A MESSAGE FROM THE PRESIDENT OF THE BOARD OF DIRECTORS ABOUT THE DISTRICT’S RESPONSE TO THE AUDIT OF THE HEALTH INSURANCE PLAN

Following is a series of questions and answers about the Board’s response to the Auditor’s two reports:

• HAS THE BOARD INVESTIGATED THE MATTERS RAISED IN THE AUDIT AND ISSUED A RESPONSE? (read more)
• WHAT DID THE INVESTIGATION AND RESPONSE REVEAL? (read more)
• WHAT IS THE COST TO THE TAXPAYERS FOR ALL MATTERS PERTAINING TO THE AUDIT? (read more)
• WHAT IS THE BOARD DOING TO RECOVER THESE EXTRAORDINARY COSTS? (read more)
• WHAT ABOUT A RESPONSE TO THE UNAUTHORIZED SEPARATE AUDIT REPORT THAT CONTAINED PROTECTED HEALTH INFORMATION? (read more)

Following is the original series of questions and answers about the Audit.  This information first appeared on the District’s website in December, 2007:

• WHAT IS A SELF-FUNDED HEALTH INSURANCE PLAN? (read more)
• THIS WAS NOT AN INDEPENDENT AUDIT PERFORMED BY A CERTIFIED PUBLIC ACCOUNTANT…WHY? (read more)
• WHAT HAPPENED WHEN THE BOARD OF DIRECTORS INSISTED ON MAINTAINING THE PRIVACY OF EMPLOYEES PERSONAL HEALTH INFORMATION? (read more)
• HOW DID THE FIRE FIGHTERSUNION VIOLATE THE TERMS UNDER WHICH THE BOARD AGREED TO ALLOW THE AUDIT? (read more)
• HOW DID THE BOARD LEARN THE AUDITOR HAD VIOLATED THE TERMS OF THE HIPAA AGREEMENT TO PROTECT PERSONAL HEALTH INFORMATION? (read more)
• WHAT IS THE PROOF THE UNION ONLY WISHED TO BUY AND PAY FOR AN AUDIT TO BE USED FOR FINANCIAL AND POLITICAL GAIN FOR ITSELF? (read more)
• WHAT IS THE REAL PURPOSE OF THE UNION’S INTEREST IN THIS AUDIT AND WHY WILL IT COST TAXPAYERS A LOT OF MONEY? (read more)
• HOW DID THE AUDITOR AND THE UNION  VIOLATE THE PRIVACY RIGHTS OF THOSE COVERED BY THE HEALTH INSURANCE PLAN? (read more)
• HOW MUCH MONEY HAS THE SELF-FUNDED HEALTH PLAN SAVED TAXPAYERS OVER THE PAST 5 YEARS? (read more)
• DOES THE BOARD PLAN TO RESPOND TO THE ISSUES RAISED IN THE AUDIT EVEN THOUGH IT WAS ONLY PRODUCED FOR THE FINANCIAL AND POLITICAL GAIN OF THE UNION? (read more)

HAS THE BOARD INVESTIGATED THE MATTERS RAISED IN THE AUDIT AND ISSUED A RESPONSE?

