Audit of the Pension Plan at Blue Cross and Blue Shield of Michigan, a Terminated Medicare Contractor

EXECUTIVE SUMMARY:

This report provides the results of an Office of Inspector General (OIG), Office of Audit Services (OAS) review titled Audit of the Pension Plan at Blue Cross and Blue Shield of Michigan, a Terminated Medicare Contractor . The purpose of our review was to determine the excess assets that should be remitted to Medicare by Blue Cross and Blue Shield of Michigan (Michigan) because of the termination of the Medicare contractual relationship in 1994.

We determined that as of January 1995, Michigan had excess Medicare pension assets of almost $12 million. Regulations and the Medicare contracts provide that pension gains which occur when the Medicare contract terminates should be credited to the Medicare program. Accordingly, we are recommending that Michigan remit almost $12 million in excess pension assets to the Medicare program.

Michigan disagreed with our recommendation because they believed the calculations should have considered future benefits and a lower retirement age. Our calculations were based on applicable regulations and estimates used by Michigan's actuaries to fund the pension plan. The Health Care Financing Administration, Office of the Actuary, reviewed our report, including Michigan's comments, and agreed with our analysis and resultant recommendation.