Monitoring of Third Party Administrators by HR/Risk is

A Report to the

Jackson County

Board of Commissioners

Commissioners

Doug Breidenthal

Rick Dyer

Colleen Roberts

County Administrator

Danny Jordan

Internal Audit Program

Eric Spivak County Auditor

Tanya Baize Senior Auditor

Nicole Rollins Senior Auditor

Monitoring of Third Party

Administrators by HR/Risk is

Adequate

December 2016

Monitoring of Third Party Administrators by HR/Risk is Adequate i | P a g e

Internal Audit Eric Spivak

County Auditor

10 S. Oakdale, Room 214

Medford, OR 97501

Phone: (541) 774-6021

Fax: (541) 774-6705

[email protected]

To: Board of Commissioners

Re: Audit of Monitoring Third Party Administrators by HR/Risk

Date: December 15, 2016

The enclosed report presents the results of an audit of oversight of third party administrators (TPAs)

by HR/Risk and the use of County financial resources as it pertains to payment of claims and

administrative expenses.

The audit was designed to determine if HR/Risk had designed and implemented appropriate

monitoring and other controls pertaining to the use of TPAs.

We found that HR/Risk has designed and implemented an appropriate system of control over

monitoring of the TPAs and the use of County financial resources as it pertains to payment of claims and

administrative expenses. We did identify some opportunities to further strengthen the control system

which are discussed within the report.

Please feel free to contact me at your convenience if you have any questions or would like

additional information not contained in the report.

C: Audit Committee

Cleve Brooks, HR/Risk Director

Moss Adams, LLP

udit Title ii | P a g e

Monitoring of Third Party

Administrators by HR/Risk

is Adequate

What We Found

Overall we found that HR/Risk has

designed and implemented an

appropriate system of control over

monitoring of the TPAs and the use of

County financial resources as it pertains

to payment of claims and administrative

expenses. We did identify some

opportunities to further strengthen the

control system. Those opportunities and

our resulting recommendations are

provided in the dialog box to the left and

further discussed in the body of the

report.

Why We Did This Audit

We conducted this audit in accordance

with the FY 15-16 Internal Audit Plan.

Our objective was to determine if:

- HR/Risk maintained proper oversight of

TPAs and the use of County financial

resources as it pertains to payment of

claims and administrative expenses.

What We Recommend

We recommend that HR/Risk:

- Give approval to the TPA to pay claims

over $3,000 in a written format.

- Work with relevant parties to

determine if time loss payments during

the three consecutive calendar day wait

period need to be paid and document

decision made.

- Implement a process to ensure the TPA

receives exact information to calculate

time loss payments.

- Periodically review actual medical

invoices for workers’ compensation.

- Perform review of cleared checks to

verify TPA wrote check to the

appropriate party.

- Consider codifying in policy that a

department notify an employee in

writing that no modified duty is

available.

- Obtain input from Counsel and then

consider developing a plan to notify

County departments of an employee

that is available for light duty.

- Add additional information to the

workers’ compensation checklist.

- Work with Counsel to determine what

pay information should be included in

the workers’ compensation calculation.

Audit Results

Monitoring of Third Party Administrators by HR/Risk is Adequate 1 | P a g e

Introduction and Background

Jackson County has three separate self-funded insurance funds: General and

Auto Liability (includes unemployment benefits), Workers’ Compensation, and

Self-Insurance Health Plan for management and confidential employees. The

HR/Risk Program, housed within the County Administration Office (CAO), is

responsible for program management of the three funds. HR/Risk contracts

with third party administrators (TPAs) that administer and process claims and

perform related tasks associated with each of the funds.

The timing of the audit coincided with two changes to personnel in the HR/Risk

Program. The HR/Risk Director had been employed for less than one year at the

time the audit was initiated. Additionally, one of the two Project/Program

Coordinators involved in the day-to-day operations of the Workers’

Compensation fund assumed her duties within 10 months of the start of the

audit, replacing a retiring employee.

We conducted our audit in accordance with Codified Ordinance 218 pertaining

to the County Auditor. This audit was added to the fiscal year 2015-16 Internal

Audit Plan.

