oversight

Audit of BlueCross BlueShield of Rhode Island Providence, Rhode Island

Published by the Office of Personnel Management, Office of Inspector General on 2017-07-27.

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

                                AUDIT OF
                  BLUECROSS BLUESHIELD OF RHODE ISLAND
                       PROVIDENCE, RHODE ISLAND

                                             Report Number 1A-10-60-16-056
                                                      July 27, 2017



                                                             -- CAUTION --
This report has been distributed to Federal officials who are responsible for the administration of the subject program. This non-public version may
contain confidential and/or proprietary information, including information protected by the Trade Secrets Act, 18 U.S.C. § 1905, and the Privacy Act,
5 U.S.C. § 552a. Therefore, while a redacted version of this report is available under the Freedom of Information Act and made publicly available on
the OIG webpage (http://www.opm.gov/our-inspector-general), this non-public version should not be further released unless authorized by the OIG.
                EXECUTIVE SUMMARY
                                         Audit of BlueCross BlueShield of Rhode Island

Report No. 1A-10-60-16-056                                                                                                                        July 27, 2017



 Why did we conduct the audit?                               What did we find?

 We conducted this limited scope audit                       We questioned $466,401 in hospital settlement recoveries,
 to obtain reasonable assurance that                         administrative expenses, and lost investment income (LII). The
 BlueCross BlueShield of Rhode                               BlueCross BlueShield Association (Association) and Plan agreed
 Island (Plan) is complying with the                         with all of the questioned amounts.
 provisions of the Federal Employees
 Health Benefits Act and regulations                         Our audit results are summarized as follows:
 that are included, by reference, in the
                                                             	 Miscellaneous Health Benefit Payments and Credits – We
 Federal Employees Health Benefits
                                                                questioned $129,923 for hospital settlement recoveries that had
 Program (FEHBP) contract.
                                                                not been returned to the FEHBP and $4,460 for applicable LII.
 Specifically, the objectives of our
                                                                We verified that the Plan has returned these questioned
 audit were to determine if the Plan
                                                                amounts to the FEHBP.
 charged costs to the FEHBP and
 provided services to FEHBP members                          	 Administrative Expenses – We questioned $332,018 in
 in accordance with the terms of the                            administrative expenses and LII, consisting of $151,683 for
 contract.                                                      pension cost credit adjustments, $108,053 for quality
                                                                improvement cost overcharges, $57,588 for unallowable and/or
 What did we audit?
                                                                unallocable cost center and natural account expenses, and
 Our audit covered miscellaneous                                $14,694 for applicable LII. We verified that the Plan has
 health benefit payments and credits                            returned these questioned amounts to the FEHBP.
 from 2013 through March 31, 2016,
                                                             	 Cash Management – The audit disclosed no findings pertaining
 as well as administrative expenses
                                                                to the Plan’s cash management activities and practices.
 from 2011 through 2015, as reported
                                                                Overall, we determined that the Plan handled FEHBP funds in
 in the Annual Accounting Statements.
                                                                accordance with Contract CS 1039 and applicable laws and
 We also reviewed the Plan’s cash
                                                                regulations.
 management activities and practices
 related to FEHBP funds from 2013                            	 Fraud and Abuse Program – The Plan is in compliance with the
 through March 31, 2016, and the                                communication and reporting requirements for fraud and abuse
 Plan’s Fraud and Abuse (F&A)                                   cases that are set forth in FEHBP Carrier Letter 2014-29.
 Program activities from 2015 through
 March 31, 2016.



  _______________________
  Michael R. Esser
  Assistant Inspector General
  for Audits                                                                   i
         This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
         information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                             ABBREVIATIONS


   Association                    BlueCross BlueShield Association
   BCBS                           BlueCross BlueShield or BlueCross and/or BlueShield
   CC                             Cost Center
   CFR                            Code of Federal Regulations
   Contract                       Contract CS 1039
   FAR                            Federal Acquisition Regulations
   FEHB                           Federal Employees Health Benefits
   FEHBAR                         Federal Employees Health Benefits Acquisition Regulations
   FEHBP                          Federal Employees Health Benefits Program
   FEP                            Federal Employee Program
   FEPDO                          Federal Employee Program Director’s Office
   F&A                            Fraud and Abuse
   LII                            Lost Investment Income
   NA                             Natural Account
   OIG                            Office of the Inspector General
   OPM                            U.S. Office of Personnel Management
   Plan                           BlueCross BlueShield of Rhode Island
   SIU                            Special Investigations Unit
   SPI                            Special Plan Invoice




                                                                        ii
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                    TABLE OF CONTENTS

                                                                                                                                          Page

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


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


     I.         BACKGROUND ..........................................................................................................1 


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


     III.       AUDIT FINDINGS AND RECOMMENDATIONS.................................................8


                A. MISCELLANEOUS HEALTH BENEFIT PAYMENTS AND CREDITS ...........8


                      1. Hospital Settlements ..........................................................................................8 


                B. ADMINISTRATIVE EXPENSES.........................................................................10 


                      1. Pension Costs ...................................................................................................10 

                      2. Cost Settlement Adjustment for Quality Improvement Costs .........................12 

                      3. Unallowable and/or Unallocable Expenses .....................................................14 


                C. CASH MANAGEMENT .......................................................................................16 


                D. FRAUD AND ABUSE PROGRAM .....................................................................17 


     IV.        SCHEDULE A – QUESTIONED CHARGES

                APPENDIX: BlueCross BlueShield Association’s Draft Report Response, dated
                March 30, 2017

                REPORT FRAUD, WASTE, AND MISMANAGEMENT




This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                            I. BACKGROUND

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
BlueCross BlueShield of Rhode Island (Plan). The Plan is located in Providence, Rhode Island.

