oversight

Audit of Independence Blue Cross Philadelphia, Pennsylvania

Published by the Office of Personnel Management, Office of Inspector General on 2014-12-02.

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 





                                         AUDIT OF 

                                  INDEPENDENCE BLUE CROSS 

                                 PHILADELPHIA, PENNSYLVANIA 


                                           Report Number lA-10-55-14-027 

                                                  December 2, 2014 





                                                            -CAUTION-

This audit report bas been distributed to Federal officials who an responsible for the administration of the audited program. This audit report may
contain proprietary data which Is pro tected by Federal law (18 U.S.C. 1905). T herefore, while this audit report is available under the Frttdom of
Information Act and made available to the public on the OIG webpage (llttp://www.opmgqv/our-inspector-general), 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 

                                   Audit ofIndependence Blue Cross



Why Did We Conduct The Audit?           What Did We Find?

The objectives of our audit were to     Our limited scope audit was conducted in accordance with
determine whether Independence          Government Auditing Standards. The report questions $86,594 in
Blue Cross (IBX or ~Ian) charged        health benefit charges. The questioned health benefit charges are
costs to the Federal Employee Health    summarized as follows:
Benefits Program (FEHBP) and            1. 	 Non-Participating Facility Review
provided services to the FEHBP               • 	 The Plan incorrectly paid six non-participating facility
members in accordance with the                   claims, resulting in overcharges of $46,933 to the FEHBP.
terms of the contract. Specifically,    2. 	 Retroactive Enrollment Review
our objectives were to determine             • 	 The Plan incorrectly paid four claims requiring retroactive
whether the Plan complied with                   enrollment adjustments, resulting in overcharges of
contract provisions relative to claim            $25,399 to the FEHBP.
payments.                               3. 	 Dialysis Review
                                             • 	 The Plan incorrectly paid 11 dialysis claims, resulting in
What Did We Audit?                               overcharges of$1 4,262 to the FEHBP.

The Office ofthe Inspector General
(OIG) has completed a limited scope
audit of the FEHBP operations at
Independence Blue Cross, located in
Philadelphia, Pennsylvania We
reviewed approximately $6.8 million
in claim payments, from a universe of
$721 million in health benefit
charges. The audit covered IBX's
claim payments from January I, 2011
through December 31, 2013 as
reported in the Annual Accounting
Statements.




 Michael R. Esser
Assistant Inspector General
forAudlh
                                                     i
              ABBREVIATIONS 





AAS           Annual Accounting Statements
Association   BlueCross BlueShield Association
BCBS          BlueCross BlueShield
COB           Coordination of Benefits
CFR           Code of Federal Regulations
FEHBP         Federal Employee Health Benefit Program
FEHB          Federal Employee Health Benefits
FEP           Federal Employee Program
FOIA          Freedom of Information Act
IG            Inspector General
OIG           Office of the Inspector General
OPM           Office of Personnel Management
IBX or Plan   Independence Blue Cross




                          11
                           TABLE OF CONTENTS

                                                                                                                            Page 

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


         ABBREVIATIONS ..................................................................................................... ii 


I. 	     BACKGROUND .......................................................................................................... ! 


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


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

         1. Non-Participating Facility Review ..........................................................................5 

         2. Retroactive Enrollment Review ...............................................................................6 

         3. Dialysis Review .......................................................................................................7 


IV. 	    MAJOR CONTRIBUTORS TO THIS REPORT .................................................. 10 


V. 	     SCHEDULE A- HEALTH BENEFIT CHARGES AND AMOUNTS
         QUESTIONED

         APPENDIX: BlueCross BlueShield Association's September 22,2014 response
         to the Draft Audit Report, issued August 7, 2014.

         REPORT FRAUD, WASTE, AND MISMANAGEMENT
                 -                                                                       -

'



                                         I. BACKGROUND 

I




    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
    Independence Blue Cross (IBX or Plan). IBX is located in Philadelphia, Pennsylvania. The
    audit was performed by the Office of Personnel Management's (OPM) Office of the Inspector
    General (OIG), as authorized by the Inspector General Act of 1978, as amended.

    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 overaJ.l 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 (BCBS) 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 BCBS plans throughout the United States to
    process the health benefit claims of its federal subscribers. There are 64 BCBS 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
    BCBS 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.