Yes, after receiving the Audit report, the Board immediately announced its intention to fully investigate the issues raised in the Audit and provide a response.  The Board’s response is also available to the public for inspection at the District’s headquarters during business hours.  Because of the real possibility of litigation, the Board instructed its Counsel to lead the investigation and response effort.  Due to the incredible length of the Audit report a second law firm (and its employee benefits specialist) was engaged to assist with this arduous and time-consuming process.  The attorneys were asked to carefully consider each finding and allegation in the Audit and seek information from all third parties involved in administering the plan.  They were asked to review documents offered in support of the findings and allegations to make sure they were accurate and complete.  Finally, they were asked to make sure the Auditor’s findings took into consideration all information available to the Auditor. This effort took hundreds of hours and several months to complete.  The results were presented to the Board and the attorneys were asked to go back and look further at several specific issues.  Finally, the Board reviewed a final draft and issued it as the District’s response.  But the Board did not stop there.  In an effort to obtain an independent analysis of whether the response was accurate and appropriate, the Board requested the engagement of the services of CBIZ, which is the consulting division of the nationally renowned CPA firm of Mayer, Hoffman, McCann.  Unlike the Auditor, this company employs Certified Public Accountants, licensed by the Missouri State Board of Accountancy.  CBIZ was asked to review the Auditor’s report and exhibits and the District’s response and exhibits and render an opinion about the Audit.  Their conclusion was clear.  The Audit  went far beyond the scope of an ordinary self-insured health plan audit and employed methods that were unconventional and potentially inaccurate.  CBIZ concluded the District’s response was accurate and that there was no evidence of fraud or wrongdoing on the part of the Board in administering the Plan.

WHAT DID THE INVESTIGATION AND RESPONSE REVEAL?

What the Board found was both astounding and disappointing.  With the exception of a few relatively minor findings and recommendations, virtually none of the findings, allegations and conclusions made by the Auditor hired by the Union was supported by the facts.  Not only had the Audit put the Board through a very time-consuming exercise, distracting it from many tasks which could have benefited the District, but a huge expense was incurred in the process.

WHAT IS THE COST TO THE TAXPAYERS FOR ALL MATTERS PERTAINING TO THE AUDIT?

The response to the audit cost the District more than $100,000.  This does not include the cost of the independent review by CBIZ and other legal costs associated with the audit.  As described above, the response to the Audit and associated activities dominated Board discussion and meetings, distracting the Board from conducting productive business.

WHAT IS THE BOARD DOING TO RECOVER THESE EXTRAORDINARY COSTS?

In June the Board voted unanimously to seek recovery of its actual costs of investigating and responding to the Audit by authorizing a lawsuit be filed.  In addition the Board authorized its attorneys to seek recovery of appropriate legal fees involved in this effort.  Suit was filed shortly thereafter and the case is currently in the discovery stages.  The Board is confident the District will prevail in this lawsuit and recover for the District and its taxpayers, all reasonable and appropriate expenses incurred.  Nothing can make up for the time lost by the Board in going through this process, although the hope is that due to the outcome, it will never occur again.

WHAT ABOUT A RESPONSE TO THE UNAUTHORIZED SEPARATE AUDIT REPORT THAT CONTAINED PROTECTED HEALTH INFORMATION?

Because of the possibility of resulting litigation, the Board was placed in a position by the Auditor in which it had no choice but to review and respond to the separate Audit report that was full of personal and protected health information of employees and their spouses and children.  This was performed under very strict procedures to safeguard any further invasion into the medical information for those employees.  The investigation was led by the same law firms (each executed Business Associate Agreements) and the results as follows:.  None of the findings, allegations and conclusions made by the Auditor was fully supported by the facts.  The private Audit report that contained private and protected health information was also provided to CBIZ for their independent analysis and their conclusions supported the District’s Response to the private Audit.

WHAT IS A SELF-FUNDED HEALTH INSURANCE PLAN?

In 2002 the Monarch Fire Protection District changed the health insurance plan for employees and dependents to a “Self-funded” plan (the “Plan”).  It has since reverted back to a conventional health insurance plan.  This meant the District paid monthly premiums into a separate account owned by the District and medical and pharmacy claims were paid from that account.  The District employed private companies that specialize in this type of plan to process these claims and used a well-known physician and hospital network for services.  This type of plan is widely used by larger employers.

THIS WAS NOT AN INDEPENDENT AUDIT PERFORMED BY A CERTIFIED PUBLIC ACCOUNTANT…WHY?

