Raleigh, N.C. — The health insurance plan for state employees and retirees is losing millions of dollars each year by overpaying on medical claims and failing to recoup most of the money, according to a state audit released Tuesday.

The State Health Plan, which provides health coverage for more than 660,000 state workers, teachers, retirees and dependents, has been mired in red ink for years, forcing lawmakers to approve bailouts in recent years. In May, the General Assembly and Gov. Beverly Perdue reached a compromise on health plan reforms, including forcing workers for the first time to pay for their own coverage.

State auditors found several problems with the plan's oversight of claims, noting that the state might have lost up to $48.6 million to overpayments between July 2007 and June 2010. The auditors recommended using software to identify possible overpayments and the reasons the errors occurred and to exercise more oversight of Blue Cross Blue Shield of North Carolina, which administers claims for the health plan.

Interim Administrator Lacey Barnes said the plan is working to improve oversight of its contract with Blue Cross and would also implement more financial controls to identify and correct overpayments.

The health plan pursues only overpayments that have been verified by outside auditors and not any claims flagged as potential overpayments, according to the state audit. Also, Blue Cross' fraud recovery efforts are "well below industry standards," the audit states, meaning that the health plan recovers only 10 cents for every dollar spent on pursuing overpayments.

Additionally, the plan also pays Blue Cross a portion of money recovered from payment mistakes that the company made, and the plan and Blue Cross haven't worked together to ensure that the state pays a medical claim only after payment has been sought from private insurance or Medicare, according to the audit.