oversight

Audit of Horizon BlueCross BlueShield of New Jersey Newark, New Jersey

Published by the Office of Personnel Management, Office of Inspector General on 2013-02-05.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                     U.S. OFFICE OF PERSONNEL MANAGEMENT
                                                           OFFICE OF THE INSPECTOR GENERAL
                                                                            OFFICE OF AUDITS




Final Audit Report
Subject:


                      AUDIT OF
           HORIZON BLUECROSS BLUESHIELD OF
                     NEW JERSEY
                 NEWARK, NEW JERSEY



                                             Report No. 1A-10-49-12-035


                                             Date: February 5, 2013




                                                            --CAUTION--

This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit
report may contain proprietary data which is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available
under the Freedom of Information Act and made available to the public on the OIG webpage, caution needs to be exercised before
releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
                                                     AUDIT REPORT


                                        Federal Employees Health Benefits Program
                                         Service Benefit Plan   Contract CS 1039
                                             BlueCross BlueShield Association
                                                       Plan Code 10


                                       Horizon BlueCross BlueShield of New Jersey
                                                  Plan Codes 280/780
                                                  Newark, New Jersey




                       REPORT NO. 1A-10-49-12-035                                       02/05/13
                                                                                DATE: ______________




                                                                               Michael R. Esser
                                                                               Assistant Inspector General
                                                                                 for Audits




                                                            --CAUTION--

This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit
report may contain proprietary data which is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available
under the Freedom of Information Act and made available to the public on the OIG webpage, caution needs to be exercised before
releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
                               EXECUTIVE SUMMARY


                            Federal Employees Health Benefits Program
                             Service Benefit Plan   Contract CS 1039
                                 BlueCross BlueShield Association
                                           Plan Code 10


                           Horizon BlueCross BlueShield of New Jersey
                                      Plan Codes 280/780
                                      Newark, New Jersey




              REPORT NO. 1A-10-49-12-035                           02/05/13
                                                            DATE: ______________



This final audit report on the Federal Employees Health Benefits Program (FEHBP) operations
at Horizon BlueCross BlueShield of New Jersey (Plan), in Newark, New Jersey, questions
$230,608 in health benefit charges. The BlueCross BlueShield Association agreed (A) with
these questioned charges.

Our limited scope audit was conducted in accordance with Government Auditing Standards. The
audit covers claim payments from January 1, 2009 through December 31, 2011 as reported in the
Annual Accounting Statements. However, our review of colonoscopy claims also included
claims that were paid from January 1, 2012 through April 30, 2012.

The questioned health benefit charges are summarized as follows:

•   Continuous Stay Claims (A)                                                         $140,413

    During our review of continuous stay claims, we determined that the Plan incorrectly paid 17
    groups of continuous stay claims, resulting in net overcharges of $140,413 to the FEHBP.
    Specifically, the Plan overpaid 15 claim groups by $142,873 and underpaid 2 claim groups
    by $2,460.




                                                i
•   System and Discount Review (A)                                                      $76,490

    Based on our review of a judgmental sample of 200 claims, we determined that the Plan
    incorrectly paid 3 claims, resulting in overcharges of $76,490 to the FEHBP.

•   Non-Participating Provider Claims (A)                                               $13,730

    During our review of claims submitted by non-participating providers, we determined that
    the Plan incorrectly paid two claims, resulting in overcharges of $13,730 to the FEHBP.
    Specifically, the Plan overpaid one inpatient claim by $10,125 and one professional claim by
    $3,605.

•   Colonoscopy Claims (A)                                                                  ($25)

    Based on our review of a judgmental sample of 40 colonoscopy claims, we determined that
    the Plan incorrectly paid 1 claim, resulting in an undercharge of $25 to the FEHBP.