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.

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 local BlueCross
and/or BlueShield (BCBS) plans, has entered into a Government-wide Service Benefit Plan
contract (contract or 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. The Plan is one
of 36 BCBS companies participating in the FEHBP. These 36 companies include 64 local BCBS
plans.

The Association has established a Federal Employee Program (FEP1) 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 BCBS, located in Owings Mills, Maryland and
Washington, D.C. These activities include acting as intermediary for claims processing between
the Association and local BCBS plans, processing and maintaining subscriber eligibility,
adjudicating member claims on behalf of BCBS plans, approving or disapproving the

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-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
    reimbursement of local plan payments of FEHBP claims (using computerized system edits),
    maintaining a history file of all FEHBP claims, and maintaining claims payment data and related
    financial data in support of the Association’s accounting of all program funds.

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

    All findings from our previous audit of the Plan (Report No. 1A-10-60-03-020, dated
    November 3, 2003), for contract years 1999 through 2001, have been satisfactorily resolved. We
    also included this Plan in each of the following recent focused audits that covered a sample of
    BCBS plans:

         	 Final Report No. 1A-99-00-16-010 (dated July 18, 2016) for aging FEP refunds as of
            June 30, 2015, and fraud recoveries and medical drug rebates from 2012 through June 30,
            2015;

         	 Final Report No. 1A-99-00-14-068 (dated November 16, 2015) for pension and                                                         

            post-retirement benefit costs from 2011 through 2013; and,


         	 Final Report No. 1A-99-00-13-018 (dated January 17, 2014) for cash management
            activities and practices related to FEHBP funds from 2011 through September 30, 2012.

    All findings related to the Plan from these recent focused audits 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 on January 31,
    2017; and were presented in detail in a draft report, dated February 22, 2017. 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	                           Report No. 1A-10-60-16-056
    This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
    information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
.
II. OBJECTIVES, SCOPE, AND METHODOLOGY
OBJECTIVES

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 objectives were as follows:

           Miscellaneous Health Benefit Payments and Credits

           	 To determine whether miscellaneous payments charged to the FEHBP were in
              compliance with the terms of the contract.

           	 To determine whether credits and miscellaneous income relating to FEHBP benefit
              payments were returned timely to the FEHBP.

           Administrative Expenses

           	 To determine whether administrative expenses charged to the contract were actual,
              allowable, necessary, and reasonable expenses incurred in accordance with the terms
              of the contract and applicable regulations.

           Cash Management

           	 To determine whether the Plan handled FEHBP funds in accordance with applicable
              laws and regulations concerning cash management in the FEHBP.

           Fraud and Abuse Program

           	 To determine whether the Plan's communication and reporting of fraud and abuse
              cases were in compliance with the terms of Contract CS 1039 (contract) and FEHBP
              Carrier Letter 2014-29.




                                                                         3	                           Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
SCOPE

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 codes 370 and 870 for contract years 2011 through 2015. During this period, the
Plan paid approximately $359 million in FEHBP health benefit payments and charged the
FEHBP $32 million in administrative expenses.


                                             BlueCross BlueShield of Rhode Island
                                                      Contract Charges

                                           100

                                           75
                              $ Millions




                                           50

                                           25

                                             0
                                                  2011       2012         2013          2014         2015
                                                                    Contract Years
                                                 Health Benefit Payments          Administrative Expenses


Specifically, we reviewed the Plan’s miscellaneous health benefit payments and credits, such as
refunds and provider audit recoveries, and cash management activities and practices from 2013
through March 31, 2016, as well as administrative expenses from 2011 through 2015. We also
reviewed the Plan’s Fraud and Abuse (F&A) Program activities from 2015 through March 31,
2016.

In planning and conducting our audit, we obtained an understanding of the 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

                                                                         4                            Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
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.

We also conducted tests to determine whether the Plan had complied with the contract, the
applicable procurement regulations (i.e., Federal Acquisition Regulations (FAR) and Federal
Employees Health Benefits Acquisition Regulations (FEHBAR), as appropriate), and the laws
and regulations governing the FEHBP. The results of our tests indicate that, with respect to the
items tested, the Plan did not comply with all provisions of the contract and federal procurement
regulations. Exceptions noted in the areas reviewed are set forth 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 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, 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 Providence, Rhode Island on various dates from
October 25, 2016, through December 16, 2016. Audit fieldwork was also performed at our
offices in Cranberry Township, Pennsylvania and Washington, D.C. through January 31, 2017.
Throughout the audit process, the Plan did an excellent job providing complete and timely
responses to our numerous requests for supporting documentation. We greatly appreciated the
Plan’s exceptional cooperation and responsiveness during the pre-audit and fieldwork phases of
this audit.

METHODOLOGY

We obtained an understanding of the internal controls over the Plan’s financial, cost accounting,
and cash management systems by inquiry of Plan officials.

