Managed Care Premium Payments for Recipients With Comprehensive Third-Party Insurance (Follow-Up)

Issued Date
January 17, 2020
Health, Department of (Medicaid Program)


To determine the extent of implementation of the seven recommendations made in our initial audit report, Managed Care Premium Payments for Recipients With Comprehensive Third-Party Insurance (Report 2016-S-60).

About the Program

Mainstream managed care (the managed care program most Medicaid recipients enroll in) provides comprehensive medical services that range from hospital care and physician services to dental and pharmacy benefits. Medicaid recipients may have additional sources of health care coverage (i.e., third-party health insurance, or TPHI), such as health insurance offered through an employer. The Department of Health’s (Department) policy is to exclude Medicaid recipients from enrollment in mainstream managed care when they also have comprehensive TPHI. Recipients should, instead, be enrolled in Medicaid fee-for-service to avoid the expense of monthly managed care premiums (for instance, under fee-for-service, after the comprehensive TPHI paid for a medical service, Medicaid could be responsible for paying a coinsurance fee).
The Office of the Medicaid Inspector General (OMIG) contracts with Health Management Systems, Incorporated (HMS) to identify and verify third-party coverages. HMS enters into data-sharing agreements with third-party insurers to obtain this information. The Department, Local Departments of Social Services (LDSS), and the New York State of Health are responsible for identifying enrollees with comprehensive TPHI and promptly disenrolling them from managed care.

We issued our initial audit report on June 13, 2018. The audit objective was to determine whether the Department made Medicaid mainstream managed care premium payments on behalf of recipients who had comprehensive TPHI coverage. The audit covered the period January 1, 2012 through September 1, 2017. Our audit identified $1.28 billion in premiums that were paid on behalf of recipients who had concurrent comprehensive TPHI. Of this, $1.17 billion (91 percent) was not recoverable per the Medicaid Managed Care Model Contract (Model Contract) because the managed care organization and third-party insurer were not the same legal entity or related (such as an affiliate). We recommended the Department work with HMS to amend data-sharing agreements with third-party insurers to require more frequent TPHI updates; work with LDSS to implement new processes that would allow for more timely identification and disenrollment of individuals with comprehensive TPHI from managed care; and amend the Model Contract to allow the Department to recover premiums from all MCOs regardless of an MCO’s relationship with a recipient’s third-party insurer. In addition, we recommended the Department review the managed care premium payments we identified and make appropriate recoveries.

Key Findings

Department officials made progress addressing the problems we identified in the initial audit report; however, additional action is needed. For the one-year period ended September 30, 2019, we found the Department paid $199 million in Medicaid mainstream managed care premiums for recipients who had comprehensive TPHI. Additionally, while timely identification of recipients’ comprehensive TPHI is essential to preventing improper premium payments, OMIG’s contractor (HMS) had not updated data-sharing agreements with the vast majority of insurance carriers to require more frequent TPHI updates. Also, OMIG had only recovered about $19 million of the improper payments identified in the initial audit. To enhance future recoveries, the Department amended its March 2019 Model Contract to allow for the recovery of premiums from all MCOs regardless of the MCO’s relationship with the third-party insurer. Of the initial report’s seven audit recommendations, three were implemented and four were partially implemented.

Key Recommendation

Officials are given 30 days after the issuance of the follow-up to provide information on any actions that are planned to address the unresolved issues discussed in this report.

Andrea Inman

State Government Accountability Contact Information:
Audit Director: Andrea Inman
Phone: (518) 474-3271; Email: [email protected]
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236