                                               ii
                                                   CONTENTS
                                                                                                                       PAGE

       EXECUTIVE SUMMARY .............................................................................................. i

 I.    INTRODUCTION AND BACKGROUND .....................................................................1

II.    OBJECTIVES, SCOPE, AND METHODOLOGY .........................................................3

III.   AUDIT FINDINGS AND RECOMMENDATIONS .......................................................5

              HEALTH BENEFIT CHARGES ............................................................................5

              1. Continuous Stay Claims.....................................................................................5

              2. System and Discount Review ............................................................................7

              3. Non-Participating Provider Claims ....................................................................8

              4. Colonoscopy Claims ........................................................................................10
IV.    MAJOR CONTRIBUTORS TO THIS REPORT ..........................................................11

 V.    SCHEDULE A – HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED

       APPENDIX (BlueCross BlueShield Association response, dated November 21, 2012,
                to the draft audit report)
                         I. INTRODUCTION AND BACKGROUND
INTRODUCTION

This final audit report details the findings, conclusions, and recommendations resulting from our
limited scope audit of the Federal Employees Health Benefits Program (FEHBP) operations at
Horizon BlueCross BlueShield of New Jersey (Plan). The Plan is located in Newark, New
Jersey.

The audit was performed by the Office of Personnel Management’s (OPM) Office of the
Inspector General (OIG), as established by the Inspector General Act of 1978, as amended.

BACKGROUND

The FEHBP was established by the Federal Employees Health Benefits (FEHB) Act (Public Law
86-382), enacted on September 28, 1959. The FEHBP was created to provide health insurance
benefits for federal employees, annuitants, and dependents. OPM’s Healthcare and Insurance
Office has overall responsibility for administration of the FEHBP. The provisions of the FEHB
Act are implemented by OPM through regulations, which are codified in Title 5, Chapter 1, Part
890 of the Code of Federal Regulations (CFR). Health insurance coverage is made available
through contracts with various health insurance carriers.

The BlueCross BlueShield Association (Association), on behalf of participating BlueCross and
BlueShield plans, has entered into a Government-wide Service Benefit Plan contract (CS 1039)
with OPM to provide a health benefit plan authorized by the FEHB Act. The Association
delegates authority to participating local BlueCross and BlueShield plans throughout the United
States to process the health benefit claims of its federal subscribers. The Plan is one of
approximately 64 local BlueCross and BlueShield plans participating in the FEHBP.

The Association has established a Federal Employee Program (FEP 1) Director’s Office in
Washington, D.C. to provide centralized management for the Service Benefit Plan. The FEP
Director’s Office coordinates the administration of the contract with the Association, member
BlueCross and BlueShield plans, and OPM.

The Association has also established an FEP Operations Center. The activities of the FEP
Operations Center are performed by CareFirst BlueCross BlueShield, located in Washington,
D.C. These activities include acting as fiscal intermediary between the Association and member
plans, verifying subscriber eligibility, approving or disapproving the reimbursement of local plan
payments of FEHBP claims (using computerized system edits), maintaining a history file of all
FEHBP claims, and maintaining an accounting of all program funds.




1
  Throughout this report, when we refer to "FEP", we are referring to the Service Benefit Plan lines of business at
the Plan. When we refer to the "FEHBP", we are referring to the program that provides health benefits to federal
employees.



                                                          1
Compliance with laws and regulations applicable to the FEHBP is the responsibility of the
Association and Plan management. Also, management of the Plan is responsible for establishing
and maintaining a system of internal controls.

All findings from our prior audit of the Plan (Report No. 1A-10-49-09-025, dated February 12,
2010), which included claim payments from 2005 through October 31, 2008, have been
satisfactorily resolved.

The results of this audit were provided to the Plan in written audit inquiries; were discussed with
Plan and/or Association officials throughout the audit and at an exit conference; and were
presented in detail in a draft report, dated September 28, 2012. The Association’s comments
offered in response to the draft report were considered in preparing our final report and are
included as an Appendix to this report.