In January 2007 the firefighters Union requested that the Board approve an audit of the Plan, which they proposed be paid for by the Union and be conducted by a firm chosen by the Union.  The Board consented to this with the condition that the Board would receive the final report at the same the Union received it.  The firefighters presented this request as an effort to examine the Plan in order to look for potential cost savings to the District.  In hindsight, as described below, this was clearly not the purpose of the audit.  Just after the audit process began, the Board learned the Auditor was only going to review medical claims of the Board members and chief officers of the District.  The Board reminded the Auditor it had consented to an audit of the Plan, not an audit targeting certain individuals.  The Auditor then agreed to include a larger sampling of plan participants.  Later, the Board was shocked to learn the Auditor chosen by the Union was not even a Certified Public Accountant, but was, instead an individual who has done health plan audits.

WHAT HAPPENED WHEN THE BOARD OF DIRECTORS INSISTED ON MAINTAINING THE PRIVACY OF EMPLOYEES PERSONAL HEALTH INFORMATION?

The Auditor requested free access to the participants’ medical claims files, which meant they would have total access to private health information.  The Board was concerned about potential violations of employees and dependents rights to privacy and potential violations of the Health Insurance Portability and Accountability Act commonly known as HIPAA.  The Board felt the Auditor could glean the information necessary to produce an audit report using coded or masked information about those who had claims.  In other words, if initials or code numbers were used, rather than employee names, the Auditor could still obtain all necessary information.  The Auditor disagreed and insisted on seeing all private and personal information.

The District’s attorney recommended the Auditor be required to sign a Business Associate Agreement (“Agreement”).  This document, authorized under HIPAA, provides very strict guidelines under which protected health information can be viewed and used by parties to such an Agreement.  The Auditor determined that she needed legal advice about signing an Agreement and over a period of months, the District and the Auditor went back and forth about language in the Agreement.  When the Agreement was finally signed in May, the Auditor was given access to the information she requested.  The Agreement stated that the Auditor could not identify individuals or private health information in the Audit report and that all notes and copies of documents that contained private and protected health information had to be destroyed or originals returned to the District. 

HOW DID THE FIRE FIGHTERS UNION VIOLATE THE TERMS UNDER WHICH THE BOARD AGREED TO ALLOW THE AUDIT?

While the Auditor indicated the Audit report would be completed by the end of July, the Audit report was not finished until September 21, 2007.  The Board was not told of its completion but in mid-October the Board learned the Audit report was furnished to the Union and its attorney in early October.  In mid-October, the Union’s attorney notified the Board’s attorney that the Auditor wanted to meet with the Board to present the Audit.  The Board and Auditor were unable to schedule such a meeting until November 15, 2007 and in the meantime the Board requested copies of the Audit report prior to November 15. 

HOW DID THE BOARD LEARN THE AUDITOR HAD VIOLATED THE TERMS OF THE HIPAA AGREEMENT TO PROTECT PERSONAL HEALTH INFORMATION?

The Union’s attorney then advised the District’s attorney that there were actually two Audit reports, one for the public and one that contained protected health information.  On November 9 the Union’s attorney attempted to deliver both reports to members of the Board.  Directors Richard Gans and Dr. David Terschluse refused delivery of the reports however the reports were delivered to Director Evans when she was not home.  Both reports were delivered to the Board’s attorney that same day, and since he has signed an appropriate Business Associate Agreement, he was permitted to view both reports.  He arranged for the public Audit reports to be delivered to Directors Gans and Terschluse on November 12. 

The District’s attorney read the Audit report that contained protected health information and determined that while the Board has the right to look at employees protected health information; it has an obligation to view only the minimum information that is necessary to administer the Plan.  He advised the Board that  if circumstances later dictated that the Board should look at that report after investigation of the facts, then he would recommend the Board do so.

WHAT IS THE PROOF THE UNION ONLY WISHED TO BUY AND PAY FOR AN AUDIT TO BE USED FOR FINANCIAL AND POLITICAL GAIN FOR ITSELF?