We interviewed Plan personnel and reviewed the Plan’s policies, procedures, and accounting
records during our audit of miscellaneous health benefit payments and credits. For the period
2013 through March 31, 2016, we also judgmentally selected and reviewed the following FEP
items:




                                                                         5                            Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
     Health Benefit Refunds

     	 A high dollar sample of 75 FEP health benefit refunds returned via auto recoupments,
        totaling $3,410,053 (from a universe of        FEP refunds returned via auto
        recoupments, totaling $          ). Our high dollar sample included the 50 highest auto
        recoupment amounts from the Plan’s new claims system (“Facets”) for September 2014
        through March 2016, and the 25 highest auto recoupment amounts from the Plan’s
        previous claims system (“LRSP”) for 2013 through August 2014.

     	 A high dollar sample of 54 FEP health benefit refund cash receipts, totaling $1,676,252
        (from a universe of       FEP refund receipt amounts, totaling $           ). Our high
        dollar sample included all refund receipt amounts of $4,000 or more.

     Other Health Benefit Payments, Credits, and Recoveries

     	 13 high dollar provider audit recoveries, totaling $813,837, from a universe of
        recoveries, totaling $          in net FEP recoveries. For this sample, we selected all
        provider audit recoveries of $8,000 or more.

     	 All              FEP hospital settlement recovery amounts, totaling $                                        .

     	 All           FEP medical drug rebate amounts, totaling $                                    .

     	 10 high dollar subrogation recoveries, totaling $160,952, from a universe of     FEP
        recoveries, totaling $       . For this sample, we selected all subrogation recoveries of
        $4,000 or more.

     	 Three fraud recoveries, totaling $18,678, from a universe of       recoveries, totaling
        $       . For this sample, we selected the three highest dollar subrogation recoveries.

     	 10 high dollar special plan invoices (SPI), totaling $45,533 in net FEP payments, from a
        universe of SPI’s, totaling $          in net FEP credits. When applicable, we selected
        the SPI’s with the two highest dollar credit amounts and the SPI’s with the two highest
        dollar charge amounts from each year for SPI pay codes related to miscellaneous health
        benefit payments and credits. SPI’s are used by the Plan to process miscellaneous health
        benefit payment and credit transactions that do not involve primary claim payments or
        checks.




                                                                         6	                           Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
We reviewed these samples to determine if health benefit refunds and recoveries were timely
returned to the FEHBP and if miscellaneous payments were properly charged to the FEHBP.
The results of these samples were not projected to the universe of miscellaneous health benefit
payments and credits, since we did not use statistical sampling.

We judgmentally reviewed administrative expenses charged to the FEHBP for contract years
2011 through 2015. Specifically, we reviewed administrative expenses relating to cost centers,
natural accounts, pension, post-retirement, employee health benefits, non-recurring projects,
Affordable Care Act fees, and out-of-system adjustments.2 We used the FEHBP contract, the
FAR, and the FEHBAR to determine the allowability, allocability, and reasonableness of
charges.

We reviewed the Plan’s cash management activities and practices to determine whether the Plan
handled FEHBP funds in accordance with Contract CS 1039 and applicable laws and regulations.
Specifically, we reviewed the letter of credit account drawdowns, working capital calculations,
adjustments and/or balances, and interest income transactions from 2013 through March 31,
2016, as well as the Plan’s dedicated FEP investment account balance as of March 31, 2016.

We also interviewed the Plan’s Special Investigations Unit regarding the effectiveness of the
F&A Program, as well as reviewed the Plan’s communication and reporting of fraud and abuse
cases to test compliance with Contract CS 1039 and FEHBP Carrier Letter 2014-29.




2
  In general, the Plan records administrative expense transactions to natural accounts that are then allocated through
cost centers to the Plan’s various lines of business, including the FEP. The Plan allocated administrative expenses
of $             to the FEHBP from        cost centers that contained    natural accounts. From this universe, we
selected a judgmental sample of 48 cost centers to review, which totaled $16,783,425 in expenses allocated to the
FEHBP. We also selected a judgmental sample of 43 natural accounts to review, which totaled $22,884,417 in
expenses allocated to the FEHBP through the cost centers. Because of the way we select and review each of these
samples, there is a duplication of some of the administrative expenses tested. We selected these cost centers and
natural accounts based on high dollar amounts, high dollar allocation methods, and our nomenclature review and
trend analysis. We reviewed the expenses from these cost centers and natural accounts for allowability, allocability,
and reasonableness. The results of these samples were not projected to the universe of administrative expenses,
since we did not use statistical sampling.

                                                                         7                            Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
III.
  IV. AUDIT
       MAJORFINDINGS AND RECOMMENDATIONS
             CONTRIBUTORS  TO THIS REPORT
 A. MISCELLANEOUS HEALTH BENEFIT PAYMENTS AND CREDITS

      1. Hospital Settlements                                                                                                        $134,383

            Our audit determined that the Plan had not returned seven hospital settlement recoveries,
            totaling $129,923, to the FEHBP as of March 31, 2016. The Plan subsequently returned
            these amounts to the FEHBP from 375 to 1,060 days late and after receiving our audit
            notification letter. Additionally, the Plan untimely deposited these hospital settlements into
            the FEP investment account, resulting in lost investment income (LII) of $4,460. As a
            result of our audit, the Plan returned $134,383 to the FEHBP, consisting of $129,923 for
            the questioned hospital settlement recoveries and $4,460 for LII on these funds returned
            untimely to the FEHBP.