                                                 2
                 II. OBJECTIVES, SCOPE, AND ,\IETHODOLOGY


OBJE CTIVES


The objectives of our audit we re to determine whethe r the Plan cha rged costs to the FEHBP and
provided services to FE HBP me mbers in accorda nce with the terms of the contract. Specifica lly,
our obj ectives were to de termine whe the r the Plan complied with contract provisions re lative to
health be ne fit payments.

SCOPE

We conduc ted our limited scope performance audit in accordance with gene rally accepted
gove nun ent auditing standards . Those stan dards re quire that we plan and perform the audit to
obta in sufficient and appropria te evi dence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evi dence obtained provides a
rea sona ble basis for our findings and conclusions based on our audit objective s.

We reviewed the BlueCro ss and BlueShield
FEHBP Annua l Accounting Statements a s                       Horizon BlueCross BlueShield of New Jersey

                                                                        Hea lth Benefit Charg es

the y pertain to Plan co de s 280 and 780 for                 $500 , --      -     -   -    -    -   -    -    -   -   --,
contract years 2009 through 20 11. During thi s
                                                              $40 0    +---===----===----J':77:;r--j
period, the Plan paid approxima tely $ 1. 1
                                                          ~   $30 0    ,-Y/. -:l----{I. ~---v­
billion in health bene fit cha rge s (See Figure 1
and Schedule A). In addition, our review of
                                                          ~ $200       +--v.. ;+----j~
                                                          ... $100
colonoscopy claim s also included cla ims that                  $() L -.lU""-_--<-....._-'~"-'
were pa id from Janua ry 1, 20 12 through                                2009             20 11
Apri l 30, 20 12. In total, we reviewed
approxima tely $25 million in claim paymen ts                                    1:1 Health Benefit Payments
made from Janua ry 1, 2010 through April 30,
20 12 for proper adj udicat ion .                                     Figure 1 - Health Ben efit Cha rge s

In planning and co nducting our audit, we obtained an understanding of the Plan ' s internal contro l
structur e to help det ermine the nature , timing, and extent of om auditing procedures. This wa s
determined to be the most effec tive approach to select area s of audit. For those area s selected,
we primarily reli ed on subs tantive tests of tran sacti ons and not tests of contro ls. Based on our
testing, we did not identify any significant matters involving the Plan ' s interna l contr ol stru cture
and its operations . However, since our audit would not nece ssarily discl ose all significant
matters in the internal control stru cture, we do not express an opinio n on the Plan' s system of
interual co ntrols tak en a s a whole.

We also conducted tests to determine whet he r the Plan had complied wi th the co ntract and the
applica ble laws and regulati ons gove rn ing the FEHBP a s they re late to cl aim payments . TIle
re sults of our tests indica te that, with respect to the items tested, the Plan did not full y co mply
with the provisions of the co ntract rel ati ve to claim payments. Exceptions noted in the area s
reviewed are set forth in detail in the "Audit Findings and Recommendations" section of this




                                                     3

audit report. With respect to the items not tested, nothing came to our attention that caused us to
believe that the Plan had not complied, in all material respects, with those provisions.

In conducting our audit, we relied to varying degrees on computer-generated data provided by
the FEP Director’s Office, the FEP Operations Center, and the Plan. Due to time constraints, we
did not verify the reliability of the data generated by the various information systems involved.
However, while utilizing the computer-generated data during our audit testing, nothing came to
our attention to cause us to doubt its reliability. We believe that the data was sufficient to
achieve our audit objectives.

The audit was performed at the Plan’s office in Newark, New Jersey from July 23, 2012 through
July 27, 2012. Audit fieldwork was also performed at our offices in Washington, D.C.;
Cranberry Township, Pennsylvania; and Jacksonville, Florida.

METHODOLOGY

We obtained an understanding of the internal controls over the Plan’s claims processing system
by inquiry of Plan officials.

To test the Plan’s compliance with the FEHBP health benefit provisions, we selected and
reviewed samples of 1,904 claims. 2 We used the FEHBP contract, the 2009 through 2011
Service Benefit Plan brochures, the Plan’s provider agreements, and the Association’s FEP
administrative manual to determine the allowability of benefit payments. The results of these
samples were not projected to the universe of claims.