The public Audit report with exhibits is over 1000 pages long.  A typical financial audit of the District which encompasses the financial condition of the District’s administration of an annual budget of just under $20M is less than 75 pages long.  The Auditor raised numerous issues, made numerous accusations and drew numerous conclusions in the 1000 page Audit.  The Union’s attorney demanded that the District respond to the report within 12 business days of receipt, despite the fact that the Auditor took nearly four and a half months to produce the Report.  The District responded that it could not possibly produce a thorough, accurate and complete response in such an unreasonably short time frame, but responded that all issues would be investigated and a response given as quickly as possible (it should be noted that the Auditor herself stated in the Audit report that “Since the issues identified both herein and within the audit report were not formally provided to the Board prior to issuance, it is highly recommended that the Board be given ample opportunity to respond to and/or refute the findings that were noted”).  The Union attorney responded by threatening the District with “going public” with the Audit report if the Union deadline was not met. 

WHAT IS THE REAL PURPOSE OF THE UNION’S INTEREST IN THIS AUDIT AND WHY WILL IT COST TAXPAYERS A LOT OF MONEY?

In its initial review of the Audit the District and its attorney determined that there were several issues raised which may have had some validity while others were not supported by the facts and are just plain untrue.  That mattered little to the Union as the following became clear…the timing of the release of the Audit combined with its dramatic claims was nothing more than an attempt by the Union to embarrass, humiliate and strong-arm the Board into negotiating a more lucrative wage and benefit package for the Union.  The Board and the Union were negotiating a new collective bargaining agreement (commonly called an MOU) at the time the Audit was finally provided to the Board.  The first negotiating session, which did not go well for the Union, was held three days before the Audit was released to the District.  The timing is just too coincidental, especially in light of the fact that the Audit report was completed and dated on September 21, 2007.

The Board made a commitment to respond to the Audit as soon as possible and to take corrective action on any and all valid issues raised. 

HOW DID THE AUDITOR AND THE UNION VIOLATE THE PRIVACY RIGHTS OF THOSE COVERED BY THE HEALTH INSURANCE PLAN?

The Board learned that not only did the Auditor violate the terms of the Agreement by producing a second report containing protected health information, but the Auditor provided this private Audit to the Union attorney.The mere fact that he is an attorney does not mean he possesses the right under HIPAA to view protected health information.  The Board has strong reason to believe Union members also either viewed the private Audit or information contained in it was given to Union members and at least one member of the media. 

HOW MUCH MONEY DID THE SELF-FUNDED HEALTH PLAN SAVED TAXPAYERS OVER ITS 5 YEARS OF EXISTENCE?

It should be noted that the self-funded health Plan saved taxpayers between $2m and $2.5M over the five years it was in existence, when comparing its costs to the projected premiums that would have been paid to a commercial health insurance policy such as the District had before the self-funded Plan and now has again.  Benefits were among the best, if not the absolute finest of any employer, fire district or otherwise in St. Louis County with very small out of pocket co-pays for employees and their dependents and with employees paying no share of the premiums for any of the coverages.

DOES THE BOARD PLAN TO RESPOND TO THE ISSUES RAISED IN THE AUDIT EVEN THOUGH IT WAS ONLY PRODUCED FOR THE FINANCIAL AND POLITICAL GAIN OF THE UNION?

In conclusion, the Board acted in good faith in agreeing to permit this Audit, never imagining it would be used for political gain.  The Board is in the process of investigating the issues, accusations and conclusions contained in the Audit (those familiar with third-party audits are likely aware that drawing conclusions in an Audit report about parties’ intentions is quite unusual) and an appropriate and timely response will be given.  Although some citizens have already drawn their own conclusions based on the accusations in the Audit and do not appear to be interested in knowing whether the accusations are based in fact, the Board is sure that most citizens will wait to form their opinions until a response is given by the Board.  But the Board is appalled by the actions of the Auditor, the Union and its attorney which we believe violate the privacy privileges that employees of the Monarch Fire Protection District and their dependents have every right to expect as participants in the Plan.