    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.




    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                                Report No. 1A-10-55-14-027
All findings from our prior audit ofiBX (Report No. 1A-10-55-04-010, dated
December 15, 2004), which included claim payments from 2000 through 2002, 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 audit report, dated August 7, 2014. The Association's comments
offered in response to the draft report were considered in preparing our fmal report and are
included as an Appendix to this report.




                                     '





                                                 2                           Report No. 1A-10-55-14-027
                                            -                                     -




      II. OBJECTIVES, SCOPE, AND METHODOLOGY 

-                      -




    Objective
    The objectives of our audit were to determine whether the Plan charged costs to the FEHBP and
    provided services to FEHBP members in accordance with the terms of the contract. Specifically,
    our objective was to determine whether the Plan complied with contract provisions relative to
    health benefit payments.

    Scope and Methodology
    We conducted our limited scope performance audit in accordance with generally accepted 

    government auditing standards. Those standards require that we plan and perform the audit to 

    obtain sufficient and appropriate evidence to provide a reasonable basis for our findings and 

    conclusions based on our audit objectives. We believe that the evidence obtained provides a 

    reasonable basis for our findings and conclusions based on our audit objectives. 


    We reviewed the BlueCross and BlueShield FEHBP Annual Accounting Statements as they
    pertain to Plan code 362 for contract years 2011 through 2013. During this period, the Plan paid
    approximately $721 million in health benefit charges (See Figure 1 and Schedule A). Specifically,
    we reviewed approximately $6.8 million in claim payments for the period January 1, 2011 through
    December 31 , 2013 for proper adjudication.


                             Independence Blue Cross
                              Health Benefit Charges

                      $300

                  ~   $200
                 ~                                                        • Health Beneflt

                 ! $100                                                     Payments




                              2011              2012        2013

                                     Figure 1 - Health Benefit Charges

    In planning and conducting our audit, we obtained an understanding ofthe Plan's internal control
    structure to help determine the nature, timing, and extent of our auditing procedures. This was
    determined to be the most effective approach to select areas of audit. For those areas selected,
    we primarily relied on substantive tests of transactions and not tests of controls. Based on our
    testing, we did not identify any significant matters involving the Plan' s internal control structure
    and its operations. However, since our audit would not necessarily disclose all significant
    matters in the internal control structure, we do not express an opinion on the Plan's system of
    internal controls taken as a whole.


                                                        3                             Report No. 1A-10-55-14-027
We also conducted tests to determine whether the Plan had complied with the contract and the
laws and regulations governing the FEHBP as they relate to claim payments. The results of our
tests indicate that, with respect to the items tested, the Plan did not fully comply with the
provisions of the contract relative to claim payments. Exceptions noted in the areas reviewed are
explained in detail in the "Audit Findings and Recommendations" section of this 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. Through audits and a
reconciliation process, we have verified the reliability of the BCBS claims data in our data
warehouse, which was used to identify the universe of claims for each type of review. The
BCBS claims data is provided to us on a monthly basis by the FEP Operations Center, and after a
series of internal steps, uploaded into our data warehouse. However, due to time constraints, we
did not verify the reliability of the data generated by the Plan' s local claims system. 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 Philadelphia, Pennsylvania in May 2014. Audit
fieldwork was also performed at our offices in Washington, D.C.; Cranberry Township,
Pennsylvania; and Jacksonville, Florida through July 2014.

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 a sample of 438 claims. We used the FEHBP contract, the 2011 through 2013 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.




                                                 4                           Report No. 1A-10-55-14-027
- -




      III. AUDIT FINDINGS AND RECOMMENDA'fiONS


  1. 	 Non-Participating Facility Review                                                         $46,933

      We performed a computer search to identify all non-participating 

      provider claims from inpatient and outpatient facilities for the 
     mx overcharged the
      period January 1, 2011 through December 31,2013. Non­                  FEHBP $46,933 as a
      participating providers are those that do not have a contract with     result of claims 

      IBX, and have not agreed to accept the IBX allowed amount as 
         processing erron
      payment in full. Our search produced 3,672 claims (representing
                                                                             related to non­
      37,418 claim lines), totaling $5,714,439 in payments. From this
      universe, we judgmentally selected the 75 highest paid claims, 

                                                                             participating providen.
      (representing 1,309 claim lines), totaling $2,265,805 in payments, 

      to determine if these claims were correctly priced by the FEP Operations Center and paid by the 

      Plan. 


