Item - 2016.AU7.2

The Audit Committee recommends that:

1.  City Council request the Treasurer to review, identify, and verify with Manulife the validity of claims where excessive quantities of drugs were reimbursed, in particular, for the prescription opioids, sedatives, stimulants, and erectile dysfunction drugs, and, if appropriate, take steps to recover any overpayments.

2.   City Council request the Treasurer to ensure the City only reimburses claimants with eligible expenses that are medically necessary for the treatment of sickness or injury in accordance with the City’s policy.  Actions to be considered include:

a.  Ensuring the new plan administrator has adequate controls in place when adjudicating controlled substances and erectile dysfunction drugs in order to verify legitimacy of claims when total quantity dispensed exceeds a year’s supply based on the maximum recommended dosages of the drug.

b.  Working with the new plan administrator to determine and agree on acceptable tolerance levels that will trigger further investigation on suspicious drug claims.

3.  City Council request the Treasurer to undertake necessary steps to ensure the City’s benefits plans are cost-effective and follow industry standards and best practice, including but not be limited to:

a.  Consultation, on a regular basis, with industry experts and the new plan administrator to identify industry standards and acceptable practices for drug benefit coverage limits, particularly in areas where utilization by the City’s members is significantly higher than industry standards or benchmarks.

b.   Recommending reasonable maximum plan coverages for the appropriate drugs with consideration for special circumstances.

4.  City Council request the Treasurer to follow up with Manulife on the questionable claims and utilization patterns for prescription opioids, sedatives, and stimulants drugs, including requesting further investigation by Manulife where needed and taking steps to recover overpayments, where appropriate.

5.  City Council request the Treasurer to ensure the new plan administrator assesses utilization patterns of claimants, in particular, with respect to prescription opioids, sedatives, and stimulants with agreeable predefined criteria and tolerance levels. 

6.  City Council request the Treasurer to regularly conduct detailed reviews of drug benefit claims history by high-risk drug categories that are commonly subjected to misuse or abuse, and on drug categories for which the City incurs significantly higher utilization and claims cost than industry standards.   

7.  City Council request the Treasurer to ensure the City only reimburses over-the-counter drug claims in accordance with City policies and to ensure cost effective reimbursement of over-the-counter drug claims.  Steps should be taken but not be limited to:

a.  Following up with Manulife to validate the eligibility of over-the-counter drug claims to ensure they meet the life sustaining requirements in the City’s policies and recover any ineligible amounts paid.

b.  Ensuring the new plan administrator has a process in place to obtain evidence of life sustaining purpose when reimbursing over-the-counter drugs in accordance with City policies.

c.  Working with the new plan administrator to develop ways to minimize the cost of dispensing fees for eligible over-the-counter drug claims.

8.  City Council request the Treasurer to ensure the new benefits plan administrator reviews the status of physicians and pharmacists when adjudicating drug claims, and identifies claims where the drug was prescribed and/or are dispensed by physicians and pharmacists whose licenses have been revoked or suspended.  The Treasurer should also ensure pharmacy names or pharmacy unique identifiers are part of the adjudication process for all drug claims.

9.  City Council request the Treasurer to identify and review with Manulife all applicable claims where dispensing fees were paid above the $9 plan limit and, if appropriate, recover overpayments.

10.  City Council request the Treasurer to ensure the new employee health benefits plan administrator has proper controls in place to restrict dispensing fees to the coverage limit, and City staff undertake periodic reviews to ensure the City is only charged the dispensing fees up to the established limit.

11.  City Council request the Treasurer to implement the Preferred Provider Network of pharmacists as authorized by the City Council in December 2013.

12.  City Council request the Treasurer to ensure more effective coordination and sharing of drug benefits report information between the Pension, Payroll and Employee Benefits Division and the Employee Health and Rehabilitation team to facilitate development of wellness initiatives amongst City employees.

13.  City Council request the Treasurer to review and identify, for the periods covered under the current and previous employee health benefits administration contracts with Manulife, all cases of billing reversals for health benefits claims where the City should receive a recovery, including those made for ineligible claims and/or result of errors.  Where overpayments are identified, steps should be taken to ensure the City recovers all overpayments. 

14.  City Council request the Treasurer to require the City’s new employee health benefits administrator to provide City staff with all necessary supplementary information to support invoiced amounts to assist the City’s review of accuracy of invoiced amounts, reasonableness of billing reversals, and of the related recoveries. 

15.  City Council request the Treasurer to undertake a review of the City’s records of eligible individuals for health benefits coverage to ensure accurate and complete information in the City’s system.  A review of the health benefit claim histories should be conducted on individuals with questionable or missing dates of birth.  Where claim reimbursements were made for ineligible individuals, steps should be initiated to recover overpayments. 

16.  City Council request the Treasurer to ensure that all individuals eligible for the City’s health benefits have up-to-date eligibility information in the City and the plan administrator’s respective systems.  A mechanism should be established to periodically reconcile eligibility information between the City and the plan administrator’s system.

17.  City Council request the Treasurer to ensure the performance standards agreement with the new benefits plan administrator comprehensively measures all the service areas to be delivered by the plan administrator.

18.  City Council request the Treasurer to ensure that the new benefits plan administrator provides the City with the necessary supplementary information to enable the City to independently assess the administrator’s performance, and consider engaging an independent auditor to assess the new plan administrator’s performance.  Clear provisions should be included in the contract to enable the City’s Auditor General to conduct an independent audit of the administrator’s performance.

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

The Auditor General’s 2016 Audit Work Plan included an audit of the management of the City’s employee extended health and dental benefits.  The audit was divided into two phases.  Phase One of the audit, which is the subject of this report, focused on drug benefit claims.  A parallel audit has also been initiated for the Toronto Transit Commission’s employee health benefits plans.  Phase Two will focus on the remaining extended health benefits such as hospital, vision, and out-of-country medical, and may include dental benefits.  A separate audit on the City’s management of the Long Term Disability Benefits Program has been conducted by the Auditor General’s Office.

The report provides 18 recommendations to help improve the City’s oversight of claims administration services, prevent and detect potential misuse of the benefits, strengthen payment verification, and identify opportunities for cost savings and overpayment recovery.  Immediate attention from City staff is required for findings related to potentially excessive claims for controlled substances, erectile dysfunction drugs, as well as unusual claim patterns.