2
 See the audit findings for “Continuous Stay Claims” (1), “System and Discount Review” (2), “Non-Participating
Provider Claims” (3), and “Colonoscopy Claims” (4) on pages 5 through 10 for specific details of our sample selection
methodologies.


                                                        4
              III. AUDIT FINDINGS AND RECOMMENDATIONS
HEALTH BENEFIT CHARGES

1. Continuous Stay Claims                                                                $140,413

   During our review of continuous stay claims, we determined that the Plan incorrectly paid 17
   groups of continuous stay claims, resulting in net overcharges of $140,413 to the FEHBP.
   Specifically, the Plan overpaid 15 claim groups by $142,873 and underpaid 2 claim groups
   by $2,460. Continuous stay claims are two or more inpatient hospital claims with
   consecutive dates of service that were billed by a provider for a patient with one length of
   stay.

   Contract CS 1039, Part II, section 2.6 states, “(a) The Carrier shall coordinate the payment of
   benefits under this contract with the payment of benefits under Medicare . . . (b) The Carrier
   shall not pay benefits . . . until it has determined whether it is the primary carrier . . . .”

   Contract CS 1039, Part III, section 3.2 (b)(1) states, “The Carrier may charge a cost to the
   contract for a contract term if the cost is actual, allowable, allocable, and reasonable.” In
   addition, Part II, section 2.3 (g) states, “If the Carrier or OPM determines that a Member’s
   claim has been paid in error for any reason . . . the Carrier shall make a prompt and diligent
   effort to recover the erroneous payment . . . .”

   For the period January 1, 2009 through December 31, 2011, we identified 1,270 continuous
   stay claim groups (representing 2,725 claims), totaling $13,094,673 in payments. From this
   universe, we selected and reviewed a judgmental sample of 210 continuous stay claim groups
   (representing 519 claims), totaling $8,478,149 in payments, to determine if these claims were
   correctly priced and paid by the Plan. Our sample included groups with cumulative claim
   payment amounts of $15,000 or more. The majority of these groups contained claims with
   consecutive dates of service. Our sample included 12 groups with claim payment errors,
   totaling $131,593 in net overcharges to the FEHBP.

   Since our sample contained several claim payment errors, we expanded our testing to include
   all claim groups with cumulative claim payment amounts of $12,000 or more but less than
   $15,000. This expanded sample included an additional 76 continuous stay claim groups
   (representing 158 claims), totaling $1,021,077 in payments. Our expanded sample included
   five groups with claim payment errors, totaling $8,820 in net overcharges to the FEHBP.

   In total, our review identified 17 groups of continuous stay claims with payment errors
   (representing 17 claim payment errors), resulting in net overcharges of $140,413 to the
   FEHBP. Specifically, the Plan overpaid 15 claim groups by $142,873 and underpaid 2 claim
   groups by $2,460. These claim payment errors resulted from the following:

   •   The Plan priced 10 claims at incorrect per diem rates, resulting in net overcharges of
       $101,952 to the FEHBP. Specifically, the Plan overpaid eight claim groups by $104,412
       and underpaid two claim groups by $2,460.



                                                5
•   The Plan did not properly coordinate three claims with Medicare, resulting in
    overcharges of $25,043 to the FEHBP.

•   In one instance, the Plan incorrectly paid a claim where the patient’s hospital stay was not
    authorized, resulting in an overcharge of $7,291 to the FEHBP.

•   The Plan processed three claims using the incorrect number of days, resulting in
    overcharges of $6,127 to the FEHBP.

Association’s Response:

The Association agrees with this finding. The Association states that the Plan has initiated
recoveries of the overpayments. As of November 16, 2012, the Plan had recovered and
returned $81,205 of the overpayments to the FEHBP. To the extent that errors did occur, the
Association also states that these payments were good faith erroneous benefit payments and
fall within the context of CS 1039, Part II, section 2.3(g). Any payments the Plan is unable
to recover are allowable charges to the FEHBP as long as the Plan demonstrates due
diligence in the collection of these overpayments. As good faith erroneous payments, lost
investment income does not apply to the claim payment errors identified in this finding.

