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February 9, 2009



DiNapoli: United Health Care Overcharged State $4 Million


United Health Care used a faulty method to calculate risk costs and overcharged the state nearly $4 million for insuring the New York State Health Insurance Program (NYSHIP), according to an audit released today by State Comptroller Thomas P. DiNapoli.

“United Health Care overcharged the state nearly $4 million,” DiNapoli said. “These days every dime counts and $4 million is a lot of taxpayer dimes. This practice must stop.”

Civil Service Commissioner Nancy G. Groenwegen said, “This Department is constantly seeking ways to reduce premium costs to the State and local NYSHIP participants, and ultimately the taxpayers. We agree with the Comptroller and have begun negotiations with United Health Care to change the way it assesses and charges for the risks it undertakes.”

New York State provides health insurance coverage to active and retired state, local government and school district employees. United Health Care is responsible for administering the medical/surgical and major medical portion of the Empire Plan, the primary health plan of NYSHIP. The New York State Department of Civil Service is responsible for overseeing the program.

Auditors found that United Health Care was improperly calculating the amount it charged the state for insuring the risk associated with administering the Empire Plan. It is standard industry policy for insurance companies to charge employers for the risk of insuring their employees. United Health Care calculated its risk charge using gross premium costs rather than net, or actual, premium costs. For the last 20 years United Health Care has consistently overestimated gross premium payments the state must pay to cover anticipated costs and had to return money to the state.

The three other insurance providers that administer the Empire Plan use actual costs to calculate the state’s risk charge.

From 2004 to 2007, United Health Care charged the state $71.6 million for the risk associating with insuring the plan, which is $3.9 million more than if it had calculated the risk charge based on actual costs.

Government Accountability
The Office of the State Comptroller regularly audits state agencies, public authorities and New York City agencies. Auditors ensure that programs achieve their established goals, funds are used efficiently and assets are adequately protected against fraud, waste and abuse. DiNapoli’s office completes approximately 200 state audits annually and identifies hundreds of millions in savings and fraud each year.

Click here for a copy of the audit.



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