      Our review of claims submitted by non-participating facilities determined that the Plan 

      incorrectly paid six claims, resulting in overcharges of$46,933 to the FEHBP. These claim 

      payment errors resulted from the following: 


      • 	 The Plan did not appropriately coordinate one claim with Medicare, resulting in an 

          overcharge of$20,362 to the FEHBP. 

      • 	 The Plan's local processors incorrectly allowed non-covered services to be paid for members
          with "basic" enrollment coverage. As a result, the Plan incorrectly paid three claims, totaling
          $20,305 in overcharges to the FEHBP.
      • 	 The FEP Operations Center did not properly calculate the deductible or coinsurance amount
          on two claims, resulting in overcharges of $6,266 to the FEHBP.

      Contract CS 1039, Part III, section 3.2 (b)(1) states, "The Carrier may charge a cost to the
      contract for a contract term ifthe cost is actual, allowable, allocable, and reasonable." 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 . . . . The recovery of any overpayment must be treated as an erroneous
      benefit payment, overpayment, or duplicate payment ... regardless of any time period
      limitations in the written agreement with the provider."

      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 under this contract until it has determined whether it is the primary
      carrier ...."

      The 2013 BlueCross and BlueShield Service Benefit Plan brochure, page 26, states, Non­
      participating providers - We have no agreements with these providers to limit what they can bill



                                                   5	                             Report No. 1A-10-55-14-027
   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.

   Recommendation 1

   We recommend that the contracting officer disallow $46,933 for claim overcharges and verify
   that the Plan returns all amounts recovered to the FEHBP.

   Recommendation 2

   We recommend that the contracting officer require the Plan to provide additional education
   and/or detailed training to all claims processors on how to properly ad!judicate non-participating
   claims for members with "basic" enrollment coverage based on the BCBS Service Benefit
   Brochure.

   IBX's Response:

   The Plan agrees with this finding. The Plan states that their current claims processor training
   includes how to process non-participating claims. Additionally, the Plan states that the
   associates that processed the claims included in this finding have been coached and advised on
   the correct methods of claim adjudication, and that they will continue to monitor this activity to
   ensure that non-participating claims are paid correctly.

2. Retroactive E nrollment Review                                                             $25,399

   The retroactive enrollment report identifies paid claims that are
   potentially affected by enrollment changes (i.e., claims paid before 
   IBX did not properly
   the member's eligibility status is updated in the FEP Direct 
           recover four claims paid
   enrollment system). The report is generated by the FEP Operations        for ineligible members,
   Center and is distributed to the Plan on a daily basis.                  resulting in overcharges
                                                                            of $25,399 to the FEHBP
   For the scope of our audit, we requested copies of the retroactive 

   reports for the following time periods: 


      •   January 1, 2011 through March 31, 2011;
      •   April 1, 2012 through June 30, 2012; and
      •   July 1, 2013 through September 30, 2013.

   From these three quarters combined, we identified 2,097 claims, totaling $3,604,184 in potential
   overpayments to the FEHBP. From this universe, we judgmentally selected 117 high dollar
   claims, totaling $1,418,887 in potential overpayments, to determine whether the Plan was
   properly reviewing these potential claim payment errors and appropriately initiating recovery
   from the providers.




                                                     6                          Report No. lA-10-55-14-027
   Our review determined that the Plan's claim processors did not initiate recovery and/or complete
   the recovery process for four claims, resulting in overcharges of$25,399 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. Also, the recovery of any overpayment must be treated as an
   erroneous benefit payment, regardless of any time period limitations in the written provider
   agreement.

   Recommendation 3

   We recommend that the contracting officer disallow $25,399 for claim overcharges and verify
   that the Plan returns all amounts recovered to the FEHBP.

   Recommendation 4

   We recommend that the contracting officer require the Association to ensure on an ongoing basis
   that the Plan is identifying and properly returning claim payment errors identified on the FEP
   Operations Center daily retroactive reports.

