NEW ORLEANS — The New Orleans inspector general says the city wasted hundreds of thousands of dollars on employee life insurance over the past eight years.
Among the findings in the report released Tuesday: There were overpayments totaling $250,000 over four years because the city failed to accurately calculate the number of employees eligible for benefits. And two insurance agents who provided no services received $250,000 in commissions.
New Orleans Mayor Mitch Landrieu’s administration said it has taken steps to fix the situation. And the Mayor’s Office said in its five-page response to the report that Hartford Life and Accident has agreed to stop the payments to the agents and pass the savings on to taxpayers.
Overpayments were not the only problem outlined in the report from Inspector General Ed Quatrevaux. Death benefit claims were not filed for six of the 21 city employees who died between Jan. 1, 2009, and Dec. 31, 2010.
The report noted that the coverage has been provided through Hartford since 2003 and that the city renewed the coverage each year without seeking competitive proposals until 2010, the year Landrieu took office.
A comparison of forms prepared by Hartford with city budget documents shows that the city paid for more employees than were actually covered from 2007 to 2011, resulting in more than $330,000 in overpayments.
“Risk Management Division personnel told us that employee counts were based on monthly reports generated by the City’s Information Technology and Innovation Department, using report parameters from the Risk Management Division,” the IG report said. “For several years, these monthly reports included retirees, who were not eligible for coverage under the policy. The overpayments to Hartford were the result of using employee counts that included ineligible retirees.”
The mistake was discovered and corrected in March, and Hartford agreed to credit the city for more than $80,000 in 2011.
Most of the problems covered in the report took place prior to Landrieu taking office May 3, 2010. However, one complication was the apparent destruction of some records in the summer of 2010. In a response to the report, Deputy Mayor and Chief Administrative Officer Andy Kopplin said an affidavit from the employee responsible indicates the destruction was inadvertent.
Kopplin said many of the problems detailed in the report have been dealt with. For example, he said administration of life insurance benefits had been moved from the city Law Department into the Chief Administrative Office as of January — a suggestion that was in the original inspector general report.
As for the agents, Kopplin said Hartford paid commissions to the agents out of premiums paid by the city “as is a typical industry practice for compensation.” He added that in renegotiating terms for the current policy, the carrier agreed to eliminate the commissions and pass the savings on to the city.
Kopplin also said the city plans to include information on benefits in the employee handbook and develop a communication plan to make sure beneficiaries of deceased employees are informed of claim information — a response to the problem of some beneficiaries not filing claims.