We conducted this performance audit in accordance with generally accepted

government auditing standards. These standards require that we plan and

perform the audit to obtain sufficient, appropriate evidence to provide a

reasonable basis for our findings and conclusions based on our audit objectives.

We believe that the evidence obtained provides a reasonable basis for our

findings and conclusions based on our audit objectives.

We did not include employee names or other identifying information when

providing examples of case file review, such as for workers’ compensation. No

other information was withheld from this report because it was considered

confidential or sensitive.

Internal Audit (IA) conducted this audit for the purpose of verifying that HR/Risk

maintains proper oversight of the TPAs and the use of County financial

resources as it pertains to payment of claims and administrative expenses. As

such, the focus of our audit was on determining if HR/Risk has designed and

implemented appropriate monitoring and other controls. Other information

identified during the course of the audit that relates to the general

administration of the self-funded insurance funds is included in the report. We

include this information as the overarching purpose of the audit is to provide

HR/Risk is

Responsible for

Oversight of TPAs

Audit Authority

Compliance with

Government

Auditing

Standards

Confidential or

Sensitive

Information

Audit Objectives


independent and objective analysis, assurance, and information that aids

decision makers in the overall management of County resources and operations.

Overall we found that HR/Risk has designed and implemented an appropriate

system of control over monitoring of the TPAs and the use of County financial

resources as it pertains to payment of claims and administrative expenses. We

did identify some opportunities to further strengthen the control system. Those

opportunities and our resulting recommendations are discussed in the body of

the report.

We reviewed current practices and claims processed during fiscal year 2015-16

and the beginning of 2016-17. Our procedures involved:

Interviewing key personnel

Reviewing State regulations and County policies

Re-performing claims calculations

Analyzing claims decisions and approvals

Testing administrative and claims payments for accuracy, financial

control requirements, and other attributes

Observing a quarterly meeting between the General and Auto Liability

TPA and the County HR/Risk personnel

Criteria consisted of County policies and procedures pertaining to the insurance

funds, such as Policy #8-03 Workers’ Compensation Insurance Coverage;

contracts with the TPAs; and State of Oregon Statutes and Administrative Rules

associated with workers’ compensation.

Audit Conclusion

Audit Scope &

Methodology

Audit Criteria


Chapter 1 – General and Auto Liability

The County maintains a General and Auto Liability fund to ensure the County

has set aside adequate resources to resolve claims against the County and/or

meet any financial obligations stemming from liabilities due to accidents,

property damage or other general liability claims. The fund is financed through

chargebacks to the County’s General and Operating funds and excess coverage

insurance is purchased to limit the County’s risk.

Every other year an actuarial firm conducts a study which is used to ensure the

fund maintains adequate and stable funding levels. A separate bank account

has been established and is used to make claim payments.

The County contracts with a third party claims administrator (TPA). The TPA’s

responsibilities include:

Investigating and, as appropriate, negotiating non-legal claims against

the County, and

Maintaining claims’ files and paying claimants upon instruction by the

County.1

What We Found

Financial Controls

HR/Risk has designed and implemented adequate controls that provide

reasonable assurance that payments are accurate and appropriate. HR/Risk,

County Counsel, and the TPA meet quarterly to discuss open claims against the

County and determine what course of action the County will take and the status

of the claims.

1 For claims of less than $3,000 the TPA has authority to pay the claim without approval from the County.

Overview of

General and Auto

Liability

Financial Controls

Are Appropriate

We Designed Our Audit Tests To

Determine if HR/Risk has developed adequate financial controls that provide reasonable

assurance that claims and administrative fees charged to the County are permissible,

accurate, and appropriate.

Determine if HR/Risk has developed adequate financial controls over the use of the

General and Auto Liability bank account.

Determine that costs are allocated on an appropriate methodology to those departments

requiring additional coverage (e.g., HHS medical malpractice insurance).


Claims Controls

As part of the control structure, payment of claims greater than $3,000 are

approved by the HR/Risk Director. We noted that in some instances approval

was given verbally. We recommend that approvals be in a written format,

which can be something as simple as an email stating, “As discussed, I approve

payment of $X to claimant …. for claim #... against the County.” HR/Risk agreed

with this recommendation and the HR/Risk Director will begin documenting

approval in writing.

