compared to the total cost of the DEA project, which often includes staff time from an organization’s human resource department as well as third-party vendor costs. While the cost of a project will vary from one jurisdiction to the next, the steps described above can help governments begin to assess potential savings, thus providing a basis for informed decision making.

For more information, contact Mark Mack, a consultant in GFOA’s Research and Consulting Center in Chicago.

Certified Public Finance Officers (CPFO) 

The CPFO Program is a broad educational self-study program designed to verify knowledge in the disciplines of government finance. To earn the CPFO designation, candidates must pass a series of five examinations covering the major disciplines of public finance. There are now 591 individuals who have received the CPFO designation.

CPFO candidates receive a 50 percent discount on GFOA publications that are used to study for the CPFO exams. The CPFO testing is currently being offered at various sites across the United States. Click here for more information on the Certification Program.

Check out GFOA’s Latest Budget Awards Program Winners

Attached is the list of governments in your state that have earned the Distinguished Budget Presentation Award in June 2015. Initial winners of this award are identified by the phrase “FIRST-TIME WINNER.”

The GFOA encourages you to contact each of the first-time winners and to offer to arrange a formal presentation of the award. If you have any questions regarding the award winners, please contact Kathie Schultz, Senior Program Associate, GFOA Technical Services Center.

Register by July 31 to Save on GFOA Training this September in Sacramento, California

Maximize your training opportunities by signing up for a series of GFOA training seminars from August 31 – September 4 at the Hyatt Regency Sacramento, California. Save 10 percent on the registration fee when you sign up and pay in full by July 31.
The following seminars are being offered:

If three or more colleagues register together for the same seminar, each will receive 10 percent off of the registration fee. (To receive this discount, please mail, fax, or scan and e-mail your registration forms and payments together. This discount cannot be applied when registering online.) Submit the training registration form or sign up online using GFOA’s e-store. 

A block of rooms has been reserved for the GFOA attendees at the Hyatt Regency Sacramento. Take advantage of the negotiated rate until August 17Click here for hotel information.

We look forward to your participation! For information on activities for your stay, go to Visit Sacramento. If you have any questions, contact the GFOA.

Encourage Your Members to Attend GFOA’s Upcoming Budget Academy in Chicago, Illinois 

Space is limited! Register to participate in GFOA’s popular Budget Analyst Training Academy, September 15−18, at GFOA’s offices in Chicago, Illinois. The course is designed for new and intermediate analysts or others new to government looking to gain important budgeting skills and improve their understanding of the public-sector budget process and budgeting best practices. Knowledge gained in the academy will improve participants’ analytical, problem-solving, and communication abilities, and help them lead their organizations in making better use of resources.

Earn 24 CPE credits with your participation. If you have any questions, contact the GFOADetails / Registration form / Register online

Do You Have an Upcoming Annual Conference?

If so, please fill out the attached “GFOA Promotional Items” form, checking off any materials you are interested in receiving for your upcoming annual conference. The form is interactive, so you can type and save your changes directly to the document. Submit the completed form at least two months before your event to Natalie Laudadio. If your state or provincial association has any new educational or mentor programs to promote or events at your annual conference to connect fellow finance officers and advance the profession, we will share the information in this monthly memorandum. Please send a brief description of your program to Natalie Laudadio.

Washington Update

Please find attached the latest Washington Update prepared by our Federal Liaison Center in Washington, DC. More information may also be found on the Federal Government Relations section of GFOA’s website.

Additional Files: