REPORT DIGEST

DEPARTMENT OF HEALTHCARE AND FAMILY SERVICES – TEACHER HEALTH INSURANCE SECURITY FUND

FINANCIAL AUDIT
For the Year Ended: June 30, 2010

Summary of Findings:

Total this audit: 1

Total last audit: 2

Repeated from last audit: 0

Release Date: May 12, 2011

State of Illinois, Office of the Auditor General

WILLIAM G. HOLLAND, AUDITOR GENERAL

To obtain a copy of the Report contact:

Office of the Auditor General, Iles Park Plaza, 740 E. Ash Street, Springfield, IL 62703

(217) 782-6046 or TTY (888) 261-2887

This Report Digest and Full Report are also available on the worldwide web at www.auditor.illinois.gov

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INTRODUCTION

This report covers our financial audit of the Teacher Health Insurance Security Fund for the year ended June 30, 2010.

SYNOPSIS

• The Department failed to have a documented written rate-setting methodology for the calculation of the Teachers’ Retirement Insurance Program premiums.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

LACK OF WRITTEN RATE-SETTING METHODOLOGY

The Department did not have a documented written rate-setting methodology to calculate the insurance rates that are used to determine the premium rates charged to participants for the Teachers’ Retirement Insurance Program (TRIP).

Auditors met with Department personnel to discuss the process of calculating insurance rates that are used to determine premium rates. During this discussion, the Department walked the auditors through a series of spreadsheets containing historical and current insurance costs, revenues and cash flow information for TRIP. The Department calculates insurance rates, which are based on, but not limited to costs, cash flows, and utilization levels. The Department then develops the premium rates that are charged for TRIP based on the calculated insurance rates and statutory limitations on the maximum premium rates that can be charged in a fiscal year. Auditors did not have any exceptions relating to incorrect premium rates being charged to participants for TRIP.

However, we noted that only one individual is involved in calculating the insurance rates and there was no written rate-setting methodology of how this individual calculates the TRIP insurance rates. Additionally, there was no formal process for a documented review of the insurance rate calculation.

Further, auditors noted that the Department did provide the Teachers’ Retirement System of the State of Illinois by April 15th with historical and projected data on enrollment, utilization, and costs of TRIP information which is used to determine the amount of health care premiums charged to participants in TRIP; however, there was no rate-setting methodology provided explaining where the information was obtained from and what information was used to determine the premium rates. (Finding 1, pages 20-21 of the Financial Report)

We recommended the Department develop a formal written rate-setting methodology as required by the State Employees Group Insurance Act.

Department officials concurred with our recommendation and stated that the Department will develop a formal written rate-setting methodology used to determine the premium rates for the Teachers’ Retirement Insurance Program.

AUDITORS’ OPINION

Our auditors state the financial statements of the Teacher Health Insurance Security Fund as of June 30, 2010, are fairly presented in all material respects.

WILLIAM G. HOLLAND

Auditor General

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AUDITORS ASSIGNED

This audit was performed by the Office of the Auditor General’s staff.