Earlier this year, letters to some government workers with CalPERS medical insurance struck a gently threatening tone. Here's our distilled version:
Dear member with dependents covered by one of our medical plans,
We know you want to help us keep medical costs down. So if your employer-provided insurance is covering someone it shouldn't be – an ex-spouse, your grandkids, a child over age 26, your dog, whomever – step up now. Get them off your plan.
Otherwise, we'll hunt you down and dump your nephew, hamster, second cousin or other ineligible whomever from the rolls.
Oh, and did you know that you might have to pay for all the premiums and medical costs your employer covered for your ineligible whomever?
So think about it. Do the right thing, and we'll forget that the whole mess ever happened, no questions asked.
The three-month amnesty period ended June 30, and the results are in: Members voluntarily removed about 6,700 ineligible dependents from their medical plans.
CalPERS provides medical coverage for 1.3 million members whose employers contract with the fund to administer benefits. The fund spent about $19 million per day last year on medical costs, making it the second-largest health insurance provider behind the federal government.
The tough-love March 26 letter went to about 390,000 employees and retirees with at least one dependent covered through a CalPERS health plan. The fund has estimated that roughly 29,000 dependents on the rolls shouldn't be. Get rid of their premiums and medical bills, officials estimated, and you cut at least $40 million in annual costs.
Experts say that most of the time, ineligible dependents wind up on medical insurance rolls because of honest errors or ignorance of the rules.
In some instances, children aren't dropped when they should be, now at age 26. Employees may wrongly think a former spouse or ex-stepchildren qualify as dependents if a court orders they must receive medical coverage. Domestic partners aren't eligible, either.
Of course, some employees know the rules and break them anyway.
While the law allows administrators and employers to retroactively recover costs for covering ineligible dependents, it doesn't happen often. Proving fraud requires proving intent, not merely ignorance, which is a high bar. Retracing expense records adds another hurdle. And employees caught fraudulently enrolling unqualified dependents don't lose their own benefits.
CalPERS, however, has said it could seek prosecution under a statute making it a misdemeanor to obtain a benefit by making a false statement. A sentence could include restitution.
It's too late for fraudsters to have an attack of conscience. A private firm has started vetting every dependent on the books. Don't be surprised if another 22,000 or so problems crop up.