State employees got insurance without premiums

Topline: Maryland gave paychecks to some employees no longer working for the state, and health insurance to employees who had not paid their premiums for up to five years, according to a Dec. 9 report from the Office of Legislative Audits.

Key facts: Maryland's Office of Personnel Services and Benefits is in charge of the state's payroll, but the office does "not have effective procedures to ensure the propriety of employee benefits," according to the audit.

The office collects health insurance premiums directly from employees and sends the money to insurance providers, along with the state's share of the cost. In 2024, there were 7,574 Maryland employees on the state's health insurance who did not pay their premiums. The audit found that 5,800 of them were still receiving coverage as of January 2025.

Auditors investigated 10 of the 5,800 employees in more detail and found the state had spent $806,800 on their health insurance, even though the employees were not paying their fair share. One of them had not paid premiums for 65 months.

The personnel office did not complete "timely" audits of the health insurance program and did not try to recover the money it mistakenly paid to employees, according to the audit.

The state also potentially overpaid health insurance companies' administrative fees by up to $6.6 million since 2021 because of a loophole in their contracts, according to the audit.

The insurance companies are allowed to raise their fees each year based on inflation, but the contract does not specify how to calculate inflation. The formula for health-care inflation can use either monthly or yearly statistics. It can use pricing data for only medical supplies, or for all goods sold in America. Each year, the insurance companies changed which dataset they used to deliberately make the fees as expensive as possible, according to the audit.

Salary management was not much better. Auditors found 915 former employees who were not removed from the state's payroll system until several days or weeks after they left their job, including one who remained in the system for 534 days.

Not all of them received paychecks after quitting, but the audit found four employees out of a random sample of 13 who mistakenly received $35,900. The state recovered $25,800 of it after the audit.

The audit also found 130 employees who earned $740,000 without submitting timesheets, even though state law requires timesheets to be approved by a supervisor.

Search all federal, state and local salaries and vendor spending with the world's largest government spending database at OpenTheBooks.com.

Background: The Office of Personnel Services and Benefits had 132 employees making an average of $145,000 in salary and benefits as of 2024, according to the audit.

The office is part of the Department of Budget and Management, which was led by Budget Secretary Helene Grady during the audit period. She was earning $275,000 as of 2024, according to records obtained by Open the Books — higher than budget secretaries in some much larger states. New York Budget Director Blake Washington makes $227,000. California Finance Director Joe Stephenshaw makes $240,000.

Summary: When a state has more employees than it can keep track of, there are two simple solutions: increase oversight and downsize the workforce.

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This article was originally published by RealClearInvestigations and made available via RealClearWire.