            Contract CS 1039, Part II, Section 2.3 (i) states, “All health benefit refunds and
            recoveries . . . must be deposited into the working capital or investment account within 30
            days and returned to or accounted for in the FEHBP letter of credit account within 60
            days after receipt by the Carrier.” Also, based on an agreement between OPM and the
            Association, dated March 26, 1999, BCBS plans have 30 days to return health benefit
            refunds and recoveries to the FEHBP before LII will commence to be assessed.

            FAR 52.232-17(a) states, “all amounts that become payable by the Contractor . . . shall
            bear simple interest from the date due . . . The interest rate shall be the interest rate
            established by the Secretary of the Treasury as provided in 41 U.S.C. 7109, which is
            applicable to the period in which the amount becomes due, as provided in paragraph (e)
            of this clause, and then at the rate applicable for each six-month period as fixed by the
            Secretary until the amount is paid.”

            Regarding reportable monetary findings, Contract CS 1039, Part III, section 3.16 (a),
            states, “Audit findings . . . in the scope of an OIG audit are reportable as questioned
            charges unless the Carrier provides documentation supporting that the findings were
            already identified and corrected (i.e., . . . untimely health benefit refunds were already
            processed and returned to the FEHBP) prior to audit notification.”

            For the period 2013 through March 31, 2016, we identified        hospital settlements that
            included $          in FEP recoveries. We reviewed all of these hospital settlements to
            determine if the Plan properly allocated and timely returned FEP’s allocable recovery
            amounts for these settlements to the FEHBP.


                                                                          8                            Report No. 1A-10-60-16-056
 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
 information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                                 Based on our review, we determined that FEP’s
              The Plan returned hospital
                                                 allocable recovery amounts for these hospital
                settlement recoveries of
                                                 settlements were properly calculated, but the Plan had
                $129,923 to the FEHBP
                                                 not returned all of these amounts to the FEHBP as of
              from 375 to 1,060 days late
                                                 March 31, 2016. Specifically, we found that FEP’s
                   and after the audit
                                                 recovery amounts for seven of the hospital
                    notification date.
                                                 settlements, totaling $129,923, were returned to the
           FEHBP on various dates in July 2016, more than 60 days after receipt (i.e., from 375 to
           1,060 days late) and after receiving our audit notification letter (dated April 1, 2016).
           Therefore, we are questioning this amount as a monetary finding. Additionally, the Plan
           untimely deposited these hospital settlement recoveries into the FEP investment account,
           resulting in LII of $4,460. In total, the Plan returned $134,383 to the FEHBP for this
           audit finding, consisting of $129,923 for the questioned hospital settlement recoveries
           and $4,460 for applicable LII. We reviewed and accepted the Plan’s LII calculation.

           Association Response:

           The Association and Plan agree with this finding.

           OIG Comment:

           As part of our review, we verified that the Plan returned $134,383 to the FEHBP in July
           and August of 2016 for this audit finding, consisting of $129,923 for the questioned
           hospital settlement recoveries and $4,460 for applicable LII.

           Recommendation 1

           We recommend that the contracting officer require the Plan to return $129,923 to the
           FEHBP for the questioned hospital settlement recoveries. However, since we verified
           that the Plan returned $129,923 to the FEHBP for these questioned hospital settlement
           recoveries, no further action is required for this amount.

           Recommendation 2

           We recommend that the contracting officer require the Plan to return $4,460 to the
           FEHBP for LII on the questioned hospital settlement recoveries. However, since we
           verified that the Plan returned $4,460 to the FEHBP for the questioned LII, no further
           action is required for this LII amount.



                                                                         9                            Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
B. ADMINISTRATIVE EXPENSES

     1. Pension Costs                                                                                                               $159,066

           The Plan had not allocated and credited the FEHBP $136,578 for a 2014 actuarially
           determined net periodic pension credit and $15,105 for a 2013 pension curtailment. As a
           result of our finding, the Plan returned $159,066 to the FEHBP, consisting of $151,683
           for the questioned pension cost credit adjustments and $7,383 for applicable LII.

           48 CFR 31.201-5 states, “The applicable portion of any income, rebate, allowance, or
           other credit relating to any allowable cost and received by or accruing to the contractor
           shall be credited to the Government either as a cost reduction or by cash refund.”

           48 CFR 31.205-6(j)(1) states, “Pension plans are normally segregated into two types of
           plans: defined-benefit and defined-contribution pension plans. The contractor shall
           measure, assign, and allocate the costs of all defined-benefit pension plans and the costs
           of all defined-contribution pension plans in compliance with 48 CFR 9904.412 (Cost
           Accounting Standard for Composition and Measurement of Pension Cost) and 48 CFR
           9904.413 (Adjustment and Allocation of Pension Cost). Pension costs are allowable
           subject to the referenced standards and the cost limitations and exclusions set forth in
           paragraph (j)(1)(i) and in paragraphs (j)(2) through (j)(6) of this subsection.”