   IBX' s Response:

   The Plan agreed to this finding. The Plan states that the daily retroactive enrollment reports are
   now being monitored daily to ensure any aging issues are proactively addressed, or to report
   system issues that could potentially delay the timely recovery of an overpayment. The Plan' s
   objective is to have all necessary retro adjustments completed within 20 calendar days.

   Association's Response:

   The Association states, "Beginning with the implementation of the third quarter release on
   September 27, 2014, all daily retroactive enrollment notices will be added to the Claims Audit
   Monitoring Tool. This will give the FEP Director's Office the ability to monitor Plan activity to
   ensure that the Plan is appropriately addressing all retroactive termination notices."

3. Dialysis Review                                                                              $14,262

   We performed a computer search to identify all dialysis claims from             IBX incorredly
   inpatient and outpatient facilities for the period January 1, 2011 through      paid 11 dialysis
   December 31, 2013. Our search produced 12,292 claims, totaling                  claims, resulting in
   $18,711,478 in payments. From this universe, we selected for review a           overcharges of
   judgmental sample of 127 claims, totaling $215,231 in payments, to              $14,262 to the
   determine if these claims were correctly priced and paid. Specifically,         FEHBP.




                                                     7                            Report No. 1A-10-55-14-027
we selected the following:

• 	 We identified the two members from each full year of the audit scope (2011 through 2013)
    with the highest utilization. For each member, we selected to review all claims from the
    month with the most incurred dates (i.e., highest utilization).
• 	 We randomly selected 17 claims from the billing provider with the highest utilization for the
    scope of our audit.
• 	 We selected to review one claim from each provider that billed a revenue code 0821 and the
    member had "basic" enrollment coverage.
• 	 We selected to review all claims from the billing provider with the highest utilization and
    where the member had "basic" enrollment coverage.

Our review of dialysis facility claims determined that the Plan incorrectly paid 11 claims,
resulting in overcharges of$14,262 to the FEHBP. These claim payment errors resulted from
the following:

• 	 The Plan's local processors incorrectly priced 10 claims, totaling $13,949 in overcharges to
    theFEHBP.
• 	 The Plan did not appropriately coordinate one claim with Medicare, resulting in an
    overcharge of $313 to the FEHBP.

In addition to the questioned charges, our review identified a procedural issue requiring
corrective action by the Plan and Association.

For 12 claims, the Plan's local claim processors did not properly adjust the FEP Direct system to
reflect the actual paid amount on the claims. This inconsistency created a variance in the amount
paid between FEP Direct and Plan's local system. These 12 claim payment variances resulted in
an overstatement of the amounts paid in FEP Direct and the health benefit charges reported on
the Annual Accounting Statements (AAS) by $117,170. Since claims expense is considered
when developing premium rates, overstating the claims expense in the AAS may increase future
rates.

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. Also, the recovery of any overpayment must be treated as an
erroneous benefit payment, regardless of any time period limitations in the written provider
agreement.

As previously cited from CS 1039, if the member's primary carrier is Medicare, the Carrier shall
coordinate the payment of benefits under Medicare.

FEP Administrative Manual (F AM) Volume III, Chapter 3 states, "Plans receive claims from
members and providers for FEP members that have received care. Plans will perform initial
processing of these claims locally by varying degrees ... once the Plan is ready to move a claim



                                                  8	                           Report No. 1A-10-55-14-027
through the adjudication process, the claims are sent to the FEP Operations Center for processing
and approval using FEPExpress [FEP Direct], the FEP Claims processing system. FEPExpress
performs various edits on the claim and sends the Plan a response record indicating whether the
claims were rejected, deferred, or approved. Plans should not reimburse the provider or member
until an approval has been received from the FEP Operations Center. Once an approval response
is received for a claim, the Plan can then issue the checks or electronic payment to the provider
or member."

Recommendation 5

We recommend that the contracting officer disallow $14,262 for claim overcharges and verify
that the Plan returns all amounts recovered to the FEHBP.               ·

Recommendation 6

We recommend that the contracting officer verify that the Plan made proper adjustments to the
applicable claims in FEP Direct to reflect the actual amounts paid to the providers, to correct
variances between the Plan's local claims system and FEP Direct. Additionally, we recommend
that the contracting officer ensure that the Plan continuously performs reconciliations between
their local claims system and the FEP Direct system as described in FAM Volume 3.