In conjunction with the audit, the HR/Risk Director asked us to opine as to

whether it would be appropriate to increase the financial authority of the TPA

to settle claims. Currently, the TPA has authority to settle claims against the

County in instances in which the claim amount is $3,000 or less.

For the five year period July 1, 2011 thru June 30, 2016 there were five (5)

claims settled for amounts between $3,001 and $5,000. Given the small

number of claims that settle within these amounts we see minimal risk in

increasing the TPA’s authority to $5,000. Moreover, when observing a quarterly

meeting between the TPA and County we noted that all open cases were

discussed, even those within the authority limits of the TPA to settle without

County approval.

Administrative Fee Controls

We tested a sample of transactions and found payments to the TPA agreed with

contractual rates, were adequately documented, appropriately authorized and

were paid in a timely manner.

Bank Account Controls

Controls in place over the bank account are appropriate. Reconciliations are

occurring and approval for account replenishment is happening per County

policy.

Chargebacks

County departments that require additional insurance coverage (e.g., HHS

medical malpractice insurance) are directly charged the costs associated with

the additional insurance coverage.

There were some

instances where

approval given to

the TPA to pay a

claim was not

written

Administrative

Fee Controls Are

Appropriate

Bank Account

Controls Are

Appropriate

Financial

Authority Level of

TPA Can Be

Increased

Method used to

Charge

Departments is

Appropriate


Chapter 2 – Workers’ Compensation

State law provides that an employer must compensate an employee for the

resulting loss of income (referred to as time loss) if the employee is temporarily

unable to work or can only work reduced hours due to an on-the job

compensable injury and/or illness. The law is designed to ensure that while on

workers’ compensation status the employee receives compensation in an

amount equal to 66 2/3 percent of the employee’s pay. The employer is also

required to pay for medical expenses relating to the compensable on-the-job

injury or illness.

The County maintains the Workers’ Compensation fund and also purchases

excess coverage insurance to ensure monies are available to make required

workers’ compensation payments. The fund is financed through chargebacks to

the County’s General and Operating funds.


fund maintains adequate and stable funding levels. A separate bank account

has been established and is used to make claim payments.



Reviewing, and investigating as necessary, claims to determine if the

claim is for a work-related injury or illness.

Processing payments for medical, time loss, and other expenses relating

to the claim.

Overview of

Workers’

Compensation


Determine if “time loss payments” were calculated in compliance with State regulations

governing workers’ compensation.

Determine if HR/Risk has developed adequate financial controls that provide reasonable

assurance that claims and administrative fees charged to the County are permissible,

accurate, and appropriate.

Determine if HR/Risk has developed adequate financial controls over the use of the

Workers’ Compensation bank account.


What We Found

Time Loss Payments – Three Consecutive Calendar Day Wait Period

There is a question as to whether the TPA’s practice as it relates to the “three

consecutive calendar day wait period” exceeds the minimum requirements

established by Oregon Revised Statute (ORS) 656.210. We stress that there is

no risk of non-compliance from the TPA’s approach with State statute, as it

appears to exceed the minimum requirements. There is, however, the risk of

expending funds unnecessarily but the totality of these funds can be considered

limited.

The question pertains to whether case law or State statute establishes payment

criteria for the three consecutive calendar day wait period. We recommend

that HR/Risk work with relevant parties, including County Counsel, County

Administration and the TPA, to determine the appropriate requirements to be

used in determining if an employee is entitled to time loss payments during the

three consecutive calendar day wait period.

ORS 656.210 establishes that there are some conditions under which an

employee is entitled to time loss payments for the three consecutive calendar

days but that under other conditions the employee is not entitled to these

payments. The statute states:

No disability payment is recoverable for temporary total or

partial disability suffered during the first three calendar days

after the worker leaves work or loses wages as a result of the

compensable injury unless the worker is totally disabled after

the injury and the total disability continues for a period of 14

consecutive days or unless the worker is admitted as an

inpatient to a hospital within 14 days of the first onset of total

disability. If the worker leaves work or loses wages on the day

of the injury due to the injury, that day shall be considered the

first day of the three-day period.

Source: ORS 656.210 (3) (Boldface/underlining added)

Guidance from the Department of Consumer and Business Services addresses

the differing requirements between total and temporary/partial disability as

expressed in the statute.

