Review of Medicare Contractor's Pension Segmentation, Mutual of Omaha Insurance Company

Under the terms of its Medicare contract, Mutual of Omaha (Mutual) was required to separately identify, allocate, and report pension assets and costs separately for its Medicare segment of business. This final audit report points out that Mutual understated Medicare segment assets as of 1992 by $3,911,067. This occurred primarily because Mutual's former actuarial firm used incorrect data in the determination of Medicare's initial assets. Increasing the Medicare segment's assets by the above amount will result in (1) lower Medicare pensions costs in future years and (2) Medicare receiving higher reversions/refunds in the event of a pension plan termination or a termination of the Medicare contract. We recommended that Mutual increase assets of the Medicare segment by $3,911,067. Mutual concurred with our recommendation.