           48 CFR 31-205-6(j)(3) states, “For segment closings, pension plan terminations, or
           curtailment of benefits, the amount of the adjustment shall be - (A) For contracts and
           subcontracts that are subject to full coverage under the Cost Accounting Standards (CAS)
           Board rules and regulations, the amount measured, assigned, and allocated in accordance
           with 48 CFR 9904.413-50(c)(12); and (B) For contracts and subcontracts that are not
           subject to full coverage under the CAS, the amount measured, assigned, and allocated in
           accordance with 48 CFR 9904.413-50(c)(12), except the numerator of the fraction at 48
           CFR 9904.413-50(c)(12)(vi) is the sum of the pension plan costs allocated to all non-
           CAS-covered contracts and subcontracts that are subject to Subpart 31.2 . . . For all other
           situations where assets revert to the contractor, or such assets are constructively received
           by it for any reason, the contractor shall, at the Government’s option, make a refund or
           give a credit to the Government for its equitable share of the gross amount withdrawn.
           The Government’s equitable share shall reflect the Government’s participation in pension
           costs through those contracts . . . Excise taxes on pension plan asset reversions or
           withdrawals . . . are unallowable in accordance with 31.205-41(b)(6).”




                                                                         10                           Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
           In general, the FAR limits the amount of pension cost that may be charged to a
           government contract to the amount of any cash contribution to the pension fund trustee,
           or the amount of expense calculated in accordance with Cost Accounting Standard 412
           and 413, whichever is lower. All cash contributions must be made by the time set for
           filing of the Federal income tax return or any extension.

           As previously cited from FAR 52.232-17(a), all amounts that become payable by the
           Carrier should include simple interest from the date due.

           Our audit covered pension costs that were charged to the FEHBP for contract years 2014
           and 2015, since we previously audited this Plan’s 2011 through 2013 pension costs
           during a recent focused BCBS audit of pension and post-retirement benefit costs (Report
           No. 1A-99-00-14-068, dated November 16, 2015). For 2014, the Plan did not charge the
           FEHBP for pension costs. For 2015, the Plan credited the FEHBP $30,044 for an
           actuarially determined net periodic pension credit. Accordingly, we reviewed the Plan’s
           pension cost documentation to determine if the amounts were properly charged or
           credited to the FEHBP in accordance with the contract and applicable federal regulations.

                                       Based on our review, we determined that the Plan
                 The Plan had not
                                       properly allocated and credited the actuarially determined
              allocated and credited
                                       net periodic pension credit to the FEHBP for 2015.
             the FEHBP $151,683 for
                                       However, the Plan had not allocated and credited an
              2013 and 2014 pension
                                       actuarially determined net periodic pension credit to the
                 cost adjustments.
                                       FEHBP for 2014. Specifically, the Plan recorded this
           pension credit of $       for 2014, but had not allocated a share of the credit to the
           FEP. The FEP should have been allocated $136,578 of this pension credit.

           During our fieldwork phase, we also found out that the Plan curtailed the pension plan in
           2013. As a result, we expanded our scope to include a review of the Plan’s 2013 pension
           curtailment, for the purpose of determining if the Plan should have allocated a share of
           this curtailment to the FEP. Based on our review, we determined that the Plan should
           have allocated and credited a share of this pension curtailment to the FEHBP.
           Specifically, the Plan recorded a pension curtailment credit of $        in 2013, but had
           not allocated a share of this credit to the FEP. The FEP should have been allocated
           $15,105 of this pension curtailment credit.

           As a result, the Plan returned $159,066 to the FEHBP for this audit finding, consisting of
           $151,683 for the questioned pension cost credit adjustments ($136,578 plus $15,105) and
           $7,383 for applicable LII. We reviewed and accepted the Plan’s LII calculation.


                                                                         11                           Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
           Association Response:

           The Association and Plan agree with this finding.

           OIG Comment:

           As part of our review, we verified that the Plan returned $159,066 to the FEHBP in
           February 2017 for this audit finding, consisting of $151,683 for the questioned pension
           cost credit adjustments and $7,383 for applicable LII.

           Recommendation 3

           We recommend that the contracting officer require the Plan to return $151,683 to the
           FEHBP for the questioned pension cost credit adjustments. However, since we verified
           that the Plan returned $151,683 to the FEHBP for these questioned credit adjustments, no
           further action is required for this amount.

           Recommendation 4

           We recommend that the contracting officer require the Plan to return $7,383 to the
           FEHBP for LII on the questioned pension cost credit adjustments. However, since we
           verified that the Plan returned $7,383 to the FEHBP for the questioned LII, no further
           action is required for this LII amount.

     2. Cost Settlement Adjustment for Quality Improvement Costs                                                                    $112,024

           Our audit determined that the Plan had not made a cost settlement adjustment to credit
           the FEHBP for 2014 quality improvement costs. As a result of this finding, the Plan
           returned $112,024 to the FEHBP, consisting of $108,053 for quality improvement cost
           overcharges and $3,971 for applicable LII.

           As previously cited from Contract CS 1039, costs charged to the FEHBP must be actual,
           allowable, allocable, and reasonable.

           As previously cited from FAR 52.232-17(a), all amounts that become payable by the
           Carrier should include simple interest from the date due.




                                                                         12                           Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
           For contract years 2013 through 2015, the FEP Director’s Office (FEPDO) approved that
           the Plan could withdraw a monthly expense allowance from the LOCA for the budgeted
           quality improvement costs, resulting in charges of $1,401,274 to the FEHBP ($          in
           2013, $          in 2014, and $        in 2015). Following each contract year, the Plan
           and FEPDO performed a cost settlement, where the Plan made an adjustment based on
           the difference between the Plan’s budgeted costs and the actual settled costs. We
           reviewed these cost settlements and applicable supporting documentation to determine
           if the Plan made the necessary adjustments to credit or charge the FEHBP for the cost
           settlement differences.

