Auditor general finds province pays millions to finance employee health and dental benefit plan deficits23 June 2022
FREDERICTON (GNB) – In his report tabled today at the legislative assembly, auditor general Paul Martin highlighted issues with the health and dental benefit plan that serves over 30,000 eligible employees in the government and various entities.
The report found, in 2017, the provincial government made a lump-sum payment of $8.8 million to finance the deficit at June 2016. The health component of the plan has been in a deficit position since 2016, with a cumulative deficit total of $6.9 million recorded in June 2021.
“The concern with outstanding deficits is that there is accumulated interest that increases fees on the debt, without a strategy to cover costs within the plan itself,” said Martin. “The interest then becomes additional cost that could have been avoided by settling the deficit in full, or by developing an effective strategy to stabilize costs.”
Martin said the audit uncovered a complex operating structure combined with poor documentation of roles and responsibilities.
“There is cause for concern in terms of accountability as, over time, the structure has become more complex with multiple parties involved in the management and administration of the plan, but these changes have not been properly documented. It becomes challenging to know who is accountable for what within the structure,” said Martin.
The report noted that the claims administrator has been repeatedly awarded the contract since the 1960s. In addition, Finance and Treasury Board has not evaluated the structure of the provider arrangement in over 30 years.
The report also found that the Department of Finance and Treasury Board has not evaluated the plan administration costs paid to Vestcor to ensure these costs are in line with industry standards and provide best value for money to the plan. Further, the report notes that the contract with Vestcor is drafted in a way that makes it difficult to identify which of Vestcor’s activities and associated costs apply specifically to the health and dental benefit plan, as opposed to the other benefit plans for which Vestcor provides administration services to the province.
The report noted that the Department of Finance and Treasury Board has not developed a process to manage risks, and highlighted the issue of weak contract management, as third-party performance is seldom evaluated against targets.
The auditor general makes 14 recommendations in his report to address issues related to managing costs and risk of both plan members and taxpayers.
Full details are available online.