We did not find

any risk of non-

compliance with

State statute,

however,

management

should evaluate if

the direction

taken by the TPA

is the direction

management

wants to take


The guidance states:

You will not receive time-loss benefits for the three-day waiting

period if you are released to light duty within the first 14 days of

disability, even if your employer does not have any work within

your light-duty restrictions.2

In our review of nine case files we found three instances in which the TPA made

payments for the three consecutive calendar day wait period, though the

employee had been released to light duty. In each instance, the employee

received medical clearance to work “light duty” but the department did not

have appropriate light duty work available. Additionally, we found one case in

which the employee worked part time after the date of injury but it appears the

three consecutive calendar day wait period was calculated based on the date of

injury and not the date at which the employee incurred lost wages and/or loss

of time. Per our understanding of the statute and guidance quoted above, the

County was not required to make payment for the three consecutive calendar

day wait period for any of the four cases.

When asked to explain why payments were made, the TPA expressed that its

approach is consistent with case law and that the approach decreases the

likelihood of being sued and/or found to be non-compliant with workers’

compensation regulations.

Each of the four cases involved additional details but those details appear to be

extraneous to the three consecutive calendar day criteria. These case details

may or may not have relevance to the TPA’s statement that it makes its

decisions based on case law. A summary of the cases are provided below.

File One. The employee was injured on Monday June 6th. Per County

payroll records the employee worked 6 hours that day and had 4 hours

of sick leave. The employee received authorization from a medical

provider to be released to work with modified duties on June 6th. The

same day the department notified the employee that the department

did not have work within the modified duty restrictions for the

employee. The employee received time loss workers’ compensation

payments for June 6th, 7th and 8th while simultaneously receiving sick pay

for those same days. Per our understanding of the law, June 6th, 7th, and

8th would have been considered the three consecutive day wait period,

2 https://www.oregon.gov/DCBS/OIW/Pages/time-loss.aspx

https://www.oregon.gov/DCBS/OIW/Pages/time-loss.aspx


as such no time loss payment was necessary regardless of whether or

not sick time pay was provided.

File Two. The employee was injured at work on Saturday February 13th

and received a modified duty release to work from a medical provider

on Sunday February 14th (a non-regular work day). Per discussion with

HR/Risk, the department did not have modified duty work available for

the employee. Per County payroll records, the employee had no time

loss or wage loss on Saturday February 13th and Monday February 15th

was a holiday for which the employee received pay for that day. The

employee received workers’ compensation time loss payments for

February 16th, 17th, and 18th. Per our understanding of the law, the

County was not required to pay time loss payments for these three

consecutive days, since the employee was released to work by a

medical provider.

File Three. The employee was injured on Monday August 24th. County

payroll records document that the employee was paid for a full day’s

work on the 24th but case file notes indicate the employee might have

left work to seek medical attention. On Monday August 24th the

employee received authorization from a medical provider to be released

to work with modified duties. Per discussion with HR/Risk, the

department did not have modified duty work available for the

employee. The employee received workers’ compensation time loss

payments for August 24th, 25th, and 26th. Per our understanding of the

law, the County was not required to pay time loss payments for these

three consecutive days, since the employee was released to work by a

medical provider.

File Four. The employee was injured on a Tuesday August 25th but

worked the remainder of the week. The employee also worked on

Monday of the following week but on Tuesday September 1st the

employee received authorization from a medical provider to be released

to work with modified duties to work only 4 hours per day. The

employee worked 4 hours per day and workers’ compensation and sick

leave was received to compensate for the remaining 4 hours per day for

September 1st till October 8th then the employee was released to full

duty status by a medical provider on October 9th. Per our understanding

of the case, the first day that the employee experienced lost wages

and/or loss of time was September 1st. Given the three consecutive

calendar day rule, our analysis indicates the County was not required to

pay time loss payments until September 4th, since pay is not required

during the three consecutive calendar day wait period.


As discussed above, the practice does not violate any State statute or other

requirement since the County is choosing to pay the employee potentially more

than required by law. Nonetheless, we recommend that the practice be

discussed among the relevant parties, including County Counsel, County

Administration and the TPA, to ensure the practice represents the direction the

County wishes to take. Regardless of which direction is selected. The direction

should be documented and used to produce guidelines for the purpose of

ensuring future decisions are consistent with the direction chosen.