The Association states, “The Plan has also completed causal analysis of these overpayments
and has determined that the payment errors were caused by examiner[s] not following
internal guidelines for the adjudication of these claims, or coding/provider billing errors. The
following processes have been implemented to reduce these types of claim payment errors in
the future:

•   Additional training and feedback was provided to the examiners and periodic audits
    checks are performed to ensure . . . the quality of these claims.

•   Internal systems and guidelines were reviewed to verify that the appropriate controls are
    in place. It was determined that based upon the number of confirmed overpayments, no
    new system controls are required for these types of claims.

•   The Plan will continue to review the System-wide claims listings that will also include
    Continuous Stay Claims in 2013.

In addition, FEP will continue to include these claims types in its on-line application Claims
Audit Monitoring Tool, used to timely identify and recover claims payment errors. This
on-line application was made available to all Plans on October 8, 2012.”

OIG Comments:

Based on our review of the Association’s response and the Plan’s supporting documentation,
we revised the amount questioned from the draft report to $140,413 for this finding.




                                             6
    Recommendation 1

    We recommend that the contracting officer disallow $142,873 for claim overcharges and verify
    that the Plan returns all amounts recovered to the FEHBP.

    Recommendation 2

    We recommend that the contracting officer allow the Plan to charge the FEHBP $2,460 if
    additional payments are made to the providers to correct the underpayment errors. However,
    before making any additional payment(s) to a provider, the contracting officer should require
    the Plan to first recover any questioned overpayment(s) for that provider.

    Recommendation 3

    We recommend that the contracting officer have the Association verify that the Plan’s
    corrective actions to minimize these types of claim payment errors in the future are being
    implemented. These corrective actions are included in the Association’s response to the draft
    report.

2. System and Discount Review                                                                                        $76,490

    The Plan incorrectly paid three claims, resulting in overcharges of $76,490 to the FEHBP.

    As previously cited from CS 1039, costs charged to the FEHBP must be actual, allowable,
    allocable, and reasonable. Also, the Plan must coordinate the payment of benefits under this
    contract with the payment of benefits under Medicare. If errors are identified, the Plan is
    required to make a diligent effort to recover the overpayments.

    For health benefit claims incurred from July 1, 2010 through December 31, 2011 and
    reimbursed from January 1, 2011 through December 31, 2011 (excluding Omnibus Budget
    Reconciliation Act of 1990, Omnibus Budget Reconciliation Act of 1993, and case
    management claims), we identified 3,545,912 claim lines, totaling $373,736,289 in
    payments, where the FEHBP paid as the primary insurer. From this universe, we selected
    and reviewed a judgmental sample of 200 claims (representing 2,262 claim lines), totaling
    $8,252,117 in payments, for the purpose of determining if the Plan adjudicated these claims
    properly and/or priced them according to the provider contract rates. 3 As part of our review,
    we also selected 35 participating and preferred providers, which were associated with the
    highest reimbursed claims in our sample, for the purpose of verifying if these providers’
    contract rates were accurately and timely updated in the Plan’s local network pricing system.




3
  We selected our sample from an OIG-generated “Place of Service Report” (SAS application) that stratified the claims by place
of service (POS), such as provider’s office and payment category, such as $50 to $99.99. We judgmentally determined the
number of sample items to select from each POS stratum based on the stratum’s total claim dollars paid.



                                                               7
      Our review identified three claim payment errors, resulting in overcharges of $76,490 to the
      FEHBP. These claim payment errors resulted from the following:

      •    The Plan did not properly coordinate two claims with Medicare, resulting in overcharges
           of $76,315 to the FEHBP.

      •    In one instance, the Plan paid a claim using the incorrect pricing allowance, resulting in
           an overcharge of $175 to the FEHBP.

