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YELLOW SHEET Office of the State Auditor of Missouri |
May 29, 2001
Report No. 2001-44
The following report is
our review of the Missouri Department of Transportation and Missouri State
Highway Patrol Medical and Life Insurance Plan.
As similarly noted in our
prior report, the financial condition of the Missouri Department of
Transportation and the Missouri State Highway Patrol Medical and Life Insurance
Plan (plan) has continued to deteriorate over the past two years.� While annual revenues have increased
approximately 43% since June 30, 1998, rising from $34.4 million to $49.4
million, expenditures have continued to exceed revenues by approximately $10
million and $3 million, respectively, in the two years ended June 30, 1999 and
2000.� Annual plan expenditures
increased approximately 26% during that time, rising from $41.5 million to
$52.4 million.� As a result, retained
earnings have declined significantly, from $4.9 million at June 30, 1998, to
negative $8.3 million at June 30, 2000.�
This trend has slowed slightly during the current fiscal period and, as
of November 30, 2000, the plan's retained earnings was approximately negative
$7.7 million.
The significant increase in plan expenditures can
again be attributed primarily to increasing medical claim costs.� To control costs, the board has made various
benefit changes including raising medical claim deductibles, out-of-pocket
maximums, service co-pays, and changing allowable services.� The board has also implemented a $50
prescription deductible and increased prescription co-pays to 30% of cost.
Revenues have risen due to several increases to the
state and member contribution rates. Effective January 1, 2001, the board again
implemented an 11% rate increase for most insurance plan groups.� In addition, a 10% rate increase is
projected for 2002, according to the plan�s actuary.���
As a result of these rate increases and benefit
changes, the actuary is projecting the plan will achieve positive retained
earnings again by the end of calendar year 2002.� While projections appear positive, actual results could be better
or worse than projections and actuarial estimates.�
Our report also noted that the plan does not
adequately monitor the prescription claims administrator�s contract
compliance.� The plan has performed no
testing of prescription claims processed and paid by the prescription claims
administrator nor has it required an independent analysis of the adequacy or
implementation of the administrator�s internal control policies and procedures
relevant to the processing and payment of the plan�s prescription claims.� The prescription claims administrator
processed and paid approximately $8.6 million and $8.5 million in prescription
claims for the years ended June 30, 2000 and 1999, respectively.
This Missouri Department of Transportation and Missouri State Highway Patrol Medical and Life Insurance Plan was organized by the Missouri Highway and Transportation Commission on July 1, 1977, under the provisions of Section 104.270, RSMo.� The plan was established to provide medical coverage on a self-insured basis, and death benefits on an insured basis.� Beginning May 1, 1982, additional life insurance was made available as an option.