Time Loss Payments – Calculation Process

The current time loss calculation process can result in a slight overpayment of

benefits. We found three instances when employees were overpaid total

amounts ranging from $9 to $400. These small discrepancies occurred because

the TPA received too much or too little pay period data (each pay period

represents two weeks) and then used that data to calculate the weekly pay

rates for time loss payments. Audit discussed this with HR/Risk and HR/Risk will

implement a simple and easy process change that will result in the TPA receiving

salary data for the exact time period to be used in the calculation.

Financial Controls

Appropriate financial controls are in place. The County has policies and

procedures in place over what information is needed by the department and

employee when a workers’ compensation claim is made. HR/Risk reviews the

open claims on a weekly basis to ensure the departments are gathering all

appropriate documents to be provided to the TPA. As such, HR/Risk is familiar

with what claims are currently being paid on and what the status of those claims

are.

At the beginning of the audit, HR/Risk brought up with us that their practice had

not been to review actual medical invoices to ensure that the TPA is paying an

appropriate amount. Therefore, as part of the audit HR/Risk and Internal Audit

selected and reviewed medical invoices for nine case files. There were no issues

noted. We recommend that HR/Risk periodically review a few medical invoices,

possibly during the reconciliation process, to ensure payments are for legitimate

purposes and were paid at appropriate amounts.

HR/Risk Will

Implement a

Process Change to

Prevent Payment

Calculation Errors

Financial Controls

Are Appropriate


Bank Account Controls

One improvement can be made to increase control over the bank account.

Reconciliation of the workers’ compensation bank account has been occurring,

however, the process has not included a review of cleared checks to verify that

checks were made out to the appropriate party by the TPA. We recommend

HR/Risk include a review of cleared checks when performing the bank account

reconciliation. Check reviews are considered a detective control that may

identify check fraud, though there is no guarantee that a check review would

identify fraud if it were occurring.

Other Observations

In performing the audit we also identified the following conditions relating to

the workers’ compensation program. Though not specific to TPAs, we include

this information as it may be helpful to those charged with administration and

oversight of HR/Risk.

One Form was not Complete. In reviewing a sample of nine case files,

we did find one instance in which the file contained an incomplete

Report of job Injury or Illness form (801 form). The operating

department had not completed the employer’s section of the form and

it was not noticed during review. However, there is no evidence to

indicate this one instance represents a systemic problem. We attribute

it to the occasional human error that is bound to occur.

Policy Modification. Policy does not require that departments provide

written notification to employees when an employee received modified

duty medical authorization but there is no light duty (modified) work

available and the department will re-evaluate the situation after the

employee’s next doctor’s appointment. We found that at least one

department does provide this notification. HR/Risk may want to

consider whether the practice of providing written notification should

be codified within policy.

Light Duty Status (Modified Duty). When an employee is given

authorization to return to work on light duty (modified) status but

his/her department does not have a need for light duty work, then

he/she is put on workers’ compensation time loss status. There is no

mechanism in place to determine if any other departments are currently

employing (or plan to hire) extra help employees for work that could be

performed by a person on light duty status. We note that in some

situations it would not make fiscal sense to utilize a person on light duty

status for work that can be performed at a lower pay rate, but there

Bank Account

Controls Are

Appropriate

One Improvement

Can be Made


may be some instances in which it would. Therefore, we recommend

that HR/Risk obtain input from County Counsel and then consider

developing a communication plan to alert departments when a person

is available for light duty and what the cost of utilizing that person

would be.

Checklist. The checklist used by HR/Risk as a tool for ensuring that all

necessary procedures are performed and documents obtained for

workers’ compensation can be enhanced by adding two items to it.

Specifically:

o The checklist could be enhanced by adding a reminder to ensure

that certain OSHA-related forms that are completed and filed in

those instances in which a person is exposed to bodily fluids.

o The checklist could be enhanced by adding a reminder to ensure

subsequent required medical evaluations are documented.

County policy requires employees on workers’ compensation

status to be re-evaluated by a doctor every 14 days. The checklist

provides a reminder to HR/Risk to obtain documentation of the

initial medical statement but the checklist does not remind

HR/Risk to verify that the subsequent evaluations are occurring

every 14 days as required.

