At least 27,000 individuals, including ex-spouses of government workers, carried NYSHIP cards in their wallets–although they did not qualify for taxpayer-financed health insurance.

That number will grow this fall if government employees fail to verify the eligibity status of another 45,000 “dependents”.

Among those already dropped from NYSHIP rolls are adult children, ex-spouses and former step-children of state and local government employees. Some of the “dependents” have died. According to the Buffalo News:

One of the more extreme examples found in the audit are the 85 employees who had between seven and 12 dependents apiece, each one of those dependents receiving benefits they didn’t deserve.

The two-year eligibility audit of 1.2 million people covered by New York State Health Insurance Plan (NYSHIP) is being conducted by Budco Health Service Solutions. The Michigan-based company has conducted similar audits of AT&T, Boeing and other large corporations.

Budco’s 2008 contract with the state Department of Civil Service guaranteed savings of three times the amount of the $4.3 million contract. With preliminary savings estimated at $25 million a year, Budco has surpassed that goal.

“New York can not afford to spend taxpayer dollars on insurance for individuals that are no longer, or were never eligible to participate in the State’s plan,” said Assemblyman Sam Hoyt, a Buffalo Democrat, was instrumental in persuading the state to hire an outside firm to conduct the audit.

The two-year review began with a 60-day amnesty period, during which time enrollees will be able to correct and update the status of dependents eligible for family coverage–without penalty.

“People also could fess up now,” a state official said in August 2008. “If enrollees are later audited and found to be falsely claiming a dependent, they could face disciplinary, civil or criminal action. That could require enrollees to reimburse the state retroactively for the cost of insuring any ‘ineligible dependents’.”

Governments, as well as private-sector employers, struggle to remove ineligible “dependents” from health insurance coverage–and to keep track of dead employees and dependents. The City of Buffalo discovered it paid $2 million to provide health insurance to 152 deceased employees.

Buffalo Mayor Byron Brown recently fired Human Resources Director Karla Thomas more than eight months after ordering her to correct the problem.

Since NYSHIP does not cover City of Buffalo employees, it is not included in the Budco audit. A company official estimates 12 to 15 percent of Buffalo “dependents” are not eligible for city health insurance, the Buffalo News reports.

Originally Published: NY Public Payroll Watch, September 9, 2010