Item - 2017.AU8.4

City Council recessed its public session and met as Committee of the Whole in closed session on May 25, 2017, to consider confidential information on this Item as it pertains to litigation or potential litigation that affects the City or one of its agencies or corporations.

The Audit Committee recommends that:

1.  City Council request the Treasurer to make a request to Manulife to input the provider information including the name of provider, location, and therapist registration number, for all City's health claims processed and reimbursed in the period 2013 to 2015 to enable proper analysis to be performed to confirm validity of claims.

2.  City Council request the Treasurer to ensure the plan administrator has adequate tools, controls and adjudication processes in place to identify unusual trends and patterns, and to detect and prevent fraud and abuse at both the provider and individual plan member level. This should include establishing predetermined criteria with the plan administrator for identification of unusual trends and patterns, and requesting periodic reports back from the plan administrator on actions taken.

3.  City Council request the Treasurer to ensure all key changes to the City's health benefits plan administration are clearly communicated and documented by City staff, and retained in accordance with the City record retention policy. When a major change to the benefit plan is made, the Treasurer should ensure the change is implemented by the benefits administrator according to the City's direction.

4.  City Council request the Treasurer to:

a. review the instances of benefit overpayments identified in the Auditor General’s Phase Two audit of extended health benefit claims;

b. where feasible identify other instances of overpayments; and

c. recover the overpayments from plan members or the Benefits Plan Administrator where feasible.

5.  City Council request the Treasurer to consider establishing a reasonable quantity limit for orthotics and orthopedic shoes benefits for dependents aged 18 or younger and for medical braces.

6.  City Council request the Treasurer to review and initiate changes to the City’s extended health benefits provisions to ensure benefit plans clearly articulate what expenses are eligible and covered by the City, including the coverage for modifications to orthopedic shoes.

7.  City Council request the Treasurer to ensure the City’s employee health benefit provisions are implemented in accordance with City's intentions and collective agreements, and that the plan administrator's interpretation of benefit provisions is in line with City intentions.

8.  City Council request the Treasurer to consider unifying, where possible, the employee health benefit provisions in various collective agreements such that both the City’s oversight of benefits and the benefit administrator’s claim adjudication can be performed in a more effective and efficient manner.

9.  City Council request the Treasurer to consider setting a reasonable contractual limit or unit cost on health benefits, particularly when the Plan Administrator does not have a Reasonable and Customary charge in place.

10.  City Council request the Treasurer to ensure that the current employee health benefit plan administrator's adjudication processes include an assessment on age reasonableness for health claims.

11.  City Council request the Treasurer to assess the reasonableness and appropriateness of the City's physiotherapy benefit provisions, taking into account the financial impact and the City's comparability to other jurisdictions.

12.  City Council request the Treasurer to put in place a written policy and procedure on granting of exception cases for employee health benefits. The reason, type of benefit, and period in effect should be documented and retained.

13.  City Council request the Treasurer to engage an external auditor to conduct an initial audit on the new plan administrator's adjudication system to ensure the coding aligns with benefit provisions. Periodic audits should also be performed on the effectiveness of the administrator's adjudication and monitoring processes.

14.  City Council request the Treasurer to conduct, on a regular basis, detailed reviews of health benefit claims history by high risk categories that are commonly subjected to misuse or abuse.

15.  City Council request the Treasurer to ensure emerging risks and issues in the employee health benefits program are identified and adequately addressed by the benefits administrator in a timely manner.

16.  City Council request the City Manager to forward this audit report to the respective Board of the Toronto Transit Commission and the Toronto Police Service for their review and consideration of the applicability of the audit recommendations in their own employee health benefit program.

17.  City Council adopt the confidential recommendations contained in Confidential Attachment 1 to the report (March 20, 2017) from the Auditor General.

18.  City Council authorize the public release of the Confidential Recommendations and information contained in Confidential Attachment 1 to the report (March 20, 2017) from the Auditor General, at the discretion of the City Solicitor in consultation with the City Manager.

Beverly Romeo-Beehler, Auditor General, and Jane Ying, Assistant Auditor General, gave a presentation to the Audit Committee on this Item.

Mike St. Amant, Treasurer, and Michael Wiseman, Director, Pension, Payroll and Employee Benefits, gave a presentation to the Audit Committee on the Management Response to the Auditor General’s Report on Management of Employee Extended Health Benefits Phase Two.

This report presents the results of the Auditor General's Phase Two audit on the City's employee extended health care benefits.

In 2015 the City spent approximately $229 million to provide employee benefits including health, dental, long term disability and employee life insurance, of which approximately $56 million was for extended health care benefits (excluding drug benefits).

Overall, we found the controls and monitoring of the City's benefit claims ineffective in identifying unusual patterns or potential frauds. Potential benefit abuse or fraud might not have been detected due to the lack of critical claim information and administrator forgoing a standard audit process for the City's claims.

City management, who retains overall responsibility for the program, should further strengthen its oversight by establishing clear understanding of the benefit administrator's actual adjudication practices, as well as performing more effective claim data analysis and implementing periodic third-party audits.

To reduce annual benefit cost and the risk of benefit abuse, we recommend several changes to the City's benefit plan design. As well, the City should establish reasonable quantity or price limits for items such as compression stockings and medical braces.

The audit provided 16 recommendations to help improve controls and benefit plan design, prevent and detect misuse, and reduce yearly costs while providing a reasonable level of benefit coverage to employees.

The City has recently contracted a new benefits administrator and this presents an opportunity to strengthen its benefits program and reduce its risk exposure moving forward.