City still risks overspending for healthcare benefits

City still risks overspending for healthcare benefits

Published on October 09, 2025

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DENVER - Without the recommended improvements to the city's self-funded health plan review process, the Office of Human Resources still risks spending taxpayer money on ineligible healthcare benefits, according to a new follow-up audit report from Denver Auditor Timothy M. O'Brien, CPA.

We found the city still needs stronger and more formalized policies and procedures - as well as strategic staff training - to prevent ineligible city employees or ineligible dependents from improperly receiving benefits. Also, UnitedHealthcare is refusing to share cost data that would allow Human Resources to determine whether the city is overpaying for services provided.

"The city has a responsibility to provide benefits to eligible employees without also paying for services that people are not eligible to receive," Auditor O'Brien said. "Better oversight processes will help the city save money."

Human Resources offers health insurance to city employees through two carriers: Kaiser Permanente and UnitedHealthcare. Since 2020, UnitedHealthcare's health insurance has been a self-funded plan - meaning the city acts as its own insurer and is responsible for processing and paying all claims for medical care.

Our original 2024 audit found risks involving policies and procedures, oversight, and contract monitoring within the office. Human Resources fully implemented one recommendation made in the original audit report. However, the office only partially implemented three others, and it has not taken steps to address the risks three other recommendations had sought to resolve.

$2 million saved after required audit

Our initial audit found Human Resources was not following a city ordinance that requires external audits every five years to ensure employees' dependents are eligible to be covered by the city's health insurance plans. After our recommendation, the office completed the required audit. Of 13,397 verified dependents, 614 were ineligible. Removing ineligible dependents from coverage saved the city more than $2 million, or $3,500 per dependent.

"City agencies should comply with city ordinances, but sometimes it takes public accountability through our audits for change to occur," said Auditor O'Brien. "The importance of our work is all the more evident when our audits guide agencies to find savings. This is especially critical as the city's budget outlook is bleak."

Dependent eligibility review

In our original audit we recommended the office develop, document, and implement procedures to regularly review the eligibility of employees' dependents. Human Resources lacked effective oversight processes to ensure only eligible dependents of city employees received city-funded health insurance benefits, as city ordinance requires. The office made significant progress in addressing the recommendation, but policies and procedures were either not created, not comprehensive, or are still in draft form.

Human Resources previously found four dependents and three employees that were enrolled in more than one health plan. Although this issue was resolved, the steps the office took to remedy it still need to be documented in policies and procedures to ensure an eligibility review is regularly completed.

"Once the office improves its monitoring of ineligible healthcare recipients and develops a documented process for preventing improper benefit enrollment, we will be more confident taxpayer dollars aren't wasted," Auditor O'Brien said.

Medical claims audit

Although not required, Human Resources' contract with UnitedHealthcare allows the city to hire an external auditor to perform a medical claims audit on an annual basis. The external audit allows the office to effectively monitor UnitedHealthcare's contractual duties by assessing whether claims are being processed according to the terms of the health plan. Also, this external audit could help uncover other causes of process errors.

We recommended the office assess whether it should pursue a medical claims audit. While the office did request proposals from third-party vendors for an audit, it has not completed the recommended needs assessment. Meanwhile, the office says UnitedHealthcare is refusing to provide medical claims and hospital cost data that is vital for the office to perform a comparison analysis. This further indicates a risk warranting a medical claims audit.

"The city's healthcare plan is self-funded, meaning the city assumes the financial risk of paying health claims directly. And yet, UnitedHealthcare is refusing to share cost information," Auditor O'Brien said. "Human Resources cannot know whether the city is overspending if it doesn't press UnitedHealthcare for this data. Overspending must be addressed."

Our office may revisit remaining risk areas in future audits to ensure the city takes appropriate corrective action.

AUDITOR TIMOTHY O'BRIEN, CPA
Denver Auditor

Denver Auditor's Office

201 W. Colfax Ave. #705 Denver, CO 80202 Email: [email protected] Call: 720-913-5000 Follow us on Facebook Connect with us on Twitter

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