IBX's Response:

The Plan agrees with this finding. The Plan states that a compare report is used to identify and
correct claims that have payment variances between FEP Direct and the local claim system. As
of June 1, 2014, the compare report is reviewed daily and the Plan's objective is to have all out­
of-balance variances adjusted within 20 calendar days.




                                                 9                           Report No. 1A-10-55-14-027
 IV. MAJOR CONTRIBUTORS TO THIS REPORT 



Information Systems Audits Group

                            Auditor

              Auditor-in-Charge



            Senior T earn Leader

              Group Chief




                                      10   Report No. lA-1 0-55-14-027
                                          V. SCHEDULE A 




                                        INDEPENDENCE BLUE CROSS
                                       PIDLADELPHIA, PENNSYLVANIA

                             HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED


HEALTH BENEFIT CHARGES                                     2011           2012           2013         TOTAL
                                                                                                 '



  PLAN CODE 362:
  CLAIM PAYMENTS                                         $222,128,146   $239,826,538   $235,314,172   $697,268,856
  MISCELLANEOUS PAYMENTS AND CREDITS                        7,145,114      7,588,507      9,256,886     23,990,507

  TOTAL                                              I   $229,273,260   $247,415,045   $244,571,058   $721,259,363


AMOUNTS QUESTIONED                                         2011           2012           2013         TOTAL

1. NON-PARTICIPATING FACILITY REVIEW                          $6,603        $19,968        $20,362        $46,933
2. RETROACTIVE ENROLLMENT REVIEW                              24,920            479              0         25,399
3. DIALYSIS REVIEW                                             2,128         12,134              0         14,262
                                               .
  TOTAL QUESTIONED CHARGES                           I       $33,651        $32,581        $20,362        $86,594
                                   APPENDIX 

                                                               ... 

                                                                BlueCroes BlueShleld
                                                                Aalodatlon
                                                                An A8loc:ildlon ol bKiepesldellll
                                                                Blue Crou and Blue SHekl Plans

                                                               Federal Employee Program
                                                                1310 G Street, N. W.
                                                               Washington, D.C. 20005
September 22, 2014                                             Phone # 202.942. 1000
                                                               Fax 202.942.1 125
                 Group Chief 

  a1ms           its Group 

U.S. Office of Personnel Management
1900 E Street, Room 6400
Washington, D.C. 20415-1100

Reference: 	        OPM FINAL AUDIT REPORT
                   Independence Blue Cross
                   Audit Report Number 1A-10-55-14-027
                   (Dated and Received August 7, 2014)

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 Independence Blue Cross. Our comments concerning the findings in this
report are as follows :

HEALTH BENEFIT CHARGES

A. Non Participation Facility Review 	                                                 $46,933

    Recommendation 1

   We recommend that the contracting officer disallow $46,933 for claim overcha rges
   and verify that the Plan returns all amou nts recovered to the FEHBP.

   Plan Response:

   Plan agrees with the finding. Claim adjustments were completed on May 13, 2014 to
   recover the overcharges.

   Recommendation 2

   We recommend that the contracting officer require the Plan to provide additional
   education and/or detailed tra ining to all claims processors on how to properly
   adjudicate non-participating claims for members with "basic" enrollment option
September 22, 2014
Page 2 of4

   based on the benefit brochure, so that these claims are properly adjudicated going
   forward .

   Plan Response:

  The Plan agrees with the finding. In recent years, the Plan has put a lot of time and
  effort in making sure our associates have the knowledge and the tools they need to
  help mitigate errors from occurring. The Plan hold associates accountable for their
  mistakes through the performance evaluation process. In the FEP claims department,
  quality is a critical part of the associates overall performance. On a monthly basis,
  associates are expected to meet the 99% quality expectations.

  The Plan's current training includes how to process non-par claims. As such the
  Plan does not believe additional formal training is required ; however, the associates
  that have processed claims included in this finding have been coached and
  counselled on the correct methods of claims adjudication. The Plan will also
  continue to monitor this activity to ensure that non-par claims are paid correctly.

