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PEIA has backlog of claims, according to legislative audit

by Brian Farkas

THE ASSOCIATED PRESS

CHARLESTON -- The Public Employees Insurance Agency has a backlog of claims and inadequate controls to oversee contracts covering claim management, pharmacy benefits and wellness programs, says a legislative audit released Sunday.

The agency has 100,000 backlogged claims, worth an estimated $43 million, PEIA Director Tom Susman said in discussing the audit, which was released to the Legislature's Joint Committee on Government Operations.

The PEIA provides health insurance coverage to more than 200,000 public employees, teachers and their dependents.

"We should have an inventory of 65,000 claims," said Susman, who was appointed by Gov. Bob Wise last month.

About 35,000 to 40,000 claims are backlogged because of last July's change in claims managers, Susman said.

"For the past several years, contractors have been managing the agency instead of the agency managing the contractors," Susman told the committee.

Acordia National Inc. replaced Mountain State BlueCross and BlueShield Inc. The state also replaced Mountain State with Intracorp as the PEIA's utilization review manager. Utilization reviews are conducted to determine if a medical procedure is necessary, or is the best procedure to perform.

"We have been in contact with the Medical Association to let them know what's going on," Susman said. "They understand a lot of this is from the conversion from Blue Cross to Acordia."

Concerning contract management, although PEIA has spent $64 million on professional contracts over the past five and a half years, "in some respects the oversight is reactionary, undocumented, and unclear," auditors wrote.

The audit covered the period between 1996 and this year.

PEIA employees must divide their time between contract oversight and other office duties and the agency lacks written guidelines on how to administer contracts.

If an employee leaves or is on vacation, other employees cannot readily fill in, auditors said.

The agency also must adopt policies to ensure information exchanges with contractors, auditors wrote.

Auditors said PEIA may have made the wrong decision in January 1999 when it paid $550,000 to buyout PBM First Health Inc.'s pharmacy benefit contract. There were 33 months remaining on the contract.

The agency entered into a new contract with PCS Health Systems Inc. That contract ended last June 30, but PEIA and PCS are in dispute over contract savings guarantees.

PEIA claims PCS still owes about $3 million. PCS contends it met and exceeded the conditions.

Auditors wrote, "in the event legal action would be necessary ... we see inadequate documentation being a possible weakness in the state's case."

Susman said he agreed with the auditor's report and that he is in the process of hiring a contract administrator to oversee agency contracts.

Representatives of the state's teachers unions said they were pleased with Susman's presentation Sunday and his direct approach to managing PEIA's insurance program.

"You have to appreciate what he's trying to accomplish," said West Virginia Education Association spokesman Bob Morgenstern. "We were told when PEIA went to a third-party administrator there would be this seamless transition. And look what happened."

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