      Association’s Response:

      The Association agrees with this finding. The Association states that the Plan has recovered
      and returned these overpayments to the FEHBP. The Association also states that the Plan has
      implemented corrective actions to minimize these types of errors in the future.

      Recommendation 4

      We recommend that the contracting officer disallow $76,490 for claim overcharges and verify
      that the Plan has returned these overcharges to the FEHBP.

3. Non-Participating Provider Claims                                                                 $13,730

      During our review of claims submitted by non-participating (non-par) providers, we
      determined that the Plan incorrectly paid two claims, resulting in overcharges of $13,730 to
      the FEHBP. Specifically, the Plan overpaid one inpatient claim by $10,125 and one
      professional claim by $3,605.

      As previously cited from CS 1039, costs charged to the FEHBP must be actual, allowable,
      allocable, and reasonable. If errors are identified, the Plan is required to make a diligent
      effort to recover the overpayments.

      The 2011 BlueCross and BlueShield Service Benefit Plan brochure, page 129, states, “Non-
      participating providers – We have no agreements with these providers to limit what they can
      bill you for their services. This means that using Non-participating providers could result in
      your having to pay significantly greater amounts for the services you receive.”

      For the period January 1, 2009 through December 31, 2011, we performed a computer search
      to identify inpatient, outpatient, and professional claims that were submitted by non-par
      providers. In total, we identified 201,183 non-par provider claims (representing 495,782
      claim lines), totaling $52,470,375 in payments that met this search criteria. From this
      universe, we selected and reviewed a judgmental sample of 130 claims (representing 1,274
      claim lines), totaling $7,035,615 in payments, to determine if these claims were correctly
      priced by the FEP Operations Center and/or paid by the Plan. 4



4
    The non-par provider claims are priced by the FEP Operations Center and then paid by the Plan.


                                                          8
Our sample selection methodologies are summarized as follows:

•   From a population of 98 non-par inpatient claims (representing 1,546 claim lines, totaling
    $7,055,339 in payments), we selected and reviewed a judgmental sample of 60 claims
    (representing 1,204 claim lines), totaling $6,775,241 in payments. The sample selections
    included the 55 highest paid claims in this population as well as 5 randomly selected
    claims.

•   From a population of 1,040 non-par outpatient claims (representing 1,040 claim lines,
    totaling $1,708,905 in payments), we selected and reviewed a judgmental sample 20
    claims (representing 20 claim lines), totaling $35,440 in payments. The sample
    selections included the 15 highest paid claims in this population as well as 5 randomly
    selected claims.

•   From a population of 200,045 non-par professional claims (representing 493,196 claim
    lines, totaling $43,706,131 in payments), we selected and reviewed a judgmental sample
    of 50 claims (representing 50 claim lines), totaling $224,934 in payments. The sample
    selections included claims that were randomly selected from 10 stratified payment groups
    (5 from each group).

Based on our review, we determined that two of the claims in our sample were paid
incorrectly, resulting in overcharges of $13,730 to the FEHBP. These claim payment errors
resulted from the following:

•   In one instance, the Plan did not use a special per diem rate, negotiated between the Plan
    and the non-par inpatient facility provider, when pricing the claim. As a result, the Plan
    overpaid this claim by $10,125.

•   In one instance, the FEP Operations Center did not properly coordinate a non-par
    professional claim with the member’s additional insurance when pricing the claim. As a
    result, the Plan overpaid this claim by $3,605.

Association’s Response:

The Association agrees with this finding. The Association states that the Plan has recovered
and returned these overpayments to the FEHBP. The Association also states that the Plan has
implemented corrective actions to reduce these types of payment errors in the future.

Recommendation 5

We recommend that the contracting officer disallow $13,730 for claim overcharges and verify
that the Plan has returned these overcharges to the FEHBP.




                                             9
4. Colonoscopy Claims                                                                       ($25)

   In one instance, the Plan incorrectly paid a colonoscopy claim, resulting in an undercharge of
   $25 to the FEHBP.