B. Retroactive Enrollment Review                                                $25,399

  Recommendation 3

  We recommend that the contracting officer disallow $25,399 for claim overcharges
  and verify that the Plan returns all amounts recovered to the FEHBP.

  Plan Response:

  Plan agrees with the finding. Claim adjustments were completed on May 18, 2014 to
  recover the overcharges.

  Recommendation 4

  We recommend that the contracting officer require the Association to ensure on an
  ongoing basis that the Plan is identifying and properly returning claim payment
  errors identified on the FEP Operations Center daily retroactive reports.

  Plan Response

  The retro report that we receive from FEP are reviewed daily. The inventory is 

  worked from oldest to youngest. The objective is to have all retro adjustments 

  completed within 20 calendar days. As of June 1, 2014, Plan management 

-rt
September 22, 2014
Page 3 of4

   ensures that the inventory is monitored daily to proactively address any aging
   issues or to report any system issues that could delay the overpayment from being
   recovered timely.

   BCBSA Response

   Beginning with the implementation of the 3rd quarter release on September 27,
   2014, all daily retroactive enrollment notices will be added to the Claims Audit
   Monitoring Tool. This will give the FEP Director's Office the ability to monitor Plan
   activity to ensure that the Plan is appropriately addressing all retroactive termination
   notices.

C. Miscellaneous Dialysis Review                                                $14,262

   Recommendation 5

   We recommend that the contracting officer disallow $14,262 for claim overcharges
   and verify that the Plan returns all amounts recovered to the FEHBP.

   Plan Response

   Plan agrees with the finding . Claim adjustments were completed on June 26, 2014
   to recover the overcharges.

   Recommendation 6


   We recommend that the contracting officer require the Plan to adjust the applicable
   claims in FEP Direct to reflect the actual amounts paid to the providers for
   variances between the Plan's local claims system and FEP Direct. Additionally, we
   recommend that the contracting officer ensure that the Plan continuously performs
   reconciliations between their local claims system and the FEP Direct system to
   check and properly adjust claim payment variances.

   Plan Response

   The Plan is in the process of adjusting the claims related to this recommendation .
   A compare report was created by the Plan to identify all FEP claims that have
   payment variances between FEP Direct and the Plan's local claim system. This
   report gives the Plan the ability to quickly identify, trend and rectify all claims that
            ort
September 22, 2014
Page 4 of4

      are out-of balance (008). A copy of the compare report was provided during the
      audit.

      Beginning June 1, 2014, the Plan ensures that the compare report is reviewed
      daily. The inventory of claims is worked from oldest to youngest. The objective of
      the review is to have all 008 adjustments completed within 20 calendar days. The
      Plan also began monitoring the inventory age daily to proactively address any aging
      issues or to report any system issues that could delay the overpayment from being
      recovered timely.

We appreciate the opportunity 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
               or

Sincerely,




                 CISA
               rector, Program Assurance

cc:
                                       Report Fraud, Waste, and 

                                           Mismanagement 

                                                  Fraud, waste, and mismanagement in
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                                                   the Inspector General staff, agency
                                                employees, and the general public. We
                                              actively solicit allegations of any inefficient
                                                    and wasteful practices, fraud , and
                                               mismanagement related to OPM programs
                                              and operations. You can report allegations
                                                          to us in several ways:


                     By Internet: 	               http://www.opm.gov/our-inspector-generallhotline-to­
                                                  report-fraud-waste-or-abuse


                         By Pbone: 	              Toll Free Number:                              (877) 499-7295
                                                  Washington Metro Area:                         (202) 606-2423


                           By Mail:               Office of the Inspector General
                                                  U.S. Office of Personnel Management
                                                  1900 E Street, NW
                                                  Room6400
                                                  Washington, DC 20415-11 00




                                                            -CAUTION-
This audit report has been distributed to Federal officials who an responsible for the administration or the audited program. This audit report may
contain proprietary data which Is proleded by Federal law (18 U.S.C. 1905). Therefore, while this au,dit report Is available under tbe Freedom of
Information Act and made available to tbe public on the OlG webpage (llttp:l!www.opm.guvlou,..;lfSPector-general), caution needs to be exerdsed
before releasing the report to the general public as it may contain proprietary Information that was redac:ttd from the publicly distributed copy.

                                                                                                               Report No. 1A-10-55-14-027