City Employees, Retirees Caught Abusing Health Care Plan

A consulting firm hired by the city of Evanston recently found that there were 14 employees and three retired employees abusing the city’s health care plan by listing nonqualified dependents, including grandchildren and ex-spouses, according to city staff.

Gallagher Benefit Services audited the 863 city staff and retirees enrolled in the health care plan to look for ineligible dependents earlier this year, according to Marty Lyons, assistant city manager and chief financial officer. The audit cost just under $20,000, Lyons said, and is expected to save the city nearly $100,000 per year.

"We think it was a very successful program and we will have a much more accountable health plan because of it," he said.

Lyons said the city conducted the audit at the suggestion of consultants from Gallagher, who told city officials they could expect to find roughly three percent of health care plan members listing ineligible dependents, translating to a cost savings of three percent of the city’s annual health care budget. The actual number of people listing ineligible dependents turned out to be approximately 2.3 percent of the total number of city staff and retirees enrolled in the plan, according to Lyons. 

City officials began the process by offering employees and retirees an amnesty period, during which they could come forward to offer documentation for dependents without penalty. Among the city’s 715 enrolled health care members, some 75 people had not turned in their documentation, according to Lyons, and one person came forward during the amnesty period.

Once the amnesty period was over, Gallagher spent two months checking records before identifying 23 ineligible dependents who were drawing benefits from the city’s health care plan, according to Lyons.

Those dependents had been covered by the city for as long as 11 years, and for as little as three months, Lyons said. They included ex-spouses, foster children and grandchildren, often with the same last name as the covered employee.

“The lack of red flags, if you will, is one way people slip through,” Lyons said. “If somebody gets divorced and they don’t tell us they got divorced, we don’t know.” 

One employee had listed her grandchildren for the past seven years, according to Lyons. He said that employees had not always been required to submit birth certificates to the city’s human resources department as proof that someone was an eligible dependent, although they are now. 

In at least two cases, employees told auditors that the city’s previous human resources division manager had told them they could list dependents who were actually ineligible. The city had no records of such a conversation, so those two employees were not disciplined, Lyons said. 

The city’s previous human resources division manager, Judith Witt, retired in 2007, according to city documents. She was replaced by Cheryl Chukwu.

The findings of the city’s audit came up at Monday night’s council meeting, when Evanston resident Junad Rizki spoke about the issue during the portion of the meeting devoted to public comment. Rizki said he found out about the audit when city staff members discussed cost savings projected for the fiscal year 2013 budget during a public meeting held earlier this fall.

“What is troubling to me is we still have thieves on staff who are basically handling our tax dollars,” he said. “This casts a shadow of doubt over every city employee, including elected officials, who for years have taken medical benefits.”

But Lyons said that none of the city’s elected officials — including aldermen, the mayor and the city clerk — had listed unqualified dependents. As for the list of people who had violated the plan, Lyons said in an e-mail that "the city is not releasing employee names."

According to Lyons, seven of the people who were caught listing nonqualified dependents were disciplined. City officials kicked one retired employee off the health care plan entirely after they found out that he had been listing his ex-spouse as a dependent. 

“They actually admitted that they knew what they were doing,” Lyons said. 

To prevent similar problems in the future, he said the city will likely do more audits every few years and will tighten up its controls on documentation when members enroll dependents. 

“I think our employees have received a very clear message,” he said.  

Editor's Note: A previous version of this story contained incorrect information about a a hypothetical ineligible dependent. We sincerely regret the error.