REPORT DIGEST

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

Financial Audit
For the Year Ended: June 30, 2012

Release Date:   April 25, 2013

Summary of Findings:
Total this audit: 1
Total last audit:  2
Repeated from last audit: 1

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

INTRODUCTION

This report covers our financial audit of the Teacher
Health Insurance Security Fund for the year ended June
30, 2012.  At June 30, 2012 the Net Assets Held in Trust
for Other Postemployment Benefits reflected a deficit of
$31,196,000.  Further, the Schedule of Funding Progress
reflects an Unfunded Actuarial Accrued Liability of
$18,853,250,000.

Per the Governor’s Executive Order 12-01, the
Department’s respective powers, duties, rights and
responsibilities related to the Teachers’ Retirement
Insurance Program were transferred to the Department of
Central Management Services as of July 1, 2012.

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).

We noted that only one individual was involved in
calculating the insurance rates and there was no written
rate-setting methodology of how this individual
calculates the TRIP insurance rates.  This individual
left the agency near the end of the fiscal year and the
Department did not have any other employees aware of how
the previous individual calculated the rates.
Additionally, there was no formal process for a
documented review of the insurance rate calculation.

Further, auditors noted that during fiscal year 2012,
the Department did provide information used to determine
health care premiums; however, there was no rate-setting
methodology provided to the Teachers’ Retirement System
of the State of Illinois explaining where the
information was obtained from and how the information
was used to determine the premium rates.  (Finding 1,
pages 21-22)  This finding was first reported in 2010.

We recommended a formal written rate-setting methodology
be developed as required by the State Employees Group
Insurance Act.  We also recommended all submission
requirements of the State Employees Group Insurance Act
be complied with.

Department officials stated that Executive Order 12-01
transferred the Office of Healthcare Purchasing from HFS
back to CMS effective July 1, 2012.  The functions
associated with State Healthcare Purchasing and the
development of a formal written rate-setting methodology
are now the responsibility of CMS.  (For the previous
Department response, see Digest Footnote #1)

AUDITORS’ OPINION

Our auditors state the financial statements of the
Teacher Health Insurance Security Fund as of June 30,
2012, are fairly presented in all material respects.

WILLIAM G. HOLLAND
Auditor General

WGH:tld

AUDITORS ASSIGNED

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


DIGEST FOOTNOTES

#1 –Lack of Written Rate-Setting Methodology – Previous
Department Response

2011:  The Department accepts the recommendation. The
Department will develop a formal written rate-setting
methodology and comply with all submission requirements
as required by the State Employees Group Insurance Act.