February 15, 2019

Contact: Sen. Cowles: (608) 266-0484 / Rep. Kerkman: (888) 529-0061

Audit Recommends Improvements to Group Insurance Programs

MADISON– Today, the nonpartisan Legislative Audit Bureau (LAB) released its evaluation of the Administration and Oversight of Group Insurance Programs (report 19-2). This report evaluated the oversight the Group Insurance Board (GIB) provided for group insurance programs the Department of Employee Trust Funds (ETF) administered, including Group Health Insurance, Income Continuation Insurance, Long-term Disability Insurance, and Group Life Insurance programs. These programs, which are available to state employees and certain local government employees, had expenditures that totaled $1.7 billion in calendar year 2017 and were funded primarily by premiums paid by employers, by premiums paid by participants, and by investment income earned on program reserves.

Program reserves help cover the cost of future benefits. LAB found total Group Health Insurance program reserves increased from $90.6 million in December 2015 to $225.5 million in December 2017, or by $134.9 million. In August 2017, GIB approved a plan to spend reserves in order to have reserves at the midpoint of established target ranges after 2021. LAB found that program reserves for the state component of the program totaled $206.6 million as of December 2017, which was $142.4 million more than the midpoint of the target ranges. LAB also found that ETF did not require the program actuary to consider future investment income earned on program reserves when recommending the amount of reserves to spend. In 2017, total investment income was $29.9 million.

“Employee Trust Funds needs to put Group Insurance Board in a much stronger position to make decisions regarding its spending of program reserves. The amount of reserves spent affects the amount of premiums paid by participating government employers who fund these costs with taxpayer money,” said Senator Robert Cowles (R-Green Bay).

LAB found that ETF did not consistently provide adequate administration of contracts with the firms that helped administer group insurance programs, including by not determining the extent to which firms achieved contractually specified performance measure goals. ETF also did not consistently prepare and provide GIB with its written analyses of key programmatic information. In addition, ETF did not indicate in writing to GIB that it had directed the program actuary to recommend in August 2018 spending $49.1 million in program reserves for the state component of the Group Health Insurance program, which was $62.7 million less than specified by the plan approved by GIB in August 2017. Although LAB found ETF has taken steps to improve its administration of the group insurance programs, LAB made numerous recommendations to improve administration and oversight.

“The audit indicates that ETF has considerable opportunity for improvement in its administration of Group Insurance Programs,” said Rep. Samantha Kerkman (R-Salem Lakes). Adequate contract administration is a base-level expectation unaffected by any recent changes or budget directives from the Legislature, as is thorough and timely communication to the GIB. I look forward to further discussion of the audit findings in advance of the budget process.”

LAB surveyed state agencies and local governments, most of which indicated satisfaction with the Group Health Insurance program and the assistance ETF provided them.  LAB also recommends improvements to ETF’s administration and oversight of IT security.

Copies of report 19-2 may be obtained from LAB’s website at or by calling (608) 266-2818. Report concerns related to state government activities to LAB by calling the toll-free hotline at 1‑877‑FRAUD‑17.