Vacation Buy-out. Vacation buy-outs are included in wages when

calculating workers’ compensation in an amount that equals 66 2/3

percent of the employee’s average weekly wage. We question whether

vacation buy-outs should be considered in this calculation. Vacation

buy-outs represent compensation above and beyond hourly

compensation of the standard 2,080 hours per year but should not be

viewed as being comparable to overtime pay.

Oregon Administrative Rule (OAR) 436-060-0025 addresses items that

should and should not be included as wages but it does not address

vacation buy-outs. We noted that OAR 436-060-0025 states “End-of-

the-year and other one-time bonuses paid at the employer’s discretion

shall not be included in the calculation of compensation.” The County

established within policy allowing vacation buy-outs when certain

conditions are met and the buy-out is in addition to the agreed-upon

annual wage of the employee. For these reasons, we do not think it

should be included in the wage calculation.

We attempted to obtain clarification from the State as to whether

vacation buy-out should be included in the calculation. The State


representative we spoke with was not familiar with the term “vacation

buy-out” and did not seem to understand the distinction between

vacation (as paid time off that represents a component of the standard

2,080 work year) and vacation buy-out (as a payment that exceeds

payment for a standard 2,080 work year).

We recommend that HR/Risk work with County Counsel to review the

relevant statutes and regulations and establish guidance on what pay

information should be included in the calculation of weekly wage. The

County may find that vacation buy-out revenue should be included

when calculating weekly wages for the purpose of workers’

compensation payments or it may find that the vacation buy-outs need

not be included in the calculation.


Chapter 3 – Self-Insured Management & Confidential Employee

Health Insurance Plan

The County maintains a self-insured health insurance plan for management &

confidential employees. For employees represented by a bargaining unit, the

County provides a monthly health insurance stipend and the bargaining units

obtain and manage health insurance coverage.


fund maintains adequate and stable funding levels. Excess insurance is

purchased to limit the risk exposure stemming from large dollar medical needs.



Receiving and processing claims in accordance with the insurance

coverage limitations established by the insurance plan.

What We Found

Administrative Fee Controls

The administrative fees paid to the TPA are in accordance with contract

stipulations and were appropriately authorized.

Claim Invoice Controls

The amount invoiced by the TPA agree with the amount paid as recorded in the

County’s financial records and the bank statement. Claim invoice payments

were appropriately authorized.

Overview Self-

Funded Health

Insurance Plan


Determine if the program has developed adequate financial controls that provide

reasonable assurance that claims and administrative fees charged to the County are

permissible, accurate, and appropriate.

Administrative

Fee Controls Are

Appropriate

Claim Invoice

Controls Are

Appropriate


Medical Claims Auditor

The County does not engage services of a medical claims auditor to provide

assurance that the TPA is adjudicating (paying) claims in the least cost manner

and in accordance with the plan. Medical claims audits are conducted to

identify the instances of duplicate billing, wrong or missing discounts, mistakes

in member eligibility, incorrect plan setup, and other problems.

HR/Risk informed us that the County’s broker has recommended that the

County not audit its TPA because it could cause negative relations between the

two parties. We offer no opinion regarding whether the County should or

should not engage in a medical claims audit. We include this discussion in the

audit report for informational purposes only. We do note that the County has

its own clinic which helps reduce the number of claims the TPA is processing for

basic medical services and pharmaceuticals and therefore the risk of

unnecessary claim payment is less than if the County did not have its own clinic.


Chapter 4 – Unemployment Claims

The payment of unemployment claims is handled under the General and Auto

Liability fund, however, it is discussed separately within this report since the

County contracts with a separate TPA to help handle unemployment claims

administration.

The County contracts with a third party claims administrator (TPA) that provides

the following services relating to unemployment claims:

Acts as an intermediary between the County and the Oregon

Department of Employment.

Coordinates with HR/Risk in gathering relevant facts in preparation for

appeals.

