Toronto councillors question benefits loopholes flagged by auditor general

Toronto city councillors are asking questions after the municipality’s auditor general raised red flags about several questionable benefits claims, including the case of an employee who submitted claims for 66 pairs of orthotics and orthopedic shoes between 2013 and 2015.

“We’re supposed to believe that a child needed 66 pairs of orthotics in a year?” asked Coun. Josh Matlow during an audit committee meeting on Friday that dealt with a new report looking at extended health claims. “Why was that loophole allowed to remain for so long? It doesn’t seem plausible to me that anyone would need 66 pairs, unless you own a wide collection of shoes, and that’s another issue.”

The city’s plan includes unlimited orthotic benefits for dependants under the age of 19 and each adult could previously claim up to three pairs of orthotics a year, a number that has since been reduced to a limit of one pair every two years. In total, the plan paid out $31,500 for claims by the employee and four family members during those three years. The claims included 60 pairs for the three children and six between the two parents.

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City management and auditors have agreed on the need for limits in areas such as orthotics coverage for dependants and unlimited physiotherapy for some employee groups but they noted the change would have to wait until the next round of collective bargaining. In total, management agreed to all 16 cost-saving recommendations from the report. They included considering the reasonableness of physiotherapy benefits; looking at unifying plans, as there are several under separate collective agreements; and ensuring the plan administrators’ adjudication process includes an assessment of age appropriateness for health claims.

In 2015, the city spent $229 million on benefits, including $56 million on non-pharmaceutical extended health coverage. This is the second phase of the auditor general’s look at the city’s benefits plans. The first phase looked at long-term disability and drug benefits. The third phase about dental benefits is on hold.

While the report suggested the lack of limits for coverage in certain categories likely increased the frequency of fraudulent claims, it also flagged concerns with the city’s former insurer. The insurer, Manulife, declined to share its adjudication process for the city’s claims, but its standard approach involves a prepayment audit and post-payment verification, the report noted.

Manulife told the auditor it didn’t “commit to a full provider registry” because the city’s request for proposals hadn’t specified it was necessary. The lack of information meant the auditors could only review a small sample of claim files.

Suppose a provider “was found out to be committing fraud with a city employee, submitting false claims,” said assistant auditor Jane Ying at the audit committee meeting. “Under the current system, [with] the lack of ability to track provider information, neither Manulife nor the city has the capacity to go back through previously approved claims to find out how many people or which employees actually used this provider.”

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The insurer performed prepayment audits on several hospital and dental claims, the audit report noted. In 2015, 709 hospital claim audits resulted in 341 declined claims, saving the city $537,168. Also in 2015, it performed 460 dental claim audits, which resulted in 279 declined claims, saving $109,485.

“Based on the high decline rates for the hospital and dental claims that were subject to prepayment audits, it is reasonable to say that had Manulife applied its standard prepayment audit to the city’s extended health claims, a considerable number of claims from suspicious providers might have been declined,” noted auditor general Beverly Romeo-Beehler in the report.

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Asked about the concerns raised by the city, Manulife issued a statement last week: “As a plan administrator for many Canadian employers, it has always been important to us that we adhere to the highest standards in the industry. We administer benefits plans based on contract agreements and our client’s plan design decisions. We also encourage and support employers to design plans which incorporate the health needs of their employees, as well as balance rigorous cost and fraud controls.”

The report also flagged overpayment and issues of high utilization, including:

  • $3,700 in orthotics benefits for seven members whose plans didn’t include such coverage;
  • $9,000 in orthotics benefits for 20 members who claimed beyond their plan limits;
  • $4,000 in compression stockings benefits for four members who claimed beyond their plan limits; and
  • $58,000 in overpayments for errors administering massage, chiropractic and other treatments.

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