                                           Based on our review, we determined that the Plan
              The Plan overcharged
                                           correctly made the cost settlement adjustments for 2013
             the FEHBP $108,053 for
                                           and 2015. However, the Plan had not made the applicable
               quality improvement
                                           adjustment to credit the FEHBP $108,053 for the 2014
                  costs in 2014.
                                           quality improvement cost settlement. As a result, the Plan
           returned $112,024 to the FEHBP for this audit finding, consisting of $108,053 for quality
           improvement costs that were overcharged to the FEHBP in 2014 and $3,971 for
           applicable LII calculated on these overcharges. We reviewed and accepted the Plan’s LII
           calculation.

           Association Response:

           The Association and Plan agree with this finding.

           OIG Comment:

           As part of our review, we verified that the Plan returned $112,024 to the FEHBP in
           November and December 2016 for this audit finding, consisting of $108,053 for quality
           improvement cost overcharges and $3,971 for applicable LII.

           Recommendation 5

           We recommend that the contracting officer disallow $108,053 for quality improvement
           costs that were overcharged to the FEHBP in 2014. However, since we verified that the
           Plan returned $108,053 to the FEHBP for the questioned quality improvement costs, no
           further action is required for this amount.




                                                                         13                           Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
           Recommendation 6

           We recommend that the contracting officer require the Plan to return $3,971 to the
           FEHBP for LII on the questioned quality improvement costs. However since we verified
           that the Plan returned $3,971 to the FEHBP for the questioned LII, no further action is
           required for this LII amount.

     3. Unallowable and/or Unallocable Expenses                                                                                       $60,928

           The Plan charged unallowable and/or unallocable cost center and natural account
           expenses of $57,588 to the FEHBP. As a result of this finding, the Plan returned $60,928
           to the FEHBP, consisting of $57,588 for the questioned expenses and $3,340 for
           applicable LII.

           As previously cited from Contract CS 1039, costs charged to the FEHBP must be actual,
           allowable, allocable, and reasonable.

           48 CFR 31.201-4 states, “A cost is allocable if it is assignable or chargeable to one or
           more cost objectives on the basis of relative benefits received or other equitable
           relationship. Subject to the foregoing, a cost is allocable to a Government contract if it -
               (a) Is incurred specifically for the contract;
               (b) Benefits both the contract and other work, and can be distributed to them in
                   reasonable proportion to the benefits received; or
               (c) Is necessary to the overall operation of the business, although a direct relationship
                   to any particular cost objective cannot be shown.”

           As previously cited from FAR 52.232-17(a), all amounts that become payable by the
           Carrier should include simple interest from the date due.

           In general, the Plan records administrative expense transactions to natural accounts that
           are then allocated through cost centers to the Plan’s various lines of business, including
           the FEP. For the period 2011 through 2015, the Plan allocated administrative expenses of
           $             to the FEHBP from        cost centers that contained      natural accounts.
           From this universe, we selected a judgmental sample of 48 cost centers to review, which
           totaled $16,783,425 in expenses allocated to the FEHBP. We also selected a judgmental
           sample of 43 natural accounts to review, which totaled $22,884,417 in expenses allocated
           to the FEHBP through the cost centers. Because of the way we select and review each of
           these samples, there is a duplication of some of the administrative expenses tested. We
           selected the cost centers and natural accounts based on high dollar amounts, a trend


                                                                         14                           Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
           analysis, and our nomenclature review. We reviewed the expenses from these cost
           centers and natural accounts for allowability, allocability, and reasonableness.

                                                       Based on our review, we determined that the Plan allocated
              The Plan charged the
                                                       and charged expenses to the FEHBP from three cost centers
               FEHBP $57,588 for
                                                       (CC) and four natural accounts (NA) that were expressly
               unallowable and/or
                                                       unallowable and/or did not benefit the FEHBP or only
              unallocable expenses.
                                                       minimally benefited the FEHBP.

           The following schedule is a summary of these questioned CC and NA expenses that were
           inappropriately charged to the FEHBP from 2011 through 2015.



             CC or NA                                                                                   Reason for                Amount
              Number                                 CC or NA Name                                      Questioning              Questioned
                                  Marketing Incentives - FEP                                              Unallocable               $37,012
                                  Miscellaneous - Cash Over and Short                                     Unallocable                   8,212
                                  Legal - Litigation                                                     Unallowable                    7,891

                                  Travel - Non Allowable                                                 Unallowable                   2,320
                                  Contributions - Non Allowable                                          Unallowable                    1,548
                                  In-House Legal                                                         Unallowable                      508
                                  Assistant Vice President of Sales /
                                  Manager of Market Enrollment Operations                                 Unallocable                      97
                 Total                                                                                                              $57,588

           In regard to the questioned expenses charged to the FEHBP, 48 CFR 31-205-8
           (Contributions and Donations), 48 CFR 31-205-14 (Entertainment Costs), and 48 CFR
           31-205-47(f)(3) (Costs Related to Legal and Other Proceedings) also provide specific
           criteria to the extent that such costs are expressly unallowable. Based on our review of
           the Plan’s documentation, these questioned CC and NA charges are not in compliance
           with the federal regulations.