What We Found

Contracting with TPA

At the beginning of the audit, the question of performing the unemployment

claim processing in house by HR/Risk was brought up. Currently the County

pays the TPA an inconsequential amount ($3,000) per year to help with the

processing of unemployment claims. The level of work performed by the TPA

did not seem to be significant, however, this is reflective in the contract

amount. Nevertheless, HR/Risk staff expressed that the filing of paperwork, the

monitoring of deadlines, knowledge of laws, and the qualitative attributes that

the TPA provides are meaningful to the department.

We do not have an opinion whether HR/Risk should do unemployment claim

processing in house or continue to contract with the TPA that is a decision that

management should make.

Overview of

Unemployment

Claims


Determine if HR/Risk is receiving a benefit from contracting with a TPA to handle

unemployment claims.

Determine if the TPA is helping represent the County’s position when a claim for

unemployment might be invalid.

Question was

Posed if

Unemployment

Claim Processing

should be Done in

House


Review of Claims

We reviewed 16 unemployment claims and we agreed with the outcomes for all

16 claims. Therefore, we believe that the TPA is helping represent the County’s

position appropriately.

Other Observations

Method Chosen to Pay Unemployment Claims. State law allows a local

government to either choose to pay an unemployment tax or reimburse

the State for actual unemployment claims paid by the State on behalf of

the County. The County chooses to use the direct reimbursement

method. For the audit, the TPA put together a comparison of the two

methods. Based on review of the comparison and how much the

County has reimbursed to the State for last six years, the direct

reimbursement method is the best method for providing the County

with a cost savings.

Quarterly Unemployment Claim Reimbursements. We agreed the

TPAs quarterly report to the State invoice, which agreed to the amount

recorded as paid in the County’s financial records. The quarterly

payments reviewed were also appropriately authorized.


Chapter 5 – Summary of Recommendations

We recommend the following:

Chapter 1 – General and Auto Liability

HR/Risk give the TPA approval to pay claims over $3,000 in a written format.

Chapter 2 – Workers’ Compensation

HR/Risk work with County Counsel, County Administration and the TPA to determine the

appropriate requirements to be used in determining if an employee is entitled to time loss

payments during the three consecutive calendar day wait period and document results.

HR/Risk implement a process change that will result in the TPA receiving salary data for the

exact time period to be used to calculate workers’ compensation benefits.

HR/Risk periodically review a few medical invoices, possibly during the reconciliation process, to

ensure payments are for legitimate purposes and were paid at appropriate amounts.

HR/Risk include a review of cleared checks when performing the bank account reconciliation to

verify that the TPA wrote the check to the appropriate party.

HR/Risk consider codifying in policy the requirement that a department notify an employee in

writing that modified duty (light duty) is not available.

HR/Risk obtain input from County Counsel and then consider developing a communication plan

to alert departments when an employee is available for light duty and what the cost of utilizing

that employee would be.

HR/Risk add additional information to the workers’ compensation checklist to help ensure that

all documentation is obtained as necessary.

HR/Risk work with County Counsel to review relevant statutes and regulations and establish

guidance on what pay information should be included in the calculation of weekly wage for

workers’ compensation.

Chapter 3 – Self-Insured Health Insurance

No recommendations made.

Chapter 4 – Unemployment Claims

No recommendations made.


Chapter 6 – Management Response


Jackson County Eric Spivak, County Auditor

Internal Audit Program 541-774-6021

10 S. Oakdale, Room 307 [email protected]

Medford, Oregon 97501

Please Report Fraud, Waste, Abuse Other Recent Audit Reports:

1-844-237-9697 Compliance Audit of Federal Awards

www.jacksoncounty.ethicspoint.com

This report is intended to promote the best possible management of public

resources. This and other audit reports produced by the Internal Audit Program are

available for viewing on the web at:

http://jacksoncountyor.org/Departments/Internal-Audit/Performance-Audit-

Reports. Printed copies can be obtained by contacting the Internal Audit Program.

mailto:[email protected]

http://jacksoncountyor.org/Departments/Internal-Audit/Performance-Audit-Reports?EntryId=42014

http://www.jacksoncounty.ethicspoint.com/

http://jacksoncountyor.org/Departments/Internal-Audit/Performance-Audit-Reports

http://jacksoncountyor.org/Departments/Internal-Audit/Performance-Audit-Reports

Documents

Monitoring of Third Party Administrators by HR/Risk is