   As previously cited from CS 1039, costs charged to the FEHBP must be actual, allowable,
   allocable, and reasonable. If errors are identified, the Plan is required to make a diligent
   effort to recover the overpayments.

   For the period January 1, 2011 through April 30, 2012, we identified 11,118 colonoscopy
   claims (representing 12,696 claim lines), totaling $4,697,253 in payments. From this
   universe, we selected and reviewed a judgmental sample of 40 claims (representing 85 claim
   lines), totaling $83,167 in payments, to determine if these claims were correctly priced and
   paid by the Plan. Our sample included all colonoscopy claims with amounts paid of $1,750
   or more.

   Based on our review, we determined that the Plan incorrectly paid one colonoscopy claim,
   resulting in an undercharge of $25 to the FEHBP. In this instance, the Plan inadvertently
   applied a copayment when processing the claim, instead of paying the claim at 100 percent of
   the local allowance.

   Association’s Response:

   The Plan agrees with this finding. The Association states that the Plan issued an additional
   payment to the provider to correct this underpayment error.

   Recommendation 6

   We recommend that the contracting officer verify that the Plan corrected the claim
   underpayment error of $25.




                                               10
                 IV. MAJOR CONTRIBUTORS TO THIS REPORT

Experience-Rated Audits Group

                Lead Auditor

                , Auditor

                 , Auditor

                    , Auditor


                  , Chief

Information Systems Audits Group

                  , Senior Information Technology Specialist

            , Senior Information Technology Specialist




                                            11
                                                              V. SCHEDULE A

                                         HORIZON BLUECROSS BLUESHIELD OF NEW JERSEY
                                                    NEWARK, NEW JERSEY

                                      HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED

HEALTH BENEFIT CHARGES                                                        2009           2010           2011         TOTAL

HEALTH BENEFIT CHARGES

     PLAN CODE 280:
       CLAIM PAYMENTS                                                       $180,031,861   $184,618,556   $208,912,703    $573,563,120
       MISCELLANEOUS PAYMENTS AND CREDITS*                                       969,614        576,032        196,029       1,741,675

     PLAN CODE 780:
       CLAIM PAYMENTS                                                        183,060,431    181,522,082    204,100,678     568,683,191
       MISCELLANEOUS PAYMENTS AND CREDITS*                                             0              0              0               0

     TOTAL                                                                  $364,061,906   $366,716,670   $413,209,410   $1,143,987,986


AMOUNTS QUESTIONED                                                            2009           2010           2011         TOTAL

1.   CONTINUOUS STAY CLAIMS                                                     $22,337        $72,604        $45,473         $140,413
2.   SYSTEM AND DISCOUNT REVIEW                                                       0              0         76,490           76,490
3.   NON-PARTICIPATING PROVIDER CLAIMS                                                0              0         13,730           13,730
4.   COLONOSCOPY CLAIMS                                                               0              0            (25)             (25)

     TOTAL QUESTIONED CHARGES                                                   $22,337        $72,604       $135,668         $230,608

* We did not review the miscellaneous payments and credits on this audit.
November 21, 2012
                                                                   Federal Employee Program
                                                                   1310 G Street, N.W.
                    , Group Chief,                                 Washington, D.C. 20005
Experience-Rated Audits Group,                                     202.942.1000
                                                                   Fax 202.942.1125
U.S. Office of Personnel Management
1900 E Street, Room 6400
Washington, D.C. 20415-1100

Reference:           OPM FINAL AUDIT REPORT
                     Horizon Blue Cross and Blue Shield of New Jersey
                     Audit Report Number 1A-10-49-12-035
                   (Dated September 28, 2012 and Received September 28, 2012)

Dear                  :
This is our response to the above referenced U.S. Office of Personnel Management
(OPM) Final Audit Report covering the Federal Employees’ Health Benefits Program
(FEHBP) for Horizon Blue Cross and Blue Shield of New Jersey. Our comments
concerning the findings in this report are as follows:

HEALTH BENEFIT CHARGES

1. Continuous Stay Claims                                                            $140,913

The Plan agrees that 17 claim groups may have been paid incorrectly. There were 15
claim groups that resulted in overpayments totaling $142,873 and two claim groups
were underpaid by ($2,460). For Sample # 160A totaling $7,791, the Plan agrees that
$7,291 was paid in error and contests $500 as the member was liable for $500
coinsurance for services rendered.

The Plan initiated recovery efforts for these confirmed overpayments and as of
November 16, 2012, the Plan has recovered and returned $81,205 to the Program.
The Plan will continue to show due diligence in its recovery efforts.

The Plan has also completed causal analysis of these overpayments and has
determined that the payment errors were caused by examiner not following internal
guidelines for the adjudication of these claims, or coding/ provider billing errors. The
Horizon Draft Report
November 21, 2012
Page 2 of 4


following processes have been implemented to reduce these types of claim payment
errors in the future:

   •   Additional training and feedback was provided to the examiners and periodic
       audits checks are performed to ensure enhance the quality of these claims.

   •   Internal systems and guidelines were reviewed to verify that the appropriate
       controls are in place. It was determined that based upon the number of
       confirmed overpayments, no new system controls are required for these types of
       claims.

   •   The Plan will continue to review the System-wide claims listings that will also
       include Continuous Stay Claims in 2013.

In addition, FEP will continue to include these claims types in its on-line application
Claims Audit Monitoring Tool, used to timely identify and recover claim payment errors.
This on-line application was made available to all Plans on October 8, 2012.

Accordingly, to the extent that errors did occur, the payments are good faith erroneous
benefit payments and fall within the context of CS 1039, section 2.3(g). Any benefit
payments the Plan is unable to recover are allowable charges to the Program as long
as the Plan is able to demonstrate due diligence in collection of the overpayment. In
addition, as good faith erroneous benefit payments; the Plan continues to initiate
recovery in a timely manner for confirmed overpayments. Because these are good
faith erroneous payments, they are not subject to lost investment income.

4. System and Discount Review                                                      $76,490

The Plan agrees that three claim payment errors totaling $76,490 may have been paid
in error. Refund recovery efforts were initiated and as of October 9, 2012, the Plan has
collected and returned $76,490 to the Program. These overpayments were caused by
manual pricing errors. The Plan has taken the following actions to minimize these
types of errors in the future:

o Used the errors as training tools during recent re-fresher trainings for the claims
  staff. In addition, the Plan will use its quality process to continue to monitor the
  accuracy of these types of claims.
o	 Conducted random system audits to promote the efficiency of the functionality of
   the system in an effort to reduce the amount of human intervention required for
   pricing.

5.	 Non-Participating Provider Claims                                          $13,730

The Plan agrees that two claim payments totaling $13,730 were paid incorrectly.
As of October 9, 2012, all overpayments have been recovered and returned to the
Program. These errors were caused by manual coding errors . In order to reduce
these types of payment errors in the future the Plan has implemented the follow ing:

o	 Conduct periodic coding training for claims processors ; and

o	 Include these types of errors in the in-line qual ity process.

o	 Included these types of errors in the training tools to be used during future re­

   fresher training for claims staff.


6.	 Co lonos copy Claims

The Plan agrees that one claim was underpaid by $25 from a populati on of 40 claims.
This error was caused by a manual coding error. As of October 9, 2012, the Plan
issued the additional payment to the provider to correct this underp ayment. T he Plan
believes that the ir current internal controls are sufficient to promote the accurate
adjudicati on of these claims types and will not implement any additional controls.
We appreciate the opportun ity to provide our response to each of the findings in this
report and request that our comments be included in their entirety and are made a part
of the Final Audit Report. If you have any questions, please contact me at
202.957.6865.

Sincerely,



                  , CPA
Director , Program Assurance

cc:	                  aPM
                     aPM
                     , FEP