           In total, the Plan returned $60,928 to the FEHBP for this audit finding, consisting of
           $57,588 for unallowable and/or unallocable CC and NA expenses that were charged to
           the FEHBP from 2011 through 2015 and $3,340 for applicable LII. We reviewed and
           accepted the Plan’s LII calculation.


                                                                         15                           Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
           Association Response:

           The Association and Plan agree with this finding.

           OIG Comment:

           As part of our review, we verified that the Plan returned $60,928 to the FEHBP in
           February 2017 for this audit finding, consisting of $57,588 for unallowable and/or
           unallocable CC and NA expenses and $3,340 for applicable LII.

           Recommendation 7

           We recommend that the contracting officer require the Plan to return $57,588 to the
           FEHBP for the questioned unallowable and/or unallocable CC and NA expenses.
           However, since we verified that the Plan returned $57,588 to the FEHBP for these
           questioned expenses, no further action is required for this amount.

           Recommendation 8

           We recommend that the contracting officer require the Plan to return $3,340 to the
           FEHBP for LII on the questioned unallowable and/or unallocable CC and NA expenses.
           However, since we verified that the Plan returned $3,340 to the FEHBP for the
           questioned LII, no further action is required for this LII amount.

C. CASH MANAGEMENT

     The audit disclosed no findings pertaining to the Plan’s cash management activities and
     practices. Overall, we concluded that the Plan handled FEHBP funds in accordance with
     Contract CS 1039 and applicable laws and regulations.




                                                                         16                           Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
D. FRAUD AND ABUSE PROGRAM


                               The audit disclosed no findings pertaining to the Plan’s F&A
            The Plan timely
                               Program activities. For the period 2015 through March 31,
         entered all fraud and
                               2016, the Plan timely entered all fraud and abuse cases into the
          abuse cases into the
                               Association’s Fraud Information Management System (FIMS).3
         Association’s FIMS.
                               Overall, we determined that the Plan is in compliance with the
     communication and reporting requirements for fraud and abuse cases set forth in the FEHBP
     Carrier Letter 2014-29.




3
  FIMS is a multi-user, web-based FEP case-tracking database that the Association’s FEP Special Investigations
Unit (SIU) developed in-house. FIMS is used by the local BCBS plans’ SIUs and the Association’s FEP SIU to
track and report potential fraud and abuse activities.

                                                                         17                           Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                             IV. SCHEDULE A – QUESTIONED CHARGES

                                                                         BL ECROSS BLUESHIELD OF RHODE ISLAND
                                                                                    PROVIDENCE, RHODE ISLAND

                                                                                         QUESTIONED CHARGES

   AUDIT FINDINGS                                                                              2012             2013             2014             2015              2016             2017          TOTAL

   A. MISCELLANEOUS HEALTH BENEF1T PAYMENTS
      AND CREDITS

        1. Hospital Settlements*                                                                      $0          $9,902          $53,916          $68,956            $1 ,609               $0      $134,383

       TOTAL MISCELLANEO S HEALTH BENEFIT
       PAYMENTS AND CREDITS                                                                           $0          $9,902           53,916          $68,956            $1,609                $0

   B. ADMINISTRATIVE EXPENSES

        1. Pension Costs*                                                                            $0         $15,105         $136,889            $3,414            $3,325             $333       $159,066
        2. Cost Settlement Adjustment for Quality Impmvement Costs*                                   0               0          108,053             1,847             2,124                0        112,024
        3. Unallowablc and/or nallocablc Expenses"                                               15,753          23,831            1,209            18,747             1,262              126         60,928

       TOTAL ADMll°"IJSTRATIVE EXPE SES                                                        $15,753          $38,936         $246,151           $24,008            $6,711             $459       $332,018

   C. CASH MANAGEMENT                                                                                 $0                                $0                $0               $0               $0             $0

   D. FRAUD AND ABUSE PROGRAM                                                                         $0                                $0                $0               $0               $0             $0



   TOTAL QUESTIONED CHARGES                                                                    $15,753          $48,838         $300,067           $92,964            $8,320             $459       $466,401

   * We includedlostin..,,;tmentincomc {Ill) within auditlin<ing.~ Al ($4,460), tn ($7,383), B2 ($3,971), and H3 ($3,340). Th erefore, no additional UJ is applicable for these auclil findings.




                                                                                                                                                                      Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary information that may be protected by the Trade Secrets
Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
APPENDIX

                                                                                                                               Federal Employee Program
March 30, 2017                                                                                                                 1310 G Street, N.W.
                                                                                                                               Washington, D.C. 20005
                                                                                                                               202.626.4800
                         , Group Chief
Experience-Rated Audits Group
Office of the Inspector General
U.S. Office of Personnel Management
1900 E Street, Room 6400
Washington, DC 20415-11000

Reference:	                                  OPM DRAFT AUDIT REPORT
                                             Rhode Island Blue Cross Blue Shield Plan
                                             Audit Report Number: 1A-10-60-16-056

Dear                               :

This is our response to the above referenced U.S. Office of Personnel Management
(OPM) Draft Audit Report covering the Federal Employees’ Health Benefits Program
(FEHBP) concerning the Rhode Island Blue Cross Blue Shield Plans.

Our comments concerning the findings in the report are as follows:

A.         MISCELLANEOUS HEALTH BENEFIT PAYMENTS AND CREDITS

           1.     Hospital Settlements 	                                                                                         $134,383

                  Recommendation 1

                  We recommend that the contracting officer require the Plan to return
                  $129,923 to the FEHBP for the questioned hospital settlement recoveries.
                  However, since we verified that the Plan returned $129,923 to the FEHBP for
                  these questioned hospital settlement recoveries, no further action is required
                  for this amount.

                  Plan Response

                  The Plan agreed with this recommendation and returned the funds to the
                  FEP Program. As stated in the Draft Report dated February 22, 2017, no
                  further action is required.




                                                                                                                 Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                  Recommendation 2

                  We recommend that the contracting officer require the Plan to return $4,460
                  to the FEHBP for LII on the questioned hospital settlement recoveries.
                  However, since we verified that the Plan returned $4,460 to the FEHBP for
                  the questioned LII, no further action is required for this LII amount.

                  Plan Response

                  The Plan agreed with this recommendation and returned the funds to the
                  FEP Program. As stated in the Draft Report dated February 22, 2017, no
                  further action is required.

B.         ADMINISTRATIVE EXPENSES

           1. Pension Costs                                                                                                       $159,066

                  Recommendation 3

                  We recommend that the contracting officer require the Plan to return
                  $151,683 to the FEHBP for the questioned pension cost adjustments.
                  However, since we verified that the Plan returned $151,683 to the FEHBP for
                  these questioned pension cost adjustments, no further action is required for
                  this amount.

                  Plan Response

                  The Plan agreed with this recommendation and returned the funds to the
                  FEP Program. As stated in the Draft Report dated February 22, 2017, no
                  further action is required.

                  Recommendation 4

                  We recommend that the contracting officer require the Plan to return $7,383
                  to the FEHBP for LII on the questioned pension cost adjustments. However,
                  since we verified that the Plan returned $7,383 to the FEHBP for the
                  questioned LII, no further action is required for this LII amount.

                  Plan Response

                  The Plan agreed with this recommendation and returned the funds to the
                  FEP Program. As stated in the Draft Report dated February 22, 2017, no
                  further action is required.




                                                                                                                 Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
           2. Cost Settlement Adjustment for Quality Improvement Costs                                                            $112,024

                  Recommendation 5

                  We recommend that the contracting officer disallow $108,053 for quality
                  improvement costs that were overcharged to the FEHBP in 2014. However,
                  since we verified that the Plan returned $108,053 to the FEHBP for the
                  questioned quality improvement costs, no further action is required for this
                  amount.

                  Plan Response

                  The Plan agreed with this recommendation and returned the funds to the
                  FEP Program. As stated in the Draft Report dated February 22, 2017, no
                  further action is required.

                  Recommendation 6

                  We recommend that the contracting officer require the Plan to return $3,971
                  to the FEHBP for LII on the questioned quality improvement costs. However
                  since we verified that the Plan returned $3,971 in questioned LII to the
                  FEHBP, no further action is required for this LII amount.

                  Plan Response

                  The Plan agreed with this recommendation and returned the funds to the
                  FEP Program. As stated in the Draft Report dated February 22, 2017, no
                  further action is required.

           3.     Unallowable and/or Unallocable Expenses                                                                           $60,928

                  Recommendation 7

                  We recommend that the contracting officer require the Plan to return $57,588
                  to the FEHBP for the unallowable and/or unallocable expenses. However,
                  since we verified that the Plan returned $57,588 to the FEHBP for these
                  unallowable and/or unallocable expenses, no further action is required for
                  this amount.




                                                                                                                 Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                  Plan Response

                  The Plan agreed with this recommendation and returned the funds to the
                  FEP Program. As stated in the Draft Report dated February 22, 2017, no
                  further action is required.

                  Recommendation 8

                  We recommend that the contracting officer require the Plan to return $3,340
                  to the FEHBP for LII on the unallowable and/or unallocable expenses.
                  However, since we verified that the Plan returned $3,340 to the FEHBP for
                  the questioned LII, no further action is required for this LII amount.

                  Plan Response

                  The Plan agreed with this recommendation and returned the funds to the
                  FEP Program. As stated in the Draft Report dated February 22, 2017, no
                  further action is required.

We appreciate the opportunity to provide our response to this Draft Audit Report and
request that our comments be included in their entirety as an amendment to the Final
Audit Report.

Sincerely,




                           

Managing Director, FEP Program Assurance 



cc:                           , BCBS Rhode Island




                                                                                                                 Report No. 1A-10-60-16-056
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                                                                                                  



                                Report Fraud, Waste, and
                                    Mismanagement 

                                            Fraud, waste, and mismanagement in
                                         Government concerns everyone: Office of
                                             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-general/hotline-to-
                                             report-fraud-waste-or-abuse


                   By Phone:                 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
                                             Room 6400
                                             Washington, DC 20415-1100
               
                                                                                                                  
                                                                                                                  




                                                                                          Report No. 1A-10-60-16-056
                                                      -- CAUTION --
This report has been distributed to Federal officials who are responsible for the administration of the subject program. This non-public
version may contain confidential and/or proprietary information, including information protected by the Trade Secrets Act, 18 U.S.C. §
1905, and the Privacy Act, 5 U.S.C. § 552a. Therefore, while a redacted version of this report is available under the Freedom of
Information Act and made publicly available on the OIG webpage (http://www.opm.gov/our-inspector-general), this non-public version
should not